Starbucks’ (SBUX) long untapped afternoon business is finally beginning to perk up.
“As you kind of move through the day, we continue to see transaction growth, just not quite at the same level of what we’re seeing in the morning,” Starbucks CEO Brian Niccol told Wall Street analysts on its late Wednesday earnings call.
Improving on the afternoon business is going to take “a combination of beverage and food, then also, just getting better at our routines in the afternoon,” he added.
The afternoon business has considerable runway for growth, analysts say. The midday and afternoon generate $11 billion in sales after 11:00 a.m., Starbucks said in an April blog post.
The company launched new energy drinks — more formally known as Refreshers — in April to get the ball rolling. But more is on tap.
Niccol said on the call that Starbucks is now testing wraps and soon will debut a line of sparkling beverages.
“If you look at where the business was, there’s still lots of space to add more transactions both in the morning and in the afternoon. We’ve made tremendous progress in both day parts, but there still is a lot of room for growth,” Niccol said.
Starbucks took another step this quarter to prove that the focus on restaurant basics and afternoon hours is gaining traction.
Global comparable-store sales rose 7.9%, well ahead of Wall Street expectations, marking the company’s fourth consecutive quarter of same-store sales growth under Niccol’s turnaround plan.
Adjusted earnings came in at $0.85 a share, easily topping analysts’ forecasts of $0.66.
The company also expanded its operating margin to 14.4% from 10.1% as cost-cutting efforts and improved store operations boosted profitability.
Starbucks signaled with its raised full-year guidance that it sees the momentum carrying over into its fourth fiscal quarter.
Shares rose 6% in early trading on Thursday. The stock has outperformed the S&P 500 by nearly 4x this year, notching a nearly 30% gain according to Yahoo Finance AlphaSpace data.
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the ‘Power Players With Brian Sozzi’ podcast and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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