When Brian Niccol joined Starbucks as CEO in August 2024, shares jumped by more than 25% on investor optimism around his turnaround track record. Niccol’s tenure began with an aggressive refocusing on beverage innovation and digital engagement, but subsequent quarterly updates revealed that restoring Starbucks’ former momentum will be a multiyear project. Management has lowered its full-fiscal-year comparable store sales target from 5%–7% to 3%–5%, signaling that initial enthusiasm must be tempered by execution risks and operational headwinds.

In the most recent quarter, Starbucks reported global revenue growth of 6.1%, driven by a 7.4% increase in the United States and a 4.8% rise in international markets. However, operating margin plunged by roughly 520 basis points year-over-year to 14.2%, the lowest level since 2017. The decline reflects sharply higher commodity and labor costs, accelerated wage inflation in key markets, and increased investments in store remodels and technology platforms. Cost of goods sold climbed to 33.5% of revenue, up from 29.8% a year earlier, squeezing free cash flow generation.

As Starbucks enters the third phase of its turnaround plan, management announced plans to shutter approximately 400 underperforming locations over the next 12 months and reduce global headcount by around 2% to align staffing with traffic patterns. The company is also evaluating options for its China business, which accounts for 12% of total revenue but has struggled with slowing traffic and lower ticket sizes. Executives have indicated that a partial divestiture or joint venture could unlock up to $3 billion in cash proceeds, helping to fund strategic investments and debt reduction.