A Year After Chipotle's Former CEO Was Tapped to Lead Starbucks' Turnaround -- Is SBUX a Buy?

Core Insights - The appointment of Brian Niccol as CEO of Starbucks was initially met with optimism, leading to a 25% surge in shares, but since his takeover, shares have declined by 6% [1][2] - Niccol acknowledges that Starbucks is in the early stages of a turnaround, with same-store sales globally down by 2% and net income significantly reduced from $1.05 billion to $558 million [3][4] Financial Performance - Same-store sales have fallen for six consecutive quarters, with a global decline of 2% [4] - Fiscal Q3 2025 net income dropped to $558 million from $1.05 billion a year ago [4] - Starbucks closed 1% of its North American stores due to performance issues [4] Strategic Initiatives - Niccol has implemented changes to enhance customer service, including requiring baristas to engage more with customers and simplifying the menu by cutting 30% of offerings [5] - The "Green Apron Service" program has shown early success, improving customer satisfaction and sales in tested locations [5] - A new coffeehouse uplift program aims to revitalize U.S. sales by investing $150,000 per store to create a more inviting atmosphere [7] International Performance - Starbucks' international business achieved over $2 billion in quarterly revenue for the first time, with positive same-store sales growth in Canada and low-single digits in the U.K. [6] - China locations have shown a 2% growth in same-store sales for three consecutive quarters, despite challenges from local competitors [6][9] Competitive Landscape - The decline in U.S. same-store sales is concerning, especially with competition from local brands like Luckin Coffee, which now generates more revenue in China than Starbucks [8][9] - Economic challenges in China, including slowing retail sales and rising unemployment, pose risks to Starbucks' market share [9] Valuation and Investment Outlook - Starbucks shares have a forward price-to-earnings ratio of 30.8, higher than the S&P 500 average of 22.6, suggesting that a successful turnaround may already be priced in [10] - The ongoing turnaround efforts are expected to extend into 2027, leading to caution among investors regarding the stock's current valuation [11] Upcoming Indicators - Starbucks is expected to announce its next quarterly dividend later this month, which could indicate the company's ability to navigate current challenges [12][13]