Should You Buy Starbucks Stock Before July 29?

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Starbucks, represented by the ticker symbol SBUX, is the globally recognized leader in coffee shop chains, essentially pioneering this concept. Yet, it serves as a striking illustration of how a market titan can appear outdated if it fails to adapt with the changing times.

It’s not there yet, and it’s working on a recovery.

I’m curious about the current state of affairs regarding Starbucks stock, its trajectory leading up to their third-quarter results due on July 29, and if it might be prudent to consider investing before these figures are disclosed.

Struggling to stay hot

Over the past four years, Starbucks has experienced a succession of four CEOs as it grapples with adapting to an evolving business environment. Despite positioning itself as a technology-focused company for some time, its systems and procedures have failed to effectively manage large numbers of customers, especially with the increasing trend towards mobile ordering. While high demand is generally something every company aims for, Starbucks has been struggling to cope, resulting in missed orders and lost sales. Furthermore, its vast network of over 40,000 stores worldwide lacks modern technology to process orders swiftly, and its image seems outdated compared to new competitors and emerging trends.

As a passionate follower of business trends, I must admit that even a powerhouse like Starbucks isn’t immune to the ebbs and flows of the market. In recent times, they’ve been grappling with falling sales and profit margins, which is quite remarkable given their widespread popularity and long-standing presence.

During the 2025 fiscal second quarter, wrapping up on March 30, I observed a 2% rise in annual revenue compared to the previous year. However, comparable sales dipped by 1%. The growth in revenue can largely be credited to the opening of 213 new stores. Unfortunately, operating margin and income took a significant hit this year, which management explained as a result of restructuring and costs associated with their turnaround strategy. Earnings per share (EPS) saw a steep drop of 50%, settling at $0.34.

New opportunities brewing

Last year, the company successfully lured CEO Brian Niccol away from Chipotle Mexican Grill, where he had been highly praised for its impressive growth and outstanding leadership. Niccol now expresses increased certainty, stating that his initial optimism has only grown, and he perceives even more opportunities than he initially anticipated.

He believes in a straightforward path to success, emphasizing customer satisfaction, employee welfare, cost management, and operational improvement. From his past experiences, he’s confident that the positive financial outcomes will naturally follow.

Over the last few years, Starbucks has shifted its priorities from being a relaxed destination for customers, alongside their homes and workplaces, known as the “third place”. However, Niccol’s “Back to Starbucks” strategy aims to refocus on this third-place concept, but with improved flexibility and a more contemporary image that accentuates the company’s farm-to-table coffee experience.

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Starbucks has seen significant advancements in several key areas. For instance, the rate of employee turnover is currently below 50%, marking an all-time low, transaction decreases are slowing down noticeably, and a larger portion of sales is now attributed to what Niccol referred to as “quality transactions.

One method of rephrasing this passage in an accessible and natural way is: Starbucks has implemented some straightforward strategies that include introducing a new shift trading system, which boosts completion rates, raises employee happiness, and strengthens customer relationships. In their retail outlets, they’ve broadened the free refill policy and switched to ceramic mugs to stimulate extended visits by customers.

Momentum is building

Management chose not to offer forecasts for the upcoming third quarter, taking into account shifting business conditions and a fresh approach, yet Niccol shared some insights during his remarks on the second quarter. Here are some key points:

1. Sales growth was robust, with a double-digit increase year over year.
2. The company saw significant gains in market share due to its innovative product offerings.
3. Operational efficiency improvements led to reduced costs and higher profit margins.
4. Niccol expressed optimism about the future, emphasizing continued investments in research and development.

  • In pilot stores, wait time decreased by an average of two minutes, leading to wait times of less than four minutes at peak times for 75% of orders.
  • Starbucks is rolling out a new feature on its app to let customers choose pickup times and get more price transparency.
  • Taking sugar out of matcha products increased sales by 40% year over year.
  • New ads led to a two-year high in customers who name Starbucks as their favorite choice.

The market greatly appreciated the second-quarter report and Starbucks’ shares have stayed high since then. Currently, the stock isn’t cheap, with a forward P/E ratio of 32. This means it needs to perform well when it releases its results on July 29, or else its price might fall. However, considering the company’s recent updates, there are good reasons to be hopeful.

Despite any potential future events affecting the report, Starbucks appears resilient enough to recover and benefit shareholders over an extended period. Not only is it revitalizing its brand, but it also aims to double its U.S. store count, providing a significant growth trajectory for years to come. Moreover, the company continues to increase its dividend payout, which currently yields approximately 2.5% at current market prices.

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2025-07-25 12:04