Starbucks CEO sees the turn in the turnaround as human touch sings

“I believe what we see with folks is when you give them an experience that they feel is unique, differentiated, special—a little touch of luxury, it goes a long way,” Niccol told analysts on the company’s second-quarter fiscal 2026 earnings call. “And we’re seeing that play out with every income cohort.”

Niccol’s comments came as Starbucks reported its first simultaneous top- and bottom-line growth in more than two years—revenue rose 9% from a year earlier to $9.5 billion, while net earnings surged 33% to $510.8 million. In premarket trading, shares climbed roughly 4.6%.

The numbers that stood out most were on the ground. U.S. comparable store sales jumped 7.1%, driven by transaction growth of more than 4%—the strongest such performance in three years. Morning traffic, long the lifeblood of the Starbucks model, climbed back to roughly fiscal 2022 levels. Global comps grew 6.2%, and all 10 of Starbucks’ largest international markets, including China, posted positive comps for the first time in nine quarters. Niccol said it reflects “the reality that more and more customers are interested in drink experiences, whether that’s morning rituals or afternoon experiences.”

The human touch

At the heart of the recovery is something decidedly low-tech: better-trained, better-staffed, better-motivated baristas. Since taking over in late 2024, Niccol has focused on addressing a litany of customer complaints—from long waits for drinks to a lack of seating—under a strategy he calls “Back to Starbucks.” The company’s internal “Grow” scorecard, which tracks performance across sales, throughput, staffing, customer satisfaction, and food safety, has shown a surge of more than 30 percentage points in the share of U.S. stores hitting its benchmark since the program launched in October.

The results have reframed one of the persistent anxieties about the Starbucks brand: that its premium price point would buckle under pressure from a cost-squeezed consumer. It’s an anxiety with real grounding: The K-shaped economy has grown more pronounced, with Bank of America data showing households earning under $75,000 are spending less on discretionary expenses compared to 2019, while those earning over $150,000 are increasing spend. And some economists now warn the bifurcation is deepening into an “E-shaped” economy, in which even middle-class consumers are under strain.

The splurge thesis

While some analysts had worried about belt-tightening by lower-income customers, Niccol said Starbucks saw gains in visits across all income levels. For low-income shoppers seeing Starbucks as a bit of a “splurge,” Niccol said the company is working hard to make sure it earns that status. For others who make Starbucks a daily or semi-daily “ritual,” Niccol said the feedback is positive in terms of speed and consistency.

“If it’s on the low-income side, where it is seen as a bit of a splurge or a little bit of indulgence,” he said, “by all means, we need to have those drinks that they want, and then we need to give them the experience where they feel like, you know what, for their hard-earned dollars it was well worth the spend.”

The thesis maps onto a broader pattern in retail’s luxury-affordability divide: Brands that deliver emotional or experiential value are outperforming undifferentiated ones, as consumers in every bracket make increasingly selective choices about where to splurge.

It also aligns with a provocative argument from University of Chicago behavioral economist Alex Imas, who told Fortune earlier this month as AI commoditizes more of the economy, spending will migrate toward what he calls the “relational sector”—goods and services where the human element, the experience, and the social meaning matter most. Imas even used Starbucks as his central analogy: people will pay for things that have a distinct human touch, and middle-class consumption patterns tomorrow will look like wealthy ones today. Niccol, with his Green Apron baristas and his “little touch of luxury” philosophy, appears to be betting on the same thing.

The Starbucks Rewards program is also firing again. The 90-day active membership base hit a record 35.6 million in Q2, up 4% year-over-year, bucking what is typically a seasonally soft quarter for enrollment. A new 60-star redemption tier has become the most-used reward, accounting for roughly a third of all redemptions.

Reasons for caution

Still, Niccol and CFO Cathy Smith were careful not to declare full victory. The U.S.-Iran war and its knock-on effect on gas and utility prices loomed over the call as a variable the company cannot control.

“We haven’t seen a lot of the macro effects trickle into consumer behavior as it relates to Starbucks,” Niccol said. “But I think we want to be cautious going forward because we’re not sure how this will play out as the issues continue to happen.”

Smith echoed the concern: “While history demonstrates the resilience of our brand through periods of high gas prices, the current macroenvironment brings heightened uncertainty to our operating landscape and consumer behavior more broadly.”

To be sure, aspirational spending is typically the first thing consumers cut when gas prices rise and economic anxiety spikes. Starbucks saw that dynamic play out painfully in fiscal 2024 and 2025 as its same-store sales cratered. The company has worked hard to earn back that trust, but it has not yet demonstrated it can hold traffic gains through a genuine macro downturn.

Coffee cost inflation—running nearly $1 per pound above year-ago levels—and tariff pressures added to the near-term headwinds, though both are expected to ease in the back half of the fiscal year. On the strength of the quarter, Starbucks raised its fiscal 2026 same-store sales growth outlook to 5% or better.

“We believe this quarter reflects the turn in our turnaround, but we know there is more work to be done,” Niccol said. “We know the path forward will not be linear, but it is clear the changes we’re making and the momentum we’re building are starting to compound.”

For this story, Fortune journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.