Starbucks (NASDAQ:SBUX) left investors feeling disappointed following its fiscal third-quarter earnings report. Management noted improving demand trends following peak COVID-19 closures but warned that a full growth and profit recovery might take more than a year.

Things have improved since then.

In late October, the coffee titan revealed surprisingly strong sales to close out fiscal 2020. That boost gave executives confidence to predict a sharp growth rebound ahead over the next 12 months.

Let's dive right in.

Sales trends

Overall sales results beat expectations, with comparable-store sales falling 9% versus the 12% to 17% slump that executives had predicted in late July. The main driver behind that success was the U.S. market, which improved to a 9% decline from the 41% slump in Q3.

A woman holding a to-go coffee.

Image source: Getty Images.

Starbucks welcomed most of its customers back to its U.S. locations as retailing activity resumed. But many of these consumers chose to make different transactions, using drive-thru services and making fewer trips with larger purchases. "Central to the strength of our recovery," CEO Kevin Johnson said in the conference call, "has been a relentless focus on rapid innovation, [and] adapting and adjusting to new customer behaviors."

Modest margin improvements

Johnson and his team have predicted that the profitability rebound will lag sales growth by a few quarters, and that factor was clear in this report. Operating margin fell to 9% from 16% a year ago. Earnings dropped by half to $0.33 per share.

Executives highlighted positive trends on this score, though, with profitability improving during each month of the quarter. Starbucks was also solidly profitable in each month of Q4 despite the reduced sales footprint. "I am very pleased with our strong finish to fiscal 2020," Johnson said. Still, the chain isn't ready to take more aggressive financial moves like resuming its stock repurchase spending, which should remain stalled through 2021.

A big rebound ahead

Management backed up that confident talk with some hard numbers. Starbucks projected that comparable-store sales will race back to growth in the fiscal year ahead, landing at between 18% and 23% compared to this past year's 14% slump. Operating margin will improve from the current 6.6% level to between 14% and 15%, or just a bit below the 15.4% mark the company achieved in the last full year before COVID-19 started disrupting the business.

Starbucks' expansion outlook is similarly aggressive, calling for over 1,000 net new store launches in 2021. Only 50 of those locations are set for the U.S. segment, where the chain is busy shifting its focus away from dense metropolitan areas to target more rural locations with drive-thru offerings.

Executives cautioned that this 2021 growth forecast assumes a gradual lessening of pandemic disruptions, with U.S. stores reaching full-capacity seating and operating hours within the next six months.

But they're encouraged by the quick recovery Starbucks has managed since late June. As a result, they have sped up their rebound forecast as the chain prepares to return to positive growth territory likely in fiscal Q1.

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