Starbucks posts first global sales growth in 18 months, high coffee prices erode profits

Starbucks said on Wednesday that its global sales grew for the first time in about 18 months, driven mainly by strong performance overseas. However, its US business is still struggling, and higher coffee bean prices have come in the way of profits.

The results come after Starbucks saw a slump in sales for months, prompting the coffee company to hire Brian Niccol as CEO in August 2024, who took the job to rebrand the firm, dubbing it “Back to Starbucks.”

Since taking over the post, Niccol has shut down hundreds of stores, simplified menusand made efforts to speed up service. However, his efforts did not bear any significant fruit as profits remained down.

Executives said the rising cost of coffee beans will continue to be a challenge for at least the next two quarters. Global prices for raw arabica beans have climbed more than 20 per cent this year after jumping 70 per cent in 2024. Combined with high import tariffs and expenses from the company’s ongoing overhaul, these costs have put pressure on profit margins.

Turnarounds are difficult to forecast, and while we have good reason to believe that our US company-operated comparable sales should build through the year, we know recoveries are not linear,” Starbucks’ CFO Cathy Smith said.

In July, the company announced plans to invest over US$500 million in additional labour hours for its US company-operated stores over the next year. Although Starbucks uses hedging to protect against rising coffee prices, global supply has been disrupted by geopolitical tensions, including US President Donald Trump’s 50 per cent tariffs on major producer Brazil, as well as ongoing climate challenges.

Brian Jacobsen, chief economist at Annex Wealth Management, said, “Their cost structure – with rent, labour, and coffee – is challenging. There are so many competitors, whether in coffee or other caffeinated drinks, that they don’t have the pricing power they used to. At least management is realistic about the challenges ahead of them.”