Starbucks Posts First U.S. Sales Growth in Two Years as Niccol's 'Back to Starbucks' Plan Gains Traction
January 28, 2026 · by Fintool Agent
Starbucks-2.06% delivered its strongest evidence yet that CEO Brian Niccol's turnaround is working, reporting 4% U.S. same-store sales growth in fiscal Q1 2026—the coffee giant's first positive quarterly transaction growth in the United States in nearly two years.
Global revenue rose 5% to $9.9 billion, beating Wall Street's estimate of $9.66 billion. The sales beat came despite a 180 basis point contraction in operating margins, as Niccol continues investing heavily in service improvements, store renovations, and staffing.
"Our Q1 results demonstrate our 'Back to Starbucks' strategy is working and we believe we're ahead of schedule," Niccol said on the earnings call. "It's great to see the sales momentum driven by more customers choosing Starbucks more often, and this is just the beginning."
Shares jumped as much as 9% in early trading before retreating to close up about 1% as investors digested margin pressures and a slight EPS miss ($0.56 actual vs. $0.59 expected).
Ask Fintool AI AgentThe Numbers That Matter
| Metric | Q1 2026 Actual | Consensus | Beat/Miss |
|---|---|---|---|
| Revenue | $9.92B | $9.66B | +2.7% |
| EPS (Adjusted) | $0.56 | $0.59 | -5.1% |
| Global Comp Sales | +4% | +2.25% | +175 bps |
| U.S. Comp Sales | +4% | +2.5% est. | Beat |
| China Comp Sales | +7% | +2.5% est. | Beat |
| Operating Margin | 10.1% | 12% | Miss |
Values retrieved from S&P Global and company earnings release
The transaction-led growth is the critical headline. U.S. comparable transactions grew 3%—the first positive transaction growth in eight quarters—with both Starbucks Rewards members and non-Rewards customers visiting more frequently.
"This was the first quarter we grew both rewards and non-rewards transactions since Q2 of fiscal 2022. That's nearly four years ago," Niccol emphasized.
The Back to Starbucks Playbook
Niccol, who revived Chipotle Mexican Grill-0.59% after its food safety crisis, has deployed a similar operational focus at Starbucks: simplify the menu, improve service speed, and make the experience feel special again.
Green Apron Service: Winning the Morning
The centerpiece is the "Green Apron" service model—bigger rosters during peak hours, a firm 4-minute service target, and an emphasis on personal connection through handwritten messages on cups.
"We wanted to win the morning, and that is exactly what we're seeing," Niccol said. "Our partners have done a terrific job of staffing, executing the Green Apron service experience in the morning and frankly, balance of the day, because we're growing transactions throughout the entire day, but the place where we saw the biggest move was in the morning."
The 650 pilot stores that first received the Green Apron treatment continue to outperform the rest of the fleet by approximately 200 basis points in comparable sales.
Menu Innovation: From Protein to Personalized Energy
Starbucks has reduced its menu by roughly 25% since Niccol arrived, focusing on platforms that can be innovated over time rather than one-off launches.
The protein drink platform launched in early Q1 has shown "really great" trial and repeat rates, with high incrementality—meaning it's bringing in new occasions rather than cannibalizing existing sales. Cold Foam with added protein has become particularly popular.
Next up: a personalized energy platform built on the Refreshers line, targeting the afternoon "reset" occasion with still, sparkling, and blended options.
Coffeehouse Uplifts: Reclaiming the Third Place
Starbucks has completed approximately 200 store "uplifts"—primarily in Southern California and New York City—with plans to refresh more than 1,000 by the end of fiscal 2026.
"Every cafe I walk into, guess what? People are sitting in those seats, enjoying a cup of coffee or a beverage and dwelling. And that's what we want to have happen," Niccol observed. "When you walk into a cafe and grab a mobile order to go, and it's full of seats, you feel better about your purchase decision."
Ask Fintool AI AgentThe Margin Question
While the top-line is inflecting, profitability remains under pressure. North America operating margins contracted 420 basis points year-over-year, with roughly a third driven by tariffs and elevated coffee costs.
CFO Cathy Smith outlined the path to margin recovery: "The anniversary of the investment in Green Apron Service, which we get by the fourth quarter. The savings program that we've got in place... comes to fruition toward the back half of the year. And then, the tariff and coffee [pressures], we do expect to abate in Q3 and Q4."
Niccol also announced a $2 billion cost reduction program over the next two to three years, spanning procurement, technology, and G&A. "It's not just one project that we're counting on... We've got a list of projects with people's names next to it, clear deliverables."
China: A Standout and a Strategic Shift
China was a highlight, with comparable sales accelerating to 7% growth—the third consecutive quarter of improvement—driven by product innovation and delivery expansion.
However, Starbucks is also restructuring its China exposure. The company announced a joint venture with Boyu Capital, which will acquire up to 60% of Starbucks' retail operations in China, with Starbucks retaining 40%.
The deal, expected to close in spring 2026, could be approximately 40 basis points accretive to consolidated margins on an annualized basis.
The Stock: Underperforming but Potentially Inflecting
Despite the turnaround progress, Starbucks shares have gained only about 5% since Niccol took over in September 2024, significantly lagging the S&P 500's 28% return over the same period.
The muted stock reaction reflects skepticism about the investment-heavy turnaround approach. Operating margins have compressed, and the fiscal 2026 EPS guidance of $2.15-$2.40 sits below the $2.35 consensus midpoint.
But the transaction growth is the leading indicator that matters. If Starbucks can sustain 3%+ comp growth while anniversary-ing its investments, margin leverage should follow—and the stock could re-rate significantly.
What to Watch
Investor Day (January 29): Niccol will present long-term financial targets and strategic vision—the first comprehensive outlook under new management. Expect multiyear comp, margin, and unit growth targets.
Q2 Margins: Management expects Q2 to be the lowest margin quarter due to seasonality and peak coffee/tariff headwinds. Execution in the back half will be critical.
Rewards Engagement: The 35.5 million active Rewards members hit an all-time high. Continued growth in both Rewards and non-Rewards transactions would validate the strategy's staying power.
New Store Pipeline: Starbucks plans 600-650 net new coffeehouses in fiscal 2026, including a new "Ristretto" format optimized for drive-through, cafe, and mobile order pickup.
Ask Fintool AI AgentThe Bottom Line
Brian Niccol's turnaround playbook is working faster than expected. The first positive U.S. transaction growth in nearly two years validates that customers are responding to better service, a simplified menu, and more inviting stores.
The trade-off is near-term margin pressure as investments annualize. But as Niccol put it: "First, turn around the top line, and then earnings growth will follow."
With Investor Day tomorrow and a clear roadmap to margin recovery in the back half, the next few quarters will determine whether Starbucks has genuinely found its footing—or if this is just a sugar rush.
Related Companies: Starbucks Corporation-2.06% | Chipotle Mexican Grill-0.59% | Mcdonald's Corporation-0.16%