Starbucks' turnaround enters a new phase: Investors want stronger profits served

Starbucks ' turnaround is showing some progress, but investors are still waiting for the bigger payoff: a meaningful recovery in profits. CEO Brian Niccol's "Back to Starbucks" plan — aimed at improving the cafe experience — has succeeded in improving traffic and getting comparable-store sales growing again. The problem: Niccol's remedies, such as adding baristas to speed up service, are not cheap and profitability remains below historic levels. As Niccol's two-year anniversary approaches in September, investors want tangible signs that stronger sales are beginning to translate into better margins. They get a chance to spot them Tuesday night, when the coffee chain reports fiscal 2026 second-quarter results. Analysts expect Starbucks' adjusted operating margin to come in at 8.3%, according to FactSet. That would be a modest uptick from 8.2% a year earlier. It was 10.1% in the busy holiday quarter ended in December. Both figures are a far cry from the mid-to-upper teens full-year operating margin that Starbucks routinely delivered before the pandemic. It has some on Wall Street asking a pointed question with major implications for the stock: Will Starbucks ever be as profitable as before? The performance of Starbucks shares during Niccol's tenure reflects some skepticism. The stock is up roughly 7% since Niccol took over on Sept. 9, 2024. In the same period, an equally weighted basket of consumer discretionary stocks in the S & P 500 has advanced about 16%. …