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Starbucks Rebounds with Strong First Quarter, Boosted by Holiday Sales and Viral Cup
Starbucks Corporation reported an impressive fiscal first quarter, with same-store sales increasing 4% for the October-December period, significantly outpacing the 2.3% growth analysts had predicted. The strong performance sent shares of the Seattle-based coffee giant surging more than 6% in pre-market trading on Wednesday.
The company’s U.S. operations showed particular strength, with domestic same-store sales also rising 4%, driven by a 3% increase in customer transactions and a 1% uptick in spending per visit. This marks Starbucks’ best U.S. performance in two years, signaling a potential turnaround after recent struggles.
“We have a plan, we are working the plan, and the plan is working,” Chairman and CEO Brian Niccol told investors during a conference call. “The shine is back on our brand, both in the U.S. and around the world.”
Niccol, who took the helm at Starbucks last year, pointed to several strategic initiatives that contributed to the positive results. The company has focused on improving store operations by adding staff and equipment to enhance service speed and customer experience. Additionally, Starbucks has been revamping its physical locations, with approximately 200 stores already redecorated and plans to update more than 1,000 by fall 2024.
The holiday season proved particularly lucrative for Starbucks, with the company achieving record revenue during its seasonal launch week. A standout success was the limited-edition glass Bearista cup, priced at $29.95, which sold out almost immediately after release. The popularity of these collectibles has created a secondary market, with authentic Bearista cups reportedly selling for as much as $119.99 on eBay.
This strong performance came despite a one-day strike by over 1,000 unionized Starbucks workers, who attempted to disrupt the company’s annual Red Cup Day—typically one of its busiest days. The labor action closed some locations briefly but appeared to have minimal impact on overall results.
Starbucks also benefited from its September decision to close nearly 600 underperforming stores across North America, redirecting resources to more profitable locations. This strategic consolidation appears to have shifted customer traffic to remaining stores, contributing to the improved same-store sales figures.
Beyond domestic operations, Starbucks saw impressive growth in China, where same-store sales increased 7%. This comes as the company restructures its Chinese business through a recently announced joint venture with Boyu Capital, a Chinese investment firm. Under the agreement, Boyu will acquire a 60% interest in Starbucks’ Chinese retail operations, valued at $4 billion, while Starbucks maintains a 40% stake and ownership of its brand rights.
Overall, Starbucks’ quarterly revenue rose 6% to $9.9 billion, exceeding analyst expectations of $9.65 billion. However, the company faced margin pressures from increased labor investments and coffee tariffs. Chief Financial Officer Cathy Smith noted that some of these cost pressures should ease as 2024 progresses, particularly following President Trump’s November announcement eliminating U.S. tariffs on coffee and other commodities.
Despite the strong top-line performance, Starbucks’ adjusted earnings of 56 cents per share fell short of the 59 cents Wall Street had expected, suggesting ongoing challenges in cost management.
Looking ahead, Niccol cautioned that the company’s recovery might not follow a linear path but expressed confidence in Starbucks’ long-term trajectory. The company projects global same-store sales and revenue to grow by at least 3% in its 2026 fiscal year, a marked improvement from the 1% decline in global same-store sales recorded in its previous fiscal year.
As Starbucks continues implementing its turnaround strategy, investors and industry observers will be watching closely to see if this quarter’s positive momentum represents a sustainable recovery for the coffee giant.
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9 Comments
Starbucks’ rebound is impressive, especially in the crucial US market. The viral bear cup stunt was clever, but their strategic initiatives around staffing and service seem to be the real drivers. I’ll be watching to see if they can maintain this momentum.
Starbucks’ strong first quarter results are a good sign for the company’s turnaround efforts. Improving store operations and customer experience seems like a wise strategy. I’ll be curious to see if they can keep this momentum going.
The viral bear cup was a stroke of marketing genius, no doubt. But Starbucks’ focus on enhancing operations and customer experience is even more promising for long-term growth. Let’s see if they can keep this positive trend going.
Starbucks is clearly making the right moves to win back customers. Improving service speed and experience is key in the competitive coffee market. I’m curious to see what other tactics they have up their sleeve.
Glad to see Starbucks making a comeback after recent struggles. Enhancing store operations and customer experience seems like a smart strategy. I’m curious to see what other innovations they have planned to keep the brand fresh.
The viral bear cup must have been a savvy marketing move by Starbucks. It’s always interesting to see how consumer trends and social media can drive sales. I wonder what other creative ideas they have in the works.
The holiday season and viral bear cup certainly gave Starbucks a boost. But it’s also encouraging to see them focus on enhancing the in-store experience. Maintaining that level of performance will be the real test.
Interesting to see Starbucks bounce back so strongly. The viral bear cup must have really captured people’s imagination! I wonder what other creative marketing ideas they have up their sleeve.
The rebound in Starbucks’ US performance is impressive. 4% same-store sales growth is no small feat. Seems their focus on improving service and experience is paying off. I’ll be watching to see if they can sustain this momentum.