Starbucks is expected to report a 15% year-over-year decline in earnings for its fiscal first quarter despite delivering 2.6% growth in global same-store sales. The company has closed underperforming locations in key markets, reducing its store count by approximately 1.2% over the past year, and has seen foot traffic remain below pre-pandemic levels in North America and China. Analysts at UBS maintain a Neutral rating, noting that while the “Back to Starbucks” turnaround plan has begun to show modest sales momentum, profitability remains under pressure from higher commodity and labor costs.

Shares of Starbucks have outpaced the broader market by rising roughly 14% year-to-date, marking their strongest start in over a decade. This rally reflects growing investor confidence in CEO Brian Niccol’s strategic initiatives, as evidenced by sustained share outperformance versus the S&P 500. Market participants are now focused on two potential catalysts this week: the release of fiscal Q1 results on Wednesday morning and an investor day event the following day, where management is expected to provide updated guidance on margins, capital allocation and unit growth targets.

While comparable-store sales trends have turned positive, Starbucks reported a 35% decline in net income year-over-year in the prior quarter, as operating margins compressed by 500 basis points. Rising wages in the U.S. and elevated freight costs in international markets weighed on profitability, offsetting the benefits of menu price adjustments. Analysts note that margin expansion will depend on driving higher store throughput and leveraging scale in the company’s loyalty program, which now counts over 30 million active members in the U.S.

Since joining in late summer 2024, CEO Brian Niccol has simplified the core beverage menu, removed low-performing items and invested millions in barista training programs. New product launches this quarter include protein-based beverages, refreshed baked goods and regional chai recipes. The company is also piloting in-store ‘coffeehouse coaches’ to standardize service quality and exploring back-of-house robotics for inventory handling. Management believes these efforts will restore Starbucks’ premium positioning and drive sustainable traffic growth over the next 12 to 18 months.