Starbucks' turnaround strategy under CEO Brian Niccol is showing some signs of progress, particularly in improving customer traffic and returning to growth in comparable-store sales, thanks to initiatives like adding more baristas to speed up service [1]. However, these improvements have come at a cost, and profitability remains below the company's historic levels, leaving investors eager for a more substantial recovery in profits [1]. As Niccol approaches his two-year anniversary in September, investors are looking for clear evidence that stronger sales are translating into better margins, with a key opportunity to assess this coming when Starbucks reports its fiscal 2026 second-quarter results [1].
Analysts expect Starbucks' adjusted operating margin for the quarter to be 8.3%, a slight increase from 8.2% a year earlier, but still well below the 10.1% achieved in the holiday quarter ended December and far from the mid-to-upper teens margins Starbucks routinely delivered before the pandemic [1]. This has led some on Wall Street to question whether Starbucks can ever return to its previous levels of profitability [1]. The company's stock performance during Niccol's tenure reflects this skepticism, with shares up roughly 7% since he took over on September 9, 2024, compared to a 16% gain for an equally weighted basket of consumer discretionary stocks in the S&P 500 over the same period [1]. The stock's highest close under Niccol was $115.81 on February 28, 2025, but has since pulled back, prompting some investors to trim their positions ahead of earnings [1].
Despite these concerns, some analysts remain optimistic about Starbucks' long-term prospects. Jim Cramer, for example, has expressed confidence in Niccol's leadership, citing operational improvements such as the increase in comparable transactions in North America reported in the first quarter of the year—the first such increase in two years [1]. However, the company still faces challenges, as margins contracted last quarter compared to a year ago and adjusted earnings per share fell by almost 20% [1]. Portfolio analysts like Jeff Marks emphasize that margin improvements will take time, and investors are closely watching for signs of profitability gains as the turnaround continues [1].
CONCLUSION
Starbucks is making operational progress under CEO Brian Niccol, but investors remain focused on the need for a meaningful recovery in profitability. While some analysts are optimistic about the long-term outlook, the company's margins and earnings are still below pre-pandemic levels, and the stock has underperformed its peers. The upcoming earnings report will be a critical indicator of whether Starbucks' turnaround can deliver the profit growth investors are seeking.