Starbucks shares climb as CEO Brian Niccol instills confidence that a revival is underway

Starbucks s rose more than 3% in ext trading on Tuesday, even though the coffee chain reported mixed quarterly results

Despite this, we heard enough positives to confirm that CEO Brian Niccol's turnaround remains firmly on track

Revenue increased 3.8% year over year to $9.46 billion in the fiscal 2025 third quarter, beating the $9.31 billion expected by analysts, according to LSEG

Given one-time costs in the quarter primarily associated with a leadership conference in Las Vegas, it's not if the reported EPS figure is comparable to the LSEG consensus estimate of 65 cents

SBUX YTD mountain Starbucks' year-to-date stock performance

Bottom line When you analyze an earnings report of a company in the early stages of a turnaround, you must remember to grade it on a curve

The results will be uneven, especially in the quick service restaurant industry, because some stores are upgraded well before other locations

In that context, it's no surprise that Starbucks dered another messy quarter, but there were signs of stabilization with seven of its top 10 outside the United States dered positive same-store sales growth, which is a good sign for the future because, right now, the bulk of Niccol's revitalization efforts are focused domestically

Same-store sales — sometimes also called comparable store sales, or comps — is a critical metric in the restaurant industry

More importantly, Starbucks' last three months were more figuring out what changes to make to set it up for long-term success

Niccol described this dynamic perfectly on the earnings call when he said, "this quarter was really all laying the operational foundation for Starbucks." Starbucks appears to have found the right strategy to return to positive comparable sales growth through its "Green An Service" apach

This initiative, which is the largest investment in company history, focuses on investments in labor and nology to imve the customer experience and speed up service times

Starbucks (SBUX) Why we own it: Starbucks has one of the most recognizable brands of any restaurant

But over the last few years, operations have been challenged by store inefficiencies and a slow recovery in China

Under the leadership of turnaround artist Brian Niccol, we expect operations will imve and return to growth

Competitors: Dunkin, McDonald's, Panera, Dutch Bros

Initiation date: Aug. 22, 2022 Portfolio weight: 2.53% Most recent buy: April 22, 2025 The Green An Service is eight weeks into its 1,500 store test gram, the company said, and so far, the results have been highly encouraging

Coffee houses with the Green An Service are outperforming legacy stores in transactions, sales and customer wait times

Thanks to these results, Niccol and his team decided to accelerate its rollout and begin fully scaling it across all U.S. company-operated stores in mid-August

This is what matters most Tuesday, which is why we argue grading on a curve is necessary

The overall results, especially on operating margins, still leave a lot to be desired

It also marked the sixth straight quarter of negative comps

However, if the pilot gram's success translates to other stores across the country, visibility into when Starbucks will return to positive same-store sales just got a whole lot er

Starbucks is headed in the right direction, with the percentage of company-operated cafes with positive full-day transaction comps and positive morning transactions imving for the third straight quarter

Based on everything we saw and heard Tuesday, this quarter marked another step in the right direction of building a better company, which is why we are reiterating our buy-equivalent 1 rating

But margins remain heavily under pressure as the company invests in its "Back to Starbucks" initiative and adds workers to stores

Still, Niccol is bullish the future. "While our financial results for the quarter don't yet reflect all the gress we've made, I see meaningful signs from across our U.S. that we're on the right path," he said

Niccol's main focus is to fix the company's brand image, customer experience inside cafes, and throughput, which is a measure of how many customers are served in an hour — trusting that imved financial results will from these remedies

We agree and think a number of data points the company cited are leading indicators of better results in the quarters ahead

These include increased engagement scores with cafe employees and coffee house leaders; imved hourly partner turnover, meaning they're staying on the job longer; a record shift completion percentage; and a decline in customer complaints

A few other changes management announced Tuesday were plans to end its mobile order and pickup-only concept stores in fiscal 2026, and new innovations tein cold foam

Turning to the international , the sales results were OK but slightly underperformed expectations

Results in China — long viewed as a key growth market but lately a thorn in its side — were actually pretty decent

This was the third consecutive quarter of revenue growth in the region

Both comps and transactions imved two percentage points over the fiscal second quarter

Management cited beverage innovation and new customization options as drivers of the increased customer frequency

On the call, Niccol once again expressed that the company is trying to find a strategic partner for its in China but will only enter a transaction if it makes sense

Niccol said he's received interest from more than 20 parties and is evaluating options

We trust Niccol will make the decision that's best for holders and long-term value creation

Guidance The company's guidance for the full fiscal 2025 remains susp but management said they plan to hold an investor day in the second quarter of fiscal year 2026 — meaning between January and March of next year — to outline long-term plans. (Jim Cramer's Charitable Trust is long SBUX

See here for a full list of the stocks.) As a r to the CNBC with Jim Cramer, you will receive a trade alert before Jim makes a trade

Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio

If Jim has talked a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade

THE ABOVE INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER

NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION VIDED IN CONNECTION WITH THE

NO SPECIFIC OUTCOME OR FIT IS GUARANTEED.