Starbucks just posted its best quarter in years. Foot traffic is up. Sales are up. Profits are up.
But Starbucks (SBUX) CEO Brian Niccol isn’t celebrating with coupons.
When Niccol took the helm in late 2024, one of his first moves was to slam the brakes on the discount-heavy approach that had quietly become the company’s default growth tool.
The message he’s been sending ever since?
Discounts don’t build loyalty. They erode it. That thinking is now showing up in the numbers.
Starbucks was hooked on discounts
For years, Starbucks leaned hard on promotional deals and reward giveaways to drive traffic. The problem, as Niccol saw it, was that the brand started feeling like a coupon book rather than a coffeehouse.
When he stepped in, he was direct about what he found. The rewards program had become a vehicle for deep discounts rather than genuine engagement.
Customers were coming for the deal, not the experience. And once the deal dried up, so did their visits.
“This needed to be about engagement. This needed to be about personalization, and this needed to be about recognition,” Niccol said.
Bloomberg/Getty Images
The contrast with his predecessor’s approach couldn’t be sharper. Under previous leadership, Starbucks had ramped up promotional activity in an attempt to win back flagging traffic.
It worked briefly. But it trained customers to wait for discounts, which crushed margins and diluted the brand.
Niccol’s answer was to strip the program back and rebuild it around tiers and recognition, not price cuts.
The numbers that back up Niccol’s bet
The fiscal second quarter results were hard to argue with.
- Starbucks reported earnings of $0.50 per share on an adjusted basis, well ahead of Wall Street’s estimate of $0.43 per share.
- Total revenue came in at $9.53 billion, beating expectations of $9.16 billion.
- Net income climbed to $510.9 million, up from $384.2 million in the same period last year.
- U.S. same-store sales grew 7.1%, driven by transaction growth of more than four percentage points. That’s the strongest traffic performance in three years.
The company also raised its full-year outlook.
Starbucks now expects global and U.S. same-store sales to rise at least 5% in fiscal 2026, up from its earlier projection of 3%.
More retail:
- Walmart expands access to weight management support & GLP-1s
- Did Coachella make money in 2026?
- Gatorade is making a major ingredient change
Adjusted earnings per share guidance was lifted to a range of $2.25 to $2.45, up from $2.15 to $2.40.
SBUX stock rose roughly 7% following the results.
Notably, most companies have been pulling back on full-year guidance in recent weeks, spooked by rising fuel costs and trade tensions.
The rewards overhaul is working
One of the clearest signs Niccol’s no-discount strategy is gaining traction is in the loyalty program data.
Starbucks Rewards hit a f35.6 million 90-day active members in the second quarter, up 4% year-over-year.Â
That’s notable because membership typically dips in this quarter due to seasonal patterns.Â
Related: McDonald’s new drinks menu looks to take down Starbucks
The redesigned program now offers three tiers: Green, Gold, and Reserve. The program rewards customers with recognition and exclusive perks rather than blanket discounts.Â
The new 60-star redemption option, which gives members $2 off a purchase, has quickly become the most-used reward, accounting for about one-third of all redemptions.
Early data also shows a growing number of customers visiting four or more times a week since the new program launched last month. That’s the kind of habitual engagement Niccol is chasing.
“We don’t have to make our rewards program a coupon book,” Niccol said on the earnings call.
Morning traffic is back at Starbucks
The operational turnaround is real, too.
Morning sales are now roughly back to fiscal 2022 levels, after years of erosion. Growth is showing up across all income levels and age groups, including younger customers like Gen Z and millennials, with brand affinity hitting five-year highs.
The company’s Cold Foam modifier platform grew more than 40% in the second quarter across U.S. company-operated stores.
Its refresher beverages, now a $2 billion platform, are being imitated by competitors, something Niccol sees as validation rather than a threat.
Niccol acknowledged that the macro environment is uncertain. Higher gas prices haven’t changed customer behavior yet, he said, but the company wanted to stay cautious with its raised guidance. Still, the tone on the call was markedly different from a year ago.
“Q2 marked a milestone for the business,” Niccol said. “We delivered growth on both the top and bottom line for the first time in more than two years.”
The message to Wall Street, and to anyone still expecting Starbucks to compete on price, was clear: the coupon era is over.
Related: Starbucks debuts a new drink to take on energy brands