Starbucks shares are trading higher despite the company missing first-quarter earnings estimates, as investors focus on improving traffic trends and early signs that the company’s turnaround strategy is gaining traction.
BNN Bloomberg spoke with Peter Saleh, managing director and analyst at BTIG, about what is driving the stock’s recent strength, how operational changes are influencing customer behaviour, the company’s strategic shift in China and potential headwinds looking ahead to 2026.
Key Takeaways
- Starbucks posted its first increase in customer traffic in two years, easing investor concerns about demand recovery.
- Faster service times driven by higher staffing levels and a simplified menu are helping bring customers back into stores.
- Same-store sales outperformed expectations, highlighting early traction from management’s turnaround efforts.
- The planned China joint venture is expected to reduce earnings dilution while allowing Starbucks to retain long-term exposure to the market.
- Consumer pressure and competition remain key risks as the company works to sustain momentum into 2026.
Read the full transcript below:
ROGER: Starbucks shares are trending higher despite missing their first-quarter earnings estimate. You can see it’s up about 1.85 per cent. The coffee chain says its traffic grew for the first time in two years. To break this down, I’m joined by Peter Saleh, managing director and analyst at BTIG. Peter, thanks very much for joining us.
PETER: Thanks for having me.
ROGER: Starbucks — what’s driving it? We’re seeing the uptick. People are liking what they’re seeing. What do you think they like the most?
PETER: Yeah, I think what investors like the most is the traffic gains. If you look at the traffic, it was up substantially this quarter. They clearly beat on same-store sales — four per cent globally, four per cent in the U.S. — that’s about 200 basis points better than what we were expecting.
But sequentially, traffic was 400 basis points better, and on a two-year stack basis, it was 600 basis points better. That’s the hardest part of the turnaround, which is getting customers to come back into your stores.
That problem looks like it was solved, or somewhat solved — at least the first step of it solved — so we’re getting customers back into the store. That’s what investors are liking here, and that’s what’s driving the shares higher today.
ROGER: All right. Now CEO Brian Niccol came in with the “Back to Starbucks” strategy. Is this the result of it? What has he done that’s making this work, or appear to work?
PETER: Yeah, I think the foundation was really investing more in labour hours and more labour in the stores, taking complexity out of the menu, reducing the menu by 25 to 30 per cent.
The end result here is faster service times. They’re under four minutes both in-store and in the drive-through as well. Customers are seeing that and are coming back more often.
I think the next phase of growth here is going to be menu innovation, both in the morning and in the afternoon. They’re pressing the accelerator a little bit more on the marketing side as well. Those are the foundations for this turnaround so far.
ROGER: How important is that speed for customers and for keeping them coming back?
PETER: Yeah, I think it’s very important, especially in the drive-through and especially in the morning. Customers don’t want to wait.
If there’s a long line in the drive-through and service times are too slow, the drive-through can back up. Customers can drive right by the store and not come in. We’ve seen time and time again in the restaurant space that when you increase throughput and move faster, you’re able to drive accelerating traffic trends.
ROGER: You mentioned adding to the menu, but they’ve also reduced the menu. Is there a danger of those two things cancelling each other out?
PETER: Yeah, I mean, I think they’ve reduced items that weren’t selling from the menu, and they’re going to focus on healthier trends, energy drinks and different food for the afternoon.
It gives them a chance to be more innovative by reducing some of the items that previously weren’t selling. I do think that’s going to be the next phase of growth for them.
ROGER: Going the other way, I was reading about $2 billion in cost-cutting over the next couple of years. Where will they find that? If they’re bringing in more staff — that’s the biggest expense — how do they balance those two things?
PETER: Yeah, we’re going to hear a lot more about that tomorrow at their investor day. They’ve outlined $2 billion of cost cuts over the next two to three years.
My guess is that will come from the supply chain and efficiencies using technology within the stores, but there’s a lot more to come on those cost reductions. We’ll hear more tomorrow night into Friday.
ROGER: Let’s talk about China. They’ve moved away from owning all of it and are working with Boyu now. Is that starting to come together for them?
PETER: Yeah, look, they sold a significant portion — a majority stake — of that business. They’re going to use that capital to pay down debt. They’ll retain a minority interest of about 40 per cent, with a pretty high royalty rate.
The upside for us was that they only talked about it being a couple of pennies diluted to their business. We would have thought it might have been a little bit more than that. That’s good news for them.
The deal hasn’t closed yet. It should close in the second or third quarter of this year. There’s a little bit longer to go, but hopefully we’ll get more details on that transaction tomorrow as well.
ROGER: Do you feel that’s the right approach for them, or do we need to wait for more details?
PETER: This was announced months ago, and it was rumoured for months before that they were going to sell the China business. It’s a done deal at this point.
We’re just trying to figure out what the economics look like going forward, which is still a little hazy in our view.
ROGER: Any potential headwinds as they head into 2026?
PETER: Yeah, look, the consumer is still stressed and under pressure. Inflation is still hovering around. Across the restaurant space, there isn’t a lot of great news recently, especially in 2025.
You’re battling for market share, and that’s definitely a headwind. But they do have levers in place to try to combat those headwinds, and so far they seem to be winning.
Their commentary in January suggests trends continued to be very strong during that month as well.
ROGER: We’ll wrap it up there. Peter, thanks very much for joining us.
PETER: Thank you.
ROGER: Peter Saleh is managing director and analyst at BTIG.
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This BNN Bloomberg summary and transcript of the Jan. 28, 2026 interview with Peter Saleh are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
