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Starbucks might have solved one its biggest problems

Brian Sozzi
Editor-at-Large

Starbucks might have finally solved one of the biggest problems holding its sales back in the U.S. — how to get people to drink highly-caffeinated coffee in the afternoon.

By introducing new iced beverages in the afternoon and offering discounts on drinks purchased in non-morning hours to rewards members, Starbucks’s afternoon sales improved for the third straight quarter, the coffee giant told analysts on a Thursday evening conference call.

“We have seen when we introduced more of our cold beverage innovations, it's improving afternoons, and our non-Starbucks rewards members tend to chat with us in the afternoon,” Starbucks chief operating officer Roz Brewer said.

Brewer added, “We believe we will continue to see that based on the kind of beverage innovation that we are seeing.

Wall Street generally applauded the signs of life in the afternoon.

“Starbucks has had that problem [in the afternoon] for a while,” Wedbush analyst Nick Setyan said on Yahoo Finance’s ‘The First Trade.’ Setyan added the incremental improvement is welcome.

Some long overdue momentum in the afternoon for Starbucks did its part to boost its U.S. same-store sales, which rose a solid 4% in the three months ended March 31.

Coupled with a fresh round of cost cuts and an improved sales trend in China, Starbucks was able to beat Wall Street profit estimates by 4 cents a share for the fiscal second quarter.

Starbucks stock was relatively unchanged on Friday’s session despite the profit beat.

All eyes now turn to rival Dunkin’ Brands when it reports first quarter earnings on May 2.

Similar to Starbucks, Dunkin’ has offered discounted hot and iced drinks in the afternoon to boost its long-sagging sales in those hours. Given Starbucks’s new-found success in the afternoon, Dunkin’ best deliver as well ... or investors could voice their concern.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow him on Twitter @BrianSozzi

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