Starbucks is seeking to return to pre-pandemic profit margins as CEO Brian Niccol’s turnaround campaign is “ahead of schedule,” executives said at the company’s investor day held Thursday, describing a strategy of international growth, new drinks and cheaper but more inviting store renovations.
“The shine is back on Starbucks,” Niccol said to an audience of analysts and media gathered at the event on Manhattan’s west side.
The investor day is the company’s first since Niccol’s hiring in September 2024, when he suspended financial guidance as he undertook a turnaround campaign called “Back to Starbucks,” focused on overhauling store operations and promoting Starbucks’ public image as a welcoming coffeehouse chain. On Wednesday, the coffee giant reported US sales growth for the first time in two years.
The event showcased a floor model of Starbucks’ new store design, featuring leather seating and teak-colored display cabinets. Starbucks also offered tastings of upcoming menu items, such as a new matcha beverage line, and exhibited new and upcoming in-store technology, such as new espresso-brewing equipment and an A.I.-powered “virtual assistant” for baristas.
Starbucks executives said that by fiscal year 2028, the company aimed to achieve an operating margin of up to 15%, marking a recovery after Niccol’s hefty investments in additional staffing. Executives also said the company would seek to achieve annual earnings per share of $3.35 to $4.
Starbucks’ shares fell about 1.5% on Thursday after the much-awaited long-term targets were announced. Lauren Silberman, an analyst with Deutsche Bank, said the range in the earnings guidance was “too wide,” during the event’s questions portion.
“It’s been around 15 months since the CEO took the helm of the ship and turning the ship around may be taking longer than originally hoped. There are incremental improvements, but the stock price is about where it was when he became CEO,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management.
Shares are up about 7% since Niccol took over as CEO in September 2024.
Chief Financial Officer Cathy Smith said Starbucks will seek to achieve its 2028 margin target through cost savings, such as reducing the cost of store remodels, and to a lesser extent, targeted menu price increases.
Executives also said the structure of its anticipated licensing of its China stores, in partnership with Boyu Capital, will deliver higher margins to the company.
Starbucks’ international division head Brady Brewer said the international operating margin could exceed 20% by 2028.
Starbucks expects to add more than 2,000 net new stores internationally by 2028 — outpacing growth in the U.S. “The world wants more Starbucks,” Brewer said.
Executives also announced a revamp of its rewards program, re-introducing a tiered structure. Chief brand officer Tressie Lieberman said that if half of Starbucks’ loyalty program members buy from Starbucks one additional time in a year, it would add $150 million in annual revenue.
Niccol said the company will also improve its supply chain, including with AI initiatives, and that the company wants 90% of its company-owned coffeehouses to be resupplied on a daily basis by the end of 2026. Starbucks has long struggled with product shortages from deep-seated supply chain kinks, Reuters reported Tuesday.
Niccol said the company had made progress in reducing out-of-stocks in the previous six months, without offering specific numbers.
“For most of our history, Starbucks delivered exceptional investor returns. We are determined to bring exceptional value again,” Smith said.
