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Starbucks is the world’s largest coffee chain, with 21,000 company-operated stores and 19,000 licensed locations worldwide as of late 2024. Nearly half of its company-owned outlets are in the U.S. Its cafés serve hot and iced coffee, espresso drinks, tea, and specialty beverages, along with breakfast items, sandwiches, and baked goods. Starbucks is also a major coffee roaster and wholesaler, selling packaged coffee and tea in its cafés and through grocery and retail channels. The company recently launched a turnaround plan, “Back to Starbucks,” focused on improving the in-store experience and encouraging customers to spend more time at its locations.

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Starbucks (SBUX): Company Profile, Stock Price, News, Rankings

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Starbucks

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Good afternoon, and welcome to Starbucks' Fourth Quarter and Full Fiscal Year 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. I will now turn the call over to Catherine Park, Vice President of Investor Relations. Ms. Park, you may now begin your conference.

Good afternoon, and thank you for joining us today to discuss Starbucks' fourth quarter fiscal year 2026 results. Today's discussion will be led by Brian Niccol, Chairman and Chief Executive Officer, and Cathy Smith, Executive Vice President and Chief Financial Officer. This conference call will include forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factors discussed in our filings with the SEC. Starbucks assumes no obligation to update any of these forward-looking statements or information.

Certain metrics referenced on today's call are non-GAAP and measured in constant currency. Please refer to the earnings release on our website at investor.starbucks.com to find reconciliations of these non-GAAP measures to the corresponding GAAP measures and supplemental financial information. This conference call is being webcast, and an archive will be available on our website through Friday, December 11, 2026. For calendar planning purposes, please note that our first quarter fiscal 2027 earnings conference call is tentatively scheduled for Wednesday, January 27, 2027.

Good afternoon, and thanks for joining. We closed fiscal 2026 with another terrific quarter and a much stronger Starbucks than we had a year ago. Back to Starbucks started as a turnaround plan, and now Back to Starbucks is our growth plan. In Q4, our net revenues were $9.1 billion, down 3.9% year-over-year, reflecting the mid-year transition of our China business to a licensed model. Global comps were up 7.2%, marking our fifth consecutive quarter of comp growth, and U.S. comps were up 7.7%. Consolidated operating margin expanded 450 basis points year-over-year to 14%, our third consecutive quarter of margin growth, and earnings per share grew approximately 54% to $0.80. For the full year, consolidated net revenues grew to $37.9 billion, up 2.1%. Global company-operated comps were up 6.2%, with U.S. comps up 6.5% and international comps up 3.7%.

Consolidated operating margin expanded 200 basis points to 11.9%, and earnings per share grew approximately 27% to $2.72, exceeding the high end of our guidance. These results reflect a relentless focus on executing our Back to Starbucks strategy. Two years ago, we committed to getting Back to Starbucks and delivering our brand promise more consistently. We put the customer at the center of every decision. We gave our partners more support. We got clear on what matters. We restored the third place, and we put Starbucks back on its front foot. Our plan is working. More customers are visiting us because the Starbucks experience is better. Our coffeehouses are coffeehouses again. Our partners are creating more moments of connection. Our brand is more visible, relevant, and loved. Our licensed and channel development businesses are extending our reach to more places and occasions.

More of our sales growth is translating into earnings. For more than 50 years, we've grown by delivering on the Starbucks brand promise. Exceptional coffee, human connection, and a great customer experience in a true third place. It comes down to the fundamentals. When we execute them with excellence, we grow. That's what we saw in fiscal 2026, and it's what gives me confidence in the durability of our performance for the future. We had a great quarter and a great year, and it put us ahead of schedule on our fiscal 2028 framework. As we focus on growth in fiscal 2027, we have even more opportunity ahead. Let me walk you through some of the highlights for the quarter. Starting in North America, company-operated comps grew 7.9%, driven by double-digit comps in Canada and strong comps in the U.S.

That momentum is being driven by great execution in our coffeehouses, a strong brand, and a healthier portfolio. First, our coffeehouses are coffeehouses again. We're operating with greater discipline and consistency, anchored by Green Apron Service. In the quarter, more than 80% of our North America company-operated coffeehouses delivered positive comps, up from less than 50% a year ago. Average service times remained on target, and we continue to refine Smart Queue and our operating routines to improve throughput and consistency across all access points. Inventory availability is at an all-time high, with daily delivery now reaching close to 90% of our North America company-operated coffeehouses. Our new quarterly coffeehouse incentive program is driving greater discipline around staffing and product waste while keeping teams focused on great customer service. Our leadership pipeline is also getting stronger.

We now have more than 3,000 coffeehouse coaches enrolled across our U.S. company-operated business, and they've all been hired from within the company. These positions improve leadership stability and execution, give our partners new pathways to grow, and help build the next generation of leaders to support our future growth. Second, customers are responding to a stronger, more relevant brand and menu. Starbucks brand affinity is at near record levels as our menu innovation, marketing, and merchandise continue to create moments that drive culture and bring people into our coffeehouses. Espresso, Refreshers, matcha, and our artisanal baked case showed continued strength in the quarter. Our Unicorn launch in August united 34 markets for our first global coffeehouse activation and delivered a record sales weekend for our North America company-operated business.

We followed that with our strongest North America fall launch day, and our global Peanuts collaboration demonstrated the power of great merch, delivering robust sales days around the world. Our U.S. company operated comp growth remained balanced with contribution from both ticket and transactions. 90-day active Starbucks Rewards members reached a record 36 million, growing both year-over-year and sequentially from Q3. Sales growth remained broad-based across income levels, generations, and day parts. Together, these results tell us the Starbucks Experience is resonating. Our coffeehouses feel more like Starbucks too. As of fiscal year-end, we surpassed our goal by completing more than 1,700 total uplifts across North America, bringing back warmth, comfortable seating, and the third place to our cafes. Uplifted coffeehouses continue to show transaction lift across access points, day parts, formats, and loyalty groups, giving us confidence to continue our pace of work.

Third, we're building a healthier coffeehouse portfolio. In North America, we closed coffeehouses that didn't show a path to delivering the experience or financial performance we expect. We also unveiled our smaller format coffeehouses in multiple markets, taking the concept we showcased at Investor Day from prototype to reality in less than a year. Customer and partner feedback has been terrific, and we'll learn from these early openings to help shape how we build for the future. International is an important growth engine for Starbucks. Our diversified portfolio remained a key strength in Q4, with comp sales growth across the majority of our licensed and company-operated markets, led by the U.K., Philippines, and Mexico. Our increasingly licensed international model, which combines the power of Starbucks with the deep market expertise of local operators, underpinned our unit growth. China exceeded its goals in fiscal 2026.

We surpassed 6,000 coffeehouses in Asia Pacific, and we grew to more than 1,900 in Latin America and the Caribbean, bringing Starbucks premium coffee experience to nearly 500 new communities. Our progress through fiscal 2026 reinforces what we know. We know what makes Starbucks special. We know Back to Starbucks drives growth, and we know how to win. For fiscal 2027, we will raise the bar. We enter the new fiscal year on a stronger operational footing and with momentum. At a high level for fiscal 2027, we expect North America comps of approximately 4%, consolidated operating margin of 13.5%-14%, and EPS of $3.15-$3.25. To deliver these results, five priorities will drive our work. First, win on the fundamentals in the coffeehouse through Green Apron Service. That means building capacity to deliver exceptional Green Apron Service to more customers.

We see room to grow transaction across every day part in our coffeehouses by extending our peak in the morning and creating a peak in the afternoon. To do this, we'll keep making Smart Queue smarter. We'll improve production flow behind the bar to unlock throughput while maintaining great craft. We'll also begin the Mastrena 3 espresso machine test and exploring next generation drive-thru concepts to improve speed and connection. It means greater operating precision. We'll keep refining how we forecast and deploy labor and how we manage inventory and product waste. We'll raise growth performance expectations while keeping our leaders focused on operating behaviors that create a meaningful third place full of community and connection and drive consistent results. It means continued investment in our partners.

Fiscal 2027 will be a major tech modernization year. We'll roll out new staffing and scheduling and point-of-sale systems through the year that simplify tasks, improve speed of service, and allow partners to spend more time engaging with customers. We're also transforming our supply chain with testing underway to improve demand forecasting, ordering accuracy, and replenishment cycles. As this work scales, it will drive greater availability, less product waste, and less work for our partners over time. Second, make our brand and menu even more relevant and loved. We'll drive mass reach through effective marketing to bring in new and lapsed customers while continuing to nurture our Starbucks Rewards members. We'll keep winning the morning and earning the afternoon with planful innovation, building scalable platforms that can grow with us.

These include functional and zero sugar beverages, new bakery items, more portable options, and protein-forward choices that meet more customer needs and wants throughout the day. Great innovation strengthens the ritual and gives customers more reasons to choose Starbucks. In fiscal 2027, we'll bring beverages, food, and merchandise together in collections that create more compelling customer moments and drive greater attach. Merchandise remains a small part of our business today, but Q4 showed its potential. Both our Pink & Peanuts launches contributed to ticket growth in the quarter. We'll apply that same integrated approach to upcoming brand launches like holiday. We've learned a lot about what it takes to execute innovation well. In fiscal 2027, we'll put even greater focus on operational readiness with thoughtful builds, better training, and the right staffing to help our partners deliver with excellence.

Third, build the right experiences and capabilities for the future. Starbucks has built an exceptional digital experience and one of the world's most engaged customer communities. In the year ahead, we'll make our industry leading Starbucks app even more intuitive for customers to order, customize, and have frictionless access wherever they are. We'll update the menu experience and build more personalized touchpoints through relevant content and recommendations tailored to customer tastes and preferences. In Q2, we'll begin to integrate delivery directly into the Starbucks app, and we'll extend the opportunity for customers to begin earning and redeeming stars on delivery orders. We are working on opportunities for AI to make search and discovery in the app more seamless, with the potential to support conversational and agentic ordering over time.

We're exploring ways to make it easier for customers to place mobile orders from their cars and through emerging AI platforms. We're also working to reimagine the drive-thru experience to make it faster, more convenient, and more personal. Roughly half of our customers use the drive-thru, making it a significant opportunity. In fiscal 2027, we'll begin testing background AI models in the drive-through that help our baristas input orders more accurately and efficiently as they interact with customers. The intent is to help our partners focus on connecting with customers while improving both throughput and speed of service. We're also exploring experiences that recognize participating customers as they arrive, present personalized digital menus, and make payment more effortless. We're early in this work, and we'll test, learn, and scale what works.

Fourth, grow with discipline in the U.S. and around the world. We see significant long-term white space in North America with the opportunity to build around 5,000 additional coffee houses over time. We're focused on making disciplined decisions today that set us up for stronger, more durable growth in the future. Rebuilding our development pipeline will take time, which means we expect fewer company-operated openings in fiscal 2027 and a stronger, healthier pipeline beyond that. As we do this work, we'll continue investing in our uplift program. We expect to complete more than 2,000 uplifts in fiscal 2027. We'll also work to grow our North America license business, bringing the Starbucks experience to even more customers.

We expect international to lead our global unit growth this fiscal year, with net new coffee house openings accelerating by nearly 50% compared to fiscal 2026. That translates to about three new coffee houses a day. Beyond fiscal 2027, we see substantial room to grow our footprint outside North America from more than 23,000 international coffee houses today to nearly 40,000 over the long term. That includes the potential to double our presence in China and India with meaningful growth across other regions. Fifth, create more opportunity for partners. Our hourly partner turnover rate remains well below the industry average, driven by what third-party studies confirm are industry-leading pay and benefits, as well as improved staffing and flexible schedules that give partners the hours they want to work.

In fiscal 2027, we'll expand coffee house coaches to more North American coffee houses, giving experienced partners more opportunities for advancement while building a pipeline of talent to support future coffee house growth. We'll pair that with more training and development opportunities and better tools for leaders to build and manage strong teams. Taken together, these priorities give us clear direction and confidence in the path ahead. Back to Starbucks started as a turnaround plan, and it put us back in a position of strength. Today, Back to Starbucks is our growth plan.

To conclude, fiscal 2026 was a tremendous year of progress and results, and it gives us confidence in our trajectory. We're ahead of schedule in relation to our fiscal 2028 framework, and we see a clear path to consistent comp growth and stronger earnings in fiscal 2027. To our partners around the world, thank you. The progress we've made reflects your focus, ownership, and belief in our brand promise. I'm confident we'll keep building on what is working, raising the bar, and bringing the best of Starbucks to even more customers around the world.

With that, I'll turn it over to Cathy to take you through our results in more detail and our fiscal 2027 guidance.

Thank you, Brian, and thank you all for joining us today. In fiscal 2026, we strengthened the fundamentals of our business, and that work is increasingly showing up in our financial performance. I'd like to also thank our partners whose focus and dedication were critical to delivering our Back to Starbucks priorities. Now to our fourth quarter results and outlook. Fourth quarter consolidated net revenues were $9.1 billion, down 3.9% year over year, primarily reflecting Starbucks China's transition from company-operated to a licensed joint venture. Global comps grew 7.2%, our fifth consecutive positive quarter. North America net revenues grew 6.3% to $7.3 billion, led by strong company-operated comps in both the U.S. and Canada. U.S. comps grew 7.7% with a healthy balance of transactions up 2.4% and ticket up 5.2%.

Contribution from transactions moderated from Q3, particularly as we began to lap the growth from last year. On a two-year basis, U.S. transaction comps improved sequentially from Q3, a sign that customers continue to choose us more often. As Brian mentioned, we delivered growth across all day parts, income levels, and access points. Ticket growth continued to reflect balanced contribution from pricing, attach, mix, and delivery growth, with pricing and mix, including merchandise, driving most of the sequential improvement from Q3. We've been very pleased with our delivery performance in the U.S., with revenues more than tripling over the past five years. These transactions have been largely incremental. Expanding delivery to more coffee houses supported our growth in fiscal 2026.

With delivery soon to be fully integrated into the Starbucks app, we see additional runway in fiscal 2027. We're also driving the engagement we want to see in our Starbucks Rewards program. 90-day active members reached a record 36 million in the quarter. More members are moving into higher frequency tiers, and Starbucks Rewards members led our transaction and sales growth in the quarter. North America licensed revenues grew 2.6% in Q4, reflecting a third consecutive quarter of positive systemwide comps and strength across broader retail, travel, and leisure. We ended the quarter with 18,176 coffee houses in North America. This reflects 247 company-operated net closures, primarily from last month's portfolio actions, and partially offset by 52 net licensed openings.

Moving to international, the segment delivered Q4 net revenues of $1.3 billion and operating income of $261.3 million, with positive systemwide comps across our diversified portfolio. International company operated comps, which are now largely comprised of Japan and the U.K., grew 0.9%. We had exceptional performance in the U.K., balanced by tougher comparisons in Japan. As a reminder, Starbucks China's retail operations are now deconsolidated from our financials and reported as a licensed business. With our 40% joint venture economics reported in income from equity investees. This transition will continue to be the driver of year-over-year changes in international through the first half of fiscal 2027.

International drove our unit growth in fiscal 2026, ending Q4 with 23,431 coffee houses, including 498 net new openings in the fourth quarter. This demonstrates our continued confidence in the long-term opportunity to grow our brand globally. In total, we ended fiscal 2026 with 41,607 coffee houses globally, with 617 net new openings for the full year, well ahead of our most recent expectations. In channel development, Q4 net revenues declined 8.9% to $494.4 million, led by the Global Coffee Alliance and the absence of coffee price-related tailwinds we saw in the first three quarters. Operating income was about flat year-over-year, despite the lower revenue base.

With consumers remaining choiceful in their spending, we and our partners will continue to lean into innovation and marketing activations to maintain our number one position in at-home and ready-to-drink coffee in North America, and to build new occasions with offerings like Refreshers and Protein. Moving to margin, Q4 consolidated operating margin expanded 450 basis points to approximately 14%. This was our third consecutive quarter of margin expansion, with improvement across every segment. North America operating margin expanded 440 basis points to approximately 16%, driven primarily by sales leverage, disciplined execution, and cost savings. We also lapped our Green Apron Service labor investments in August, which are now a part of our base. These benefits were partially offset by higher product and distribution costs, mainly from product mix.

Coffee price impacts were roughly neutral in the quarter. Consolidated G&A declined approximately 20%, reflecting our cost savings efforts and China deconsolidation. Together, these results reflect stronger execution with more of our sales growth flowing to the bottom line. Interest and other income of $59.2 million benefited from net gains on certain investments in the fourth quarter. Our effective tax rate was in line with our expectations at 24.7%. All in, fourth quarter EPS was $0.80, up approximately 54% year-over-year. Our fourth quarter and full-year results showcase our focus on executing Back to Starbucks to strengthen the business, and our earnings recovery is well underway.

Turning to our outlook, in fiscal 2027, we see multiple drivers of growth and a clear path to stronger earnings as we continue advancing our long-term priorities. As a reminder, fiscal 2027 is a 53-week year. Our guidance includes the extra week, except for sales comps, which are on a comparable 52-week basis. Starting at the top of the P&L, we expect full-year consolidated net revenues to decrease by approximately 1% year-over-year, including approximately $700 million of revenues related to the 53rd week. The expected decline is primarily driven by our international segment as we lap Starbucks China's retail operations, which were company operated in the first half of the year. Our revenue expectations also include modest coffee deflation and the impact of fewer new North America coffee house openings.

We expect full-year North America net revenue growth to slightly exceed comp growth, driven by the impact of the 53rd week. During the first three quarters of the year, we expect North America net revenue growth will trail the segment's comp growth, reflecting the recent company-operated coffee house closures. In addition, we expect Channel Development net revenues to decline by approximately 10%, also heavily influenced by coffee price trends. In the U.S., consumers are increasingly prioritizing experiences that feel worth it. That reinforces our focus on quality, craft, and connection, and on delivering a consistently great customer experience. We expect fiscal 2027 North America comps to grow approximately 4%, led by beverage and food innovation, Green Apron Service, delivery, and a small contribution from uplifts and sales transfer from coffee house closures.

Any pricing will remain focused and well below CPI. We expect fiscal 2027's cadence of U.S. comps to be more balanced across the quarters than fiscal 2026. Specifically, we expect less variability between Q1 and the rest of the year. Also moving forward, we'll focus our annual comp guidance on our North America company-operated business. It is the primary driver of our underlying comp performance as our international portfolio is now predominantly licensed. We expect fiscal 2027 consolidated operating margin of 13.5%-14%, up approximately 190 basis points at the midpoint. This is led by our North America business and supported by sales leverage and our focus on disciplined coffeehouse execution.

In addition, we remain on track with our cost savings work, which we expect to continue realizing through fiscal 2028. To date, we've realized roughly half of those gross savings. We expect benefits to operating margin to become more evident in fiscal 2027, as we now have lapped our labor investments in Green Apron Service. In G&A, we continue to realize savings from actions we took last year and expect consolidated G&A dollars to be flat to slightly down year-over-year. For international, we expect operating margin to begin the year at around 20% and improve slightly through the year, supported by sales leverage and our capital-efficient licensed model.

In Channel Development, we expect operating margin to remain in the mid to high 40% range over the longer term. For tax, we expect our effective tax rate will be roughly in line with or slightly below fiscal 2026. Putting it all together, we expect EPS of $3.15-$3.25, growing close to 18% year-over-year at the midpoint. Our guidance includes a benefit of slightly more than $0.10 related to the 53rd week. Finally, we expect approximately 1,200 net new coffee houses globally in fiscal 2027. International is expected to drive much of this growth at approximately 1,100 net new openings, with China contributing about half.

In North America, we expect 90-100 net new coffee houses for the year. About half is expected to come from our licensed portfolio. The balance is expected to come from our company-operated business as we rebuild the development pipeline Brian discussed. Fiscal 2027 is an important step toward our fiscal 2028 framework. We're tracking ahead of pace toward our 2028 goals, and we remain focused on building from here. Our capital allocation priorities remain investing in the business with discipline, maintaining our investment-grade balance sheet, and supporting a competitive dividend. We recently raised our quarterly dividend to $0.63 per share, our 16th consecutive annual increase.

We also expect to deploy approximately $1 billion towards share repurchases, reflecting our confidence in the business and our plan. In fiscal 2027, we expect Capital Expenditure to be approximately 5% of net revenues, primarily as we continue investing in uplifts and our Back to Starbucks priorities. To conclude, fiscal 2026 demonstrated the meaningful progress we're making and gives us confidence in the path ahead. Back to Starbucks has moved us from turnaround to growth, and our priorities are clear. We're focused on executing with discipline and delivering sustainable growth and long-term shareholder value.

With that, we are now ready to take your questions.

We will now begin our question and answer session. If you would like to ask a question, press star, then the number one on your telephone keypad. In order to allow as many questions as possible, we ask you to please limit yourself to one question at a time. We will come back for follow-up questions as time allows. Your first question comes from Brian Harbour with Morgan Stanley. Please state your question.

Yeah, thanks. Good afternoon, guys. In guiding 4% same-store sales this year, that is very specific. You had kind of the 3%+ algo. Should we think about that as being, you essentially view this as an on algo year plus maybe some of the benefit from closures and uplifts that you stated. Could you just comment on whether you are seeing something akin to that right now as we enter the fiscal first quarter and just, I guess, more broadly, what do you view as kind of the most important incremental layers as we go into this year?

Yeah. Look, thanks for the question. No, the way to think about it is our guidance for fiscal year 2027 is really built on the strength of the fundamentals of the business, really driven by Green Apron Service, coupled with a really strong Rewards and digital program, and then obviously the marketing menu innovation that we have going on. So, the way I look at it is we are probably a year ahead of schedule relative to the guidance we gave for fiscal year 2028. We just see strength in the business that gave us the confidence to commit to 4% comps. Obviously, I think our goal always is to continue to build on the strength that we have.

The good news is that strength is coming through the fundamentals. I cannot emphasize that enough. Hopefully, you heard that in my prepared remarks. The business is on really strong footing, and it is driven by operational health.

Thank you. Your next question comes from Danilo Gargiulo with Bernstein. Please state your question.

Great. Thank you. I was wondering if you can comment on the evolution of margins in 2027. How should we think about the puts and takes? I heard you say expectations on deflationary coffee. If you can also indulge us in maybe expanding on the $2 billion saving opportunities that you have identified in the past. If you could give us some examples of incremental savings that you could be unlocking from here on, excluding the sales leverage that is coming with that. And congrats.

Thanks, Danilo, and I appreciate the congrats. Thank you. So a little bit of color on 2027 margin, as we shared in the prepared remarks, you will not see as much variation as you saw in 2026. As you know, we had a lot of change moving through our P&L last year. So going into 2027, it will be a little bit more balanced. I guess, all in, probably about a little bit better than 40%-45% or so is in the first half. The remainder is in the back half. But it is fairly balanced throughout the course of the year. Then to really answer about savings, we are really pleased with our savings program.

As we shared in the prepared remarks, we are over 50% of the $2 billion gross savings program achieved. This year, more towards G&A, as we always shared. Next would be OpEx and then cost of goods sold. Cost of goods sold is the one that we always said would be more into 2027 and 2028, and that is exactly what we are going to see, is you are going to start to see it weight more there because of just the realities of getting new products online, with new vendors. Sometimes we have to let existing contracts finish. Just getting that to pull through our business, the cost of goods sold start to show up in 2027 and 2028 more.

We are on track. We feel very, very good. Still have a very robust pipeline. The team continues to add to that every day. You are going to see a little bit more in cost of goods sold and then operating expenses. Lastly would be G&A, because you have seen the most of that this year. We will have a little bit of benefit from the calendarization of the work we did this year.

Yeah. The only thing I would add to what Cathy said is just if you remember at our Investor Day, we targeted the idea of 13.5%-15% margins by fiscal year 2028. I think the fact that we are already believing we will achieve that low end of that guidance in fiscal year 2027 speaks to, I think, the excellent work on the cost, but also, the fundamentals that are driving the top line in transaction. The fact that we are already hitting what we were guiding for 2028, the low end, in 2027, I think just speaks to the strength of the business and the operating discipline that we have on cost.

Your next question comes from David Palmer with Evercore ISI. Please state your question.

Thanks. I wanted to ask a question about the company unit growth in the United States, Americas. I think your comment was that net unit growth would be something south of 100, I think maybe closer to 40-50 this year. Could you speak to maybe the ramp that you see going into longer term going forward? I know there is capabilities that have to be added back. If I could throw in one other thing, the technology test that you are talking about sounds like a lot of that is going to help the drive-thru. Could you just give us a sense of timetable if that works? If it does work, what metrics do you think that will affect sales or profitability and when that could hit? Thank you.

Yeah. I will start on the first part of your question, just in regard to new units in the U.S. specifically. We think it is going to be in that, call it 100 net new range, or a little below there. That is really driven by the fact that we had to reset the pipeline. Obviously, we had to do some closures. What I am really excited about is how the pipeline is building for 2028. I think we showed you guys our prototype at Investor Day, and I am happy to say that that prototype is now up and running in a couple markets, and we are seeing great response, both in the cost to build and then the way that our teams are able to operate.

Our partners are providing great experiences for our customers. So the feedback on the new unit has been really positive. Obviously, it is early days on the performance, but they have all opened really well. As you look out into fiscal year 2028, we want to get back into building new units north of 300 or so in the U.S. We believe that is what gets us going towards that opportunity of 5,000 or more in North America. So lots of opportunity on the new unit side of things. It does take a little bit of time to reset the pipeline, but I believe we now have done all the hard work, and now it is in the business of executing against the pipeline and getting the units built.

On your question about drive-thru, we are just getting started in some of these ideas, and it will be exciting to see how these things test out. Once we have better understanding of the testing, our goal is, David, that we will improve throughput. You know how this works. If you can improve throughput, a lot of good things happen from there, both on the top line and bottom line. More to come. It would be premature to get specific on this, but the whole rationale behind it is to give a better customer experience and also a better partner experience, which then results in more throughput that ultimately drives the top and bottom line.

Your next question comes from Chris O'Cull with Baird. Please go ahead with your question.

Yeah. Good afternoon, and congrats to the team for the progress it is making. I had a follow-up question about the North American margin. The profit flow-through was much better than we expected in the fourth quarter. Beyond higher sales, what were the biggest drivers of the leverage? Looking ahead, what does guidance assume for the North America and international operating margins next year? Are there any unusual items that could make the quarterly progression uneven?

Thanks, Chris. Starting to Q4 2026's North America margin, as you just said, the biggest driver is always sales leverage. The 7.7% comp we did in the U.S., that obviously helps a ton with the sales leverage. So that is the biggest driver of the margin expansion we saw. We also are rolling over our Green Apron Service investments we did last year, remember, in mid-August timeframe. We get the benefit of rolling over those investments as well. Then a little bit of a few other things.

We had some pricing benefit, we had some supply chain savings come through, and all of that is helping with that margin expansion. I would go back to where Brian was earlier, though, and it is all on the fundamentals. If you think about what we are doing to drive the durability of both the top line and the bottom line, everything we are talking about are going to help us to continue with that progress, which obviously then shows up in our guidance for this next year for fiscal 2027. Then maybe moving to fiscal 2027. I am going to knock on wood about one-timers or unusual things. I am hoping not. We do know we have got some benefits of coffee, should be helping us year over year.

Obviously, we were a little bit higher in coffee prices this last year. It started to moderate throughout the course of the year. By the time it got to the fourth quarter, there was no impact. That will help us with a little bit of a tailwind this next year. All of the fundamental work we have done around cost savings will continue to help. The biggest driver of the profit this next year, again, will always be that comp guide that we just gave. That is always going to help with the leverage. We are optimistic with the progress we are making, and that should be showing up in the guidance we just gave.

Your next question comes from Sara Senatore with Bank of America. Please proceed.

Oh, thank you. Just, I guess, a question maybe about longer-term growth. Cathy, first, do you mind just sharing the benefits, perhaps from sales transfer, store closures? Just trying to think about the balance between traffic and ticket over time. I think your check, obviously, a nice mix of attach and maybe a little bit of price. Next year, 4% comp, I think would imply maybe less ticket, I am assuming, and a bit more of a balance with traffic. So just sort of the components there.

Then I think, Brian, at one point, it seems like you have kind of narrowed your expectations for how many stores that North America could support over time. Any changes or what has changed, perhaps, from maybe earlier commentary where maybe the number was a bit higher than the 5,000 you cited? Thank you.

Maybe I'll start, Sara. Good afternoon. I'll start with first Q4 comps to help break down the growth we saw. As you said, you asked about store closures or transfers there. It's consistent with the previous quarter. About 200 basis points helped us there. Pricing and delivery were about half of the ticket, and then the attach and mix were the other half of ticket. Again, we had a 5.2% ticket in U.S., and that was about half pricing delivery and about half attach and mix. As we move into FY 2027, we're going to weight a little bit more towards ticket than transaction as we continue to see the strength of all the work the team's doing in attach and mix. We continue to see really good progress both there in attach and mix.

We'll see some price continue to come through. It'll be below CPI. The remainder of that comp growth will be in transactions, continued to be led by our great operations.

Yeah. The only thing I would add to that is the thing that gives us a lot of confidence in pushing the guidance up in 2027 versus just a long-term guidance of 3% or better is the fact that we continue to have really good strength in transactions. That's the foundational elements that are driving the business. Then I think we've made great progress in food attach and mix, as Cathy mentions.

On your question around new units, the way I would describe it is we've got clear line of sight on the 5,000. Obviously, as we get closer down the road, I'm guessing there's going to be more upside to that number. But for now, as we've done all the market planning, we feel really good about saying we see line of sight on the 5,000 additional units.

Your next question comes from Andrew Charles with TD Cowen. Please state your question.

Great. Thank you very much. Just one quick clarification and then a question. Curious, what drove the expectation that 1Q North America same-store sales to run pretty consistent with 2Q to 4Q, given that there's an easier comp in the first quarter? My real question is, Brian, the proxy calls out a successful new platform launch in the U.S. by the end of the fiscal year. I am curious, of the priorities laid out, what fits this criteria? You've spoken in the past about how win in the morning and the afternoon is going to be your bigger focus. So perhaps the revamped afternoon food platform is going to satisfy that criteria. But curious if you could expand just more on your thoughts.

I'll start, Andrew, on the cadence of our comp guidance throughout the course of the year. Yes, Q1 is the easiest lap if you just look at last year. But if you look at absolute transactions, we were actually fairly consistent through the year. One thing the team's done or a lot of work on is trying to take some of the seasonality out of our business. We have a strong product lineup that happens. The cadence of it is less. In the past, we used to have, I think, a little bit more very distinct seasons. We've been trying to make sure that we smooth that out. You saw it a little bit last year. You'll see it a little bit more this year. But they worked really hard at pulling the seasonality.

The other thing is I just look at the absolute transaction volume per quarter. It's actually far more consistent throughout the year. That's what gives us the guidance that we did, which is fairly consistent through the year. Obviously, there'll be a little bit of variation.

Yeah, and then to your question of platforms. Protein would be an example of a platform. Obviously, the Energy Refreshers is an example of a platform. Then some of the work that we've done on the food front. You'll be seeing some platforms roll out on the food side of things around our leveraging our bites business, moving that from just a morning idea to also an afternoon idea. Then there's still opportunities on health and wellness to go beyond just Protein. We feel really good about the initiatives we've got coming down the pike on call it platforms, and then also the platforms that we've already gotten out the door.

You'll continue to see us have both, I would call LTO ideas and then also platform ideas. Those working together are doing a nice job of driving transaction and sales.

Thank you. Your next question comes from John Ivankoe with JPMorgan Chase & Co. Please state your question.

Hi, thank you. I wanted to talk about the implications of seven-day-a-week delivery, which I think is also going to have 24-hour fulfillment if it doesn't already. Brian or Cathy, can you talk about the implications specifically in the afternoon, but also the morning, and what that might mean for beverages, what might that mean for food, what that might mean to the grab-and-go case? In other words, how big of an unlock might we be just on the cusp of relative to the legacy Starbucks distribution platform into the stores' back end? Thank you.

Yeah. Look, it's a great question. We do believe supply chain is going to be a nice advantage for us once we get the replenishment schedule there. We're getting closer on the daily deliveries. We're going to continue to improve on the replenishment schedule. But yeah, it helps in exactly those areas that you talked about. We have this mantra of we want to have the right product at the right place, at the right time. What this allows us to do is just that. Each of our coffee houses behave differently on various elements of the business, whether it's food or beverage that's in the cold case that you can grab and go, whether it's the food platform that we heat up for people and give you that fresh food experience or the beverages that we make by craft for everybody.

To have the ability to get the daily deliveries within a signal for the replenishment within 24 hours is going to be a big advantage for us to make sure that we keep all of those things in stock, at the right cadence for our customers and our partners to serve it. We believe there's still a lot of upside to be had there. The team's making great progress. We've made a lot of progress already on the daily deliveries, and we're going to be getting to the replenishment here in the next, call it six to 12 months.

Your next question comes from Lauren Silberman with Deutsche Bank. Please state your question.

Hey, thanks for the question, and congrats. You guys have mentioned a couple of times that you're running ahead of schedule. I know approaching the low end of the fiscal 2028 guide. But what elements have been faster, like sales, margins, cost savings, anything else that we don't necessarily see? Can we interpret this as potential upside to fiscal 2028 targets? Thank you.

Well, look, the good news is you listed off all the things that are ahead of schedule, sales, margins, and earnings. That's why you see us guiding already to the low side of fiscal year 2028. Look, the other thing I'd tell you is the guidance for fiscal year 2028, I think we said this at Investor Day. It's just a point in time on our journey. We have no expectations that that's an endpoint. Our goal is obviously to always continue to figure how we grow the business smartly, and that's exactly what's happening. We're doing it the right way, through the fundamentals of operations, and then obviously surrounding it with, I think, the right innovation, whether it's digital, menu.

Then obviously, I think, the creative solutions we're going to have in the assets too. I think we're hitting on all cylinders, and that's why you heard me say, really, Back to Starbucks as a strategy is switch gears from a turnaround plan to a growth plan. I couldn't be more optimistic about where we're headed.

Your next question comes from Sharon Zackfia with William Blair. Please state your question.

Hi. Thanks. I am curious whether you are seeing a continued correlation between the scorecard and individual unit comp performance. If you look at those small percentage of locations that are comping negatively, is that typically related to scorecard deficiencies and things you can do operationally, or are there more idiosyncratic issues?

The good news is the growth scorecard continues to be a great indicator of performance. I will tell you, the stores that were not comping, there are some idiosyncratic issues, like the road is under construction or we might have been moving delivery around to make sure we allocate delivery to the right stores. Then there are a handful of stores that we know we need to be operating better, whether that means we need more stability in the team, or we may have some issues with above-store leadership. There are opportunities. The good news is the scorecard gives us clear feedback, so we know where to spend our time on those stores. I think our operators and Mike and the team are doing a great job of dialing that in going forward.

It is going to continue to be the tool that we use. Actually, just as an aside, I got a great email just the other day from one of our coffee house leaders. Her name is Maddie. She runs a store in northern Idaho. She told me from when we started the growth scorecard with Green Apron Service, she was one of the stores that was number 1,574. Her goal was to get into the top five. She sent me an email just this week to let me know that she is now number three in the entire system. Of course, I had to call her and find out what she did. You know what she told me? She focused on Green Apron Service, and she focused on that growth scorecard.

And as a result, Mike and I are going to be heading out to go see her because I want to celebrate leadership like that. And we've got more of those stories every day at Starbucks. It's a very powerful tool, it's a very effective tool, and it's also a tool that I think our coffee house leaders understand how to use and use it in a way that's very productive and enables them to lead correctly.

Your next question comes from Jacob Aiken-Phillips with Melius Research. Please state your question.

Hey, good afternoon, everybody. With CapEx at approximately 5% sales next year, development expected to accelerate in the following year, how much of the spending establishes capabilities that can support the next phase of growth? And can the higher opening pace fit within the similar capital envelope, or should we expect another step up? Thank you.

Yeah. Hi. This next year, we're going to be, as you would look at, I think, when you see our full filings, our CapEx was actually a lower percent of revenue this last year. Really, I think reflecting those, the fewer new openings. As we move into this next year, we are ramping up our uplifts. We want to bring that great coffee house experience to more and more stores. As we said, we're going to continue to increase that. That's where some of the CapEx will go this next year, and then obviously supporting the new store openings that we've communicated. Going beyond that, though, into the following year, we still believe we should be in that 5% of revenue range, plus or minus. And we'll continue to use that as our guide.

When you ask about what amount is going for new capabilities, maybe for the future, it is actually fairly small. If you think about where our supply chain is, we do not need a lot of incremental capital. There is some, obviously, to continue to invest there, but it is not massive amounts. Traditionally, our biggest capital goes into the support of our coffee houses.

Your next question comes from Jon Tower with Citi. Please state your question.

Great. Thanks for taking the question. Curious, maybe, obviously uplifts are a big part of the story, or a bigger part of the story next year than they were in 2026. Curious if you could shed some light on what you are seeing with respect to absolute lifts on the stores so far, how it is actually showing up in the business. Are you seeing a nice balance between traffic and ticket, or is one kind of over-indexing? Then just a second question. You had mentioned the idea of being more asset light across the world, outside of North America. When thinking about the Japanese business, do you guys have any thoughts on if and when you do something with that and turn it into a license model?

Well, I will start with the first part of your question on the uplifts. The uplifts continue to do exactly what we want. It is brand building, and it is transaction driving, and it shows up in the total results for the business. I am really excited for the fact that we are going to get going and be able to do more than 2,000 in this coming fiscal year. The feedback, and I do not know if you have had the opportunity to go into one of our coffee houses that have gone through an uplift, but the feedback both from our partners and our customers is, "This feels like Starbucks again. Thank you for bringing back my third place." It does a lot for, I think, the brand.

Then obviously we love what we are seeing from the impact on transactions and then obviously, the total sales results. That, by all accounts, is a winner for us, and we are going to keep driving that really hard. To your question on international, the thing I would tell you is, we had another great year international. I think this is now seven consecutive quarters of comp growth. If you exclude China, our revenue was up 5%. So really, the team did a tremendous job around the world. I am really excited about the growth opportunities that are in front of us.

Specifically to Japan, I got to give the Japan team a lot of credit. They had another terrific year. It is a really great business. I think we have said this consistently. We always evaluate what is the right ownership strategy. If and when the time comes where that should change, we will share that with you. But I am really proud of the way that the team delivered, and I am really proud of how our international business is performing. I am really confident for the new unit growth that we have got coming down for this fiscal year and into the out years.

Thank you. Your next question comes from Peter Saleh with BTIG. Please state your question.

Great. Thanks for taking the question, and congrats on the performance. I wanted to ask about the Rewards program. You have had a couple of quarters now under your belt with the change in the Rewards program. I know you mentioned 36 million active users, but can you give us a little bit more sense on how they are performing, in terms of frequency, spend? Any more detail you can provide there would be great. Thanks.

Yeah, look, that is one of those initiatives that continues to, I think, meet and exceed our expectations. The way we've done the new tiering, with Green, Gold, and Reserve. We are continuing to see people move up from Green to Gold and Gold to Reserve, and that is really driven by, first and foremost, frequency. Then I think as we get better with our personalization, we are also going to see ticket continue to have an impact. But the early days, the first big moves we are seeing are in the frequency world. Not surprising, a lot of the new users that first come into Green start out at a lower frequency level, and then as they spend more time in the program, we see their frequency levels increase, and then we see people moving up from Green to Gold and obviously Gold to Reserve.

The program is working exactly the way we would hope. Customers are giving us feedback that they are enjoying the program. They love being able to redeem the stars at 60 stars for the $2 offer. The team is doing a great job of figuring out how to take advantage of what is the next step in the evolution of that Rewards program, which is going to be more around additional personalization.

Thank you. Your next question comes from Margaret-May Binshtok with Wolfe Research. Please state your question.

Hi, thank you for taking my question. Brian, I know you have talked about creating a second peak in the afternoon as a priority for fiscal 2027. Can you talk a little bit about where the afternoon stands today, perhaps versus a year ago? What you see the biggest drivers are from here on the afternoon and any update on how Energy Refreshers have trended since you launched. Thank you.

Starbucks (SBUX) Q4 2026 Earnings Call Transcript

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