Once the king of coffee, Starbucks (SBUX 0.48%) has been struggling to find its footing in a changing landscape. Sales have been heading lower for too long, and competition everywhere is creating challenges for a rebound.
It's been just over a year since superstar CEO Brian Niccol took over, and investors will get an update on how things are going when Starbucks reports fiscal fourth-quarter earnings on Oct. 29. Let's take a look at what's been going on, what investors could expect, and whether to buy the stock now.
Image source: Starbucks.
Going back to its roots
Starbucks has been mired in problems ranging from too-long lines to outdated equipment and old-style cafes. It's the classic example of a company getting too big to handle and in danger of becoming a dinosaur. It now operates more than 41,000 stores worldwide, and that's not an easy boat to steer.
It's gone through four different CEOs over the past five years, and when Niccol joined last year, he laid out a plan to return the company to its roots as a gathering place for customers to enjoy coffee. He said the process felt "transactional," product has been inconsistent, and the wait is too long. Prior to his joining, the company had become too promotional, which marred what was supposed to be an elevated Starbucks experience.
Some changes he's made since then are bringing back the condiments bar, which made it quicker for baristas to hand off beverages, and new technology to streamline the ordering process.
This is still a work in progress, but there have already been some positive results, including some quicker order fulfilment.
NASDAQ: SBUX
Key Data Points
How it's playing out
Starbucks is still reporting declines, but management isn't expecting an immediate turnaround. "We've fixed a lot and done the hard work on the hard things to build a strong operating foundation," Niccol said after the fiscal third-quarter (ended June 29) report, "and based on my experience of turnarounds, we are ahead of schedule."
He's still in the rebuilding stage, and he expects to "unleash a wave of innovation" in 2026 that will bring Starbucks into its next phase of growth.
Although comparable sales (comps) fell 2% from last year in the quarter, Starbucks opened 308 stores, and total sales increased 4%. Comps also increased 2% in China, a strong showing in a large growth market.
What management might tell shareholders
In other words, don't expect any incredible improvement in the fourth quarter. Management declined to provide specific guidance for the quarter and said that it felt "conservative" about how the quarter would turn out.
On the negative side, it's still dealing with inflation and tariff changes, and it's expecting year-over-year cost comparisons to peak in the 2026 first quarter. It's still heavily investing in its turnaround plan, and that will hit the bottom line in the fourth quarter.
On the positive side, transactions are improving, and it has changed its supply practices to hedge better for tariffs and cost changes. The new technology it has implemented to improve the order and fulfilment process is also leading to better outcomes in stores.
One update the company already gave is that it recently had its "strongest single Tuesday and week of sales in company history the week Pumpkin Spice Latte and other fall favorites returned."
Should you buy Starbucks stock?
Starbucks stock is down 7% in 2025, and at the current price, it trades at a forward, 1-year P/E ratio of 26. That's not exactly cheap for a company that's struggling. It points to the market's overall positive view of what Starbucks can achieve under Niccol's leadership.
There's always the chance that Starbucks overdelivers in the fourth quarter and the price jumps, but investors shouldn't buy before Oct. 29 with that expectation. If you can buy and hold for the long term, Starbucks could end up making a huge recovery and offering years of growth and stability. It also pays a dividend that yields 2.9% at today's price, and it could be a good candidate for passive income even today.
