The coffee giant <\/strong>has been slashing costs, restructuring operations and investing extensively in cafe performance after a challenging period of declining traffic, margin pressure and weakening consumer spending trends.<\/p>\n New CEO Brian Niccol<\/strong>, who took over in 2024, has been working to streamline operations, improve shop execution and speed up service times as Starbucks <\/strong>seeks to stabilize sales growth.<\/p>\n The corporation is also making tough cuts behind the scenes.<\/p>\n Starbucks<\/strong> announced intentions recently to cut about 300 U.S. corporate support <\/strong>positions as it looks at more layoffs overseas with its foreign support functions. The company also anticipates about $400 million <\/strong>in restructuring expenses relating to office consolidations, employee separation fees and impairments of assets.<\/p>\n With such cuts, Starbucks is nevertheless spending significantly to increase staffing levels, caf\u00e9 operations and customer experience.<\/p>\n Now a big Wall Street boost implies investors might finally be warming to the idea.<\/p>\n TD Cowen\u2019s<\/strong> positive recommendation comes as Starbucks<\/strong> moves toward a larger goal of $2 billion <\/strong>in gross cost savings by fiscal 2028 while aiming to restore higher profitability across its worldwide company.<\/p>\n \u201cThe turnaround remains in its early innings,\u201d TD Cowen analyst Andrew Charles wrote after meetings with Starbucks leadership, including CEO Brian Niccol and CFO Cathy Smith.<\/p>\n TD Cowen<\/strong>upgradedStarbucks <\/strong>to Buy from Hold and increased its price target to $120 from $106<\/strong>.<\/p>\n The business also boosted its fiscal 2026-2028 earnings-per-share expectations by almost 9% <\/strong>to $2.46<\/strong>, $3.23 <\/strong>and $3.94<\/strong>, respectively.<\/p>\n Analyst Andrew Charles<\/strong> said conversations with Starbucks<\/strong> management increased confidence in the sustainability of the North America recovery attempt<\/strong>.<\/p>\n The analyst cited Niccol’s<\/strong> operational track record at Taco Bell<\/strong> as a specific example.<\/p>\n TD Cowen<\/strong> now sees North America same-store sales growth of 6.1% <\/strong>in fiscal 2026<\/strong>, 5% <\/strong>in fiscal 2027 <\/strong>and 4% <\/strong>in fiscal 2028<\/strong>.<\/p>\n Those predictions are higher than broader Wall Street expectations.<\/p>\n The firm also projects consolidated operating margins of 15.1% <\/strong>for fiscal 2028, beyond Starbucks\u2019 long-term target range of 13.5% to 15% and the consensus estimate of 14.6%<\/strong>.<\/p>\n More Restaurants\u00a0<\/strong><\/p>\n The rising margin expectation for the firm should be supported by a fall in coffee commodity costs, sales leverage and the $2 billion <\/strong>cost savings initiative announced by Starbucks<\/strong>, TD Cowen <\/strong>said.<\/p>\n Shares rose in premarket trading following the upgrade.<\/p>\n The upgrade comes at a critical time for Starbucks<\/strong> as the firm tries to juggle dramatic cost cuts with investments to boost customer traffic and store performance.<\/p>\n The affected Starbucks<\/strong> employees are in sectors including technology, finance, marketing and research, the Wall Street Journal said.<\/p>\n The company is also closing regional offices in Chicago, Atlanta, Dallas and Burbank, Calif., while keeping offices in Seattle, New York, Toronto and Coral Gables, Fla.<\/p>\n Photo by Brycia James on Getty Images<\/p>\n<\/figcaption><\/figure>\n The question for Wall Street is not whether Starbucks <\/strong>plans to cut costs.<\/p>\n The challenge is whether those savings can deliver continuous earnings growth without impairing the customer experience that made Starbucks <\/strong>one of the world\u2019s best-known restaurant brands.<\/p>\n TD Cowen\u2019s <\/strong>revised $120 price target <\/strong>is based on about 30 times estimated fiscal 2028 earnings<\/strong>, indicating the view that Starbucks <\/strong>may be entering its first really regular profitability cycle after several bumpy years.<\/p>\n That price is significantly above the average multiple of Starbucks<\/strong> historically.<\/p>\n But the company thinks the premium is justified if it can continue to see same-store sales improving, operational margins growing and corporate spending cleaning.<\/p>\n Management has also linked executive incentives to long-term savings goals, including a target of delivering at least $800 million <\/strong>in cumulative savings by the end of 2027.<\/p>\n That puts more strain on execution.<\/p>\n Meanwhile, Starbucks<\/strong> continues to work its way through a tough consumer climate, as restaurant traffic remains uneven across the industry.<\/p>\n The company is also contending with higher labor expenses and increasing competition from fast-growing coffee chains and convenience merchants that are expanding into luxury beverages.<\/p>\n Still, Wall Street seems more and more eager to bet on Niccol\u2019s turnaround strategy.<\/p>\n If Starbucks can combine higher traffic growth with lower operating expenses, the company\u2019s profit recovery might stretch well beyond the next several quarters.<\/p>\n That is a tougher possibility for investors to dismiss.<\/p>\n Related: Starbucks delivers tough update on regional offices, cuts 100s of jobs<\/strong><\/p>\n #Starbucks #powerful #Wall #Street #reality #check<\/p>\n","protected":false},"excerpt":{"rendered":" Starbucks (SBUX) has spent most of the past year attempting to convince Wall Streetthat its turnaround strategy is finally starting to pay off. The coffee giant has been slashing costs,… <\/p>\n","protected":false},"author":1,"featured_media":3071,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[246],"tags":[5238,2166,1384,1005,379,1152],"class_list":["post-3070","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-popular","tag-check","tag-powerful","tag-reality","tag-starbucks","tag-street","tag-wall"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/3070","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3070"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/3070\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/3071"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3070"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3070"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3070"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}TD Cowen sees stronger earnings and margins for Starbucks<\/h2>\n
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Starbucks turnaround<\/strong> key numbers<\/h3>\n
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![](\"https:\/\/www.thestreet.com\/.image\/NDA6MDAwMDAwMDAzMDQ3MDkw\/houston-texas-may-20-2024-the-starbucks-at-iah-terminal-c-stockpack-gettyimages.jpg?profile=rss\")
Starbucks stock<\/strong> now faces a major execution challenge<\/h2>\n