Starbucks says afternoon traffic is rising as turnaround starts to take hold

Starbucks said U.S. afternoon traffic is becoming a bigger growth engine, with the strongest growth between 3 p.m. and 5 p.m. over the 90 days ended May 16. The company also said hours after 11 a.m. generated $11 billion in U.S. sales in fiscal 2025, and management cited Refreshers as the second-best-selling beverage category behind espresso. The update supports CEO Brian Niccol's turnaround efforts and follows stronger-than-expected quarterly earnings, with shares up 21% year-to-date and TD Cowen recently raising its price target to $120 from $106.

Analysis

The important read-through is not simply that Starbucks is seeing more afternoon visits, but that management appears to be proving it can reallocate demand rather than merely discount for it. If the brand can extend dwell time and broaden daypart mix without materially impairing morning throughput, that expands the earnings base through higher labor productivity and better fixed-cost absorption, which matters more than a modest traffic uptick in isolation. The market will likely keep rewarding evidence that the turnaround is becoming self-reinforcing because incremental afternoon occasions tend to carry higher attachment rates in food and cold beverages.

The second-order beneficiary is the broader cold beverage and refreshment ecosystem, while the likely loser is any competitor relying on post-lunch impulse visits. BROS looks structurally more exposed near term because its growth narrative is still tied to a similar later-day beverage mission, but with less brand breadth and more execution sensitivity; if Starbucks is taking share in the 3-5 p.m. window, it pressures smaller chains’ customer acquisition efficiency and menu differentiation. There is also a supplier implication: sustained mix shift toward refreshers/cold beverages should tighten demand for specific syrups, dairy alternatives, packaging, and ice-related throughput inputs, which can create localized inflation in COGS and labor if the trend scales faster than operations.

The key risk is that this is a marketing-led lift that fades once novelty wears off or once weather normalizes, especially over a 1-2 quarter horizon. The bigger reversal trigger is operational slippage: if afternoon volume creates service-time deterioration, it could hurt brand perception more than it helps ticket, and the same traffic unlock becomes self-limiting. Over a 6-12 month horizon, the question is whether management can keep adding new relevant occasions without diluting the core espresso identity or leaning too heavily on promotions.

Consensus may be underestimating how much of the move is already in the stock after a strong year-to-date rerating. That creates a narrower margin of safety if the next leg of improvement is slower than the market expects. Still, the setup favors names with visible operating leverage and punishes those with a single-daypart story, making this more compelling as a relative-value trade than an outright long into earnings season.

Key Decisions for Investors

• Long SBUX / short BROS as a 3-6 month relative-value pair: Starbucks has broader monetization levers if afternoon demand inflects, while BROS is more exposed if late-day beverage share is being partially recaptured by incumbents.
• Buy SBUX on pullbacks rather than chasing strength; use a 1-2 quarter horizon and look for continuation if management confirms afternoon traffic gains and margin stability in the next print.
• Sell out-of-the-money BROS call spreads for the next 1-2 earnings cycles: good way to express skepticism that its later-day growth can outpace a larger competitor with stronger distribution and brand trust.
• If owning SBUX outright, hedge part of the position with a near-dated downside put spread into earnings: the main risk is not demand collapse but disappointment versus elevated turnaround expectations.
• Monitor cold beverage mix and labor metrics closely; if average ticket rises while service times stay contained, add to SBUX, but if throughput degrades, reduce exposure quickly because the afternoon thesis becomes self-defeating.