Starbucks is becoming cool again. Here's how it pulled off its turnaround.

By Claudia Assis

Novelty items resonate with Gen Z customers, Starbucks says in positive earnings report

Starbucks said its focus on faster service, more food options and novelty drinks was working.

Shares of Starbucks rallied 4.5% in extended trading Wednesday after the coffee chain reported its fourth straight increase in same-store sales and said that the latest quarter was proof that its turnaround plan is working.

Starbucks' (SBUX )sales in North America led the way and offset a 34% drop in international sales, thanks to an increase in transactions and in the average ticket. The company beat Wall Street's expectations for its third quarter and raised guidance.

Starbucks is in the middle of a closely watched turnaround just as investors in the consumer sector are worried about inflation, tariffs and the impact of the war with Iran.

But on a call with analysts following results, CEO Brian Niccol focused on what he said was working for the company - trendier products, faster service and more food options.

"We're on the right path and we remain ahead of schedule," he said of the company's turnaround plan.

It leaned on new products like novelty sugary drinks and limited-offer items like S'mores beverages that resonated "particularly well" with Gen Z customers, he added.

Starbucks is gearing up for a return of favorites such as pumpkin spice lattes in the fall and will begin testing sparkling beverages in a few markets, he said.

"Taken together, our brand flywheel is working," Niccol said.

Overall, Starbucks' fiscal third-quarter same-store sales rose 7.9%, whereas analysts polled by FactSet expected a 5.7% increase.

The company also raised its guidance for the year, calling for fiscal 2026 same-store sales growth "nearing" 6% and revenues between flat to "slightly" growing.

The company in April guided for same-store growth of 5% "or greater," and saw the full year's revenue roughly flat in comparison with 2025.

Starbucks reported fiscal third-quarter adjusted earnings of 85 cents a share on sales of $9.3 billion, a slight decline from the year-ago period but ahead of Wall Street's expectations.

Analysts polled by FactSet forecast adjusted earnings of 66 cents a share on sales of $9.18 billion for the quarter. The company reported adjusted profit of 41 cents on sales of $9.46 billion in the year-ago period.

-Claudia Assis

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07-29-26 2019ET