What Starbucks (SBUX) Said on Its Q4 Earnings Call

Key Points

• Starbucks delivered a strong fiscal 2026 fourth quarter: Global comparable sales rose 7.2%, operating margin expanded to about 14%, and EPS increased 54% to $0.80. Full-year EPS climbed 27% to $2.72.
• Fiscal 2027 guidance calls for continued earnings growth despite lower reported revenue. Revenue is expected to decline about 1%, primarily because China’s transition to a licensed joint venture removes previously consolidated retail sales; EPS is projected at $3.15–$3.25, with roughly 1,200 new stores planned.
• Management said its “Back to Starbucks” turnaround is becoming a growth strategy, supported by store remodels, record Rewards membership, menu innovation, technology upgrades and cost savings. The company also raised its quarterly dividend to $0.63 per share.

Starbucks NASDAQ: SBUX reported fourth-quarter fiscal 2026 results marked by higher comparable sales, expanded operating margins and a sharp increase in earnings per share, while outlining fiscal 2027 targets that call for continued earnings growth despite lower consolidated revenue tied largely to changes in its China reporting structure.

Chairman and Chief Executive Officer Brian Niccol said the company’s “Back to Starbucks” effort has progressed from a turnaround plan into a growth strategy. “Our plan is working,” Niccol said, citing stronger coffeehouse execution, customer engagement, menu innovation and a more disciplined store portfolio.

Fourth-Quarter and Full-Year Results

Fourth-quarter consolidated net revenue was $9.1 billion, down 3.9% from a year earlier. Chief Financial Officer Cathy Smith said the decline primarily reflected the midyear transition of Starbucks China from company-operated retail operations to a licensed joint venture. China’s retail operations are now deconsolidated, with Starbucks reporting its 40% joint-venture economics through income from equity investees.

Global comparable sales rose 7.2% during the quarter, representing Starbucks’ fifth consecutive quarter of positive comparable-sales growth. U.S. comparable sales increased 7.7%, including a 2.4% rise in transactions and a 5.2% increase in average ticket. North America revenue rose 6.3% to $7.3 billion.

Fourth-quarter consolidated operating margin expanded 450 basis points year over year to about 14%, while North America operating margin expanded 440 basis points to approximately 16%. Smith attributed the improvement principally to sales leverage, disciplined execution, cost savings and the anniversary of Green Apron Service labor investments made in the prior year. Higher product and distribution costs, primarily related to product mix, partially offset those benefits.

Fourth-quarter earnings per share increased about 54% to $0.80. Interest and other income totaled $59.2 million, benefiting from net gains on certain investments, while the effective tax rate was 24.7%.

For fiscal 2026, Starbucks reported consolidated revenue of $37.9 billion, up 2.1%. Global company-operated comparable sales increased 6.2%, including 6.5% growth in the U.S. and 3.7% internationally. Consolidated operating margin expanded 200 basis points to 11.9%, and annual earnings per share rose approximately 27% to $2.72, exceeding the high end of the company’s guidance.

Operations, Loyalty and Store Portfolio

Niccol said more than 80% of North America company-operated coffeehouses posted positive comparable sales during the quarter, compared with fewer than 50% a year earlier. Inventory availability reached an all-time high, with daily delivery serving nearly 90% of North American company-operated locations.

The company completed more than 1,700 coffeehouse “uplifts” across North America by fiscal year-end. These remodels are intended to restore warmer interiors, seating and the company’s “third place” experience. Niccol said uplifted stores have continued to show transaction gains across access points, dayparts, formats and loyalty groups.

Starbucks Rewards reached a record 36 million 90-day active members, with members moving into higher-frequency tiers. Smith said Rewards members led the company’s transaction and sales growth in the quarter. The company also said U.S. delivery revenue has more than tripled over the last five years, with delivery transactions viewed as largely incremental.

Starbucks ended fiscal 2026 with 41,607 global coffeehouses, following 617 net new openings for the year. North America ended the quarter with 18,176 locations, reflecting 247 company-operated net closures, mostly tied to recent portfolio actions, partially offset by 52 net licensed openings. International ended the quarter with 23,431 coffeehouses, including 498 net new openings during the fourth quarter.

Fiscal 2027 Outlook

For fiscal 2027, a 53-week year, Starbucks expects consolidated net revenue to decline approximately 1% year over year. The outlook includes roughly $700 million of revenue from the 53rd week, but the expected revenue decline is driven primarily by the comparison with China retail revenue included in the prior year’s first half.

• North America comparable-sales growth of approximately 4%.
• Consolidated operating margin of 13.5% to 14%.
• Earnings per share of $3.15 to $3.25, representing growth of nearly 18% at the midpoint.
• Approximately 1,200 net new coffeehouses globally, including about 1,100 international openings.
• Capital expenditures of approximately 5% of net revenue.
• About $1 billion in planned share repurchases.

Smith said the earnings outlook includes a benefit of slightly more than $0.10 from the 53rd week. Starbucks expects North America revenue growth to slightly exceed comparable-sales growth for the full year due to that additional week, although revenue growth is expected to trail comparable sales during the first three quarters because of recent company-operated store closures.

The company expects international to account for the bulk of new unit growth, with China contributing about half of international openings. North America is expected to add 90 to 100 net new locations, about half of which will come from licensed stores. Niccol said the company expects fewer company-operated openings in fiscal 2027 while it rebuilds its development pipeline, but aims to return to more than 300 annual U.S. new units in fiscal 2028.

Growth Priorities

Management identified five fiscal 2027 priorities: improving coffeehouse fundamentals through Green Apron Service; increasing brand and menu relevance; building digital and operational capabilities; expanding with greater discipline; and creating more advancement opportunities for employees.

Starbucks plans to modernize staffing, scheduling and point-of-sale systems, begin integrating delivery directly into its app in the second quarter, and allow customers to earn and redeem Stars on delivery orders. The company also plans to test artificial-intelligence tools in drive-thrus to help baristas input orders more accurately and efficiently.

Menu plans include functional and zero-sugar beverages, bakery products, portable items and protein-focused offerings. Niccol cited protein beverages, Energy Refreshers and food products built around the company’s bites business as examples of platforms intended to support growth beyond limited-time offers.

Starbucks also expects to complete more than 2,000 North American coffeehouse uplifts in fiscal 2027. Smith said the company has realized more than half of its previously identified $2 billion gross savings program, with additional savings expected increasingly in cost of goods sold and operating expenses through fiscal 2027 and fiscal 2028.

The company raised its quarterly dividend to $0.63 per share, marking its 16th consecutive annual dividend increase.

About Starbucks (NASDAQ:SBUX)

Starbucks Corporation is a global specialty coffee company headquartered in Seattle, Washington. Founded in 1971, the company operates and licenses coffeehouses under the Starbucks brand, serving brewed coffee, espresso beverages, teas, cold drinks, food, and other ready-to-consume products.

In addition to its company-operated and licensed stores, Starbucks sells packaged coffee, tea, and single-serve products through grocery retailers, convenience stores, and other distribution channels.

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