Starbucks earnings: first positive comps in 7 quarters as turnaround takes hold
- Hardik Shah
- Oct 29
- 3 min read
TLDR
Revenue Strength: Q4 net revenue +5% to $9.6B; international hit a quarterly record $2.1B.
Margin Trends: Non-GAAP operating margin 9.4% (-500 bps YoY) on inflation, tariffs, and labor investments; GAAP operating margin 2.9% (-1,150 bps).
Forward Outlook: U.S. comps positive in September and through October; 2026 G&A expected below FY2023 as restructuring benefits flow through.
Business Overview
Starbucks is the world’s largest specialty coffee roaster and retailer with ~41,000 stores worldwide, split between company-operated and licensed formats across North America and International. U.S. and China comprise 61% of the global footprint (16,864 and 8,011 stores, respectively). Beyond retail, the Channel Development segment (e.g., Global Coffee Alliance ready-to-drink/at-home) extends brand reach.
Starbucks Earnings
Revenue: $9.6B, +5% YoY (reported and constant currency). Global comps +1% (North America flat; International +3%; China +2%).
Margins: GAAP operating margin 2.9% (-1,150 bps); Non-GAAP operating margin 9.4% (-500 bps), reflecting restructuring costs, inflation, and labor tied to “Back to Starbucks.”
Profitability: GAAP EPS (Earnings per Share) $0.12 (-85%); Non-GAAP EPS $0.52 (-35%).
Segment Highlights:
North America (U.S.): Comps flat; U.S. transactions -1%, ticket +1%; store count 16,864.
International: Revenue $2.1B (+9%), comps +3% on +6% transactions (ticket -3%). Margin 10.8% (-410 bps).
Channel Development: Revenue $543M (+17%), margin 48.9% (-800 bps) on mix/joint-venture income.
Drivers: Healthier mix (fewer discount-driven offers), coffee and tariff inflation, and targeted labor investments to improve service and throughput.
Brian Niccol (CEO): “It’s clear from our results that our plan is working and our turnaround is taking hold.”
Forward Guidance
Early Q1 signs are constructive: U.S. company-operated comps turned positive in September and stayed positive through October as Green Apron Service ramps.
FY2026: Consolidated G&A expected below FY2023 as support-function simplification offsets service investments; turnarounds “not always linear.”
Risks & Opportunities: Coffee price/tariff volatility; execution of store closures/uplifts; China partnership process; ongoing menu innovation and loyalty upgrades.
Operational Performance
Green Apron Service (new customer-experience standard) scaled across U.S. portfolio with added staffing/hours, earlier openings (~5:00 a.m.), and SmartQ sequencing; ~80% of U.S. cafés now average ≤4-minute service times. Delivery grew ~30% YoY; Clover Berica brewer rollout nearly complete by Q1 end.
Network Optimization: Q4 net closures 107 (of which 627 as part of restructuring; >90% in North America) to focus on viable, welcoming cafés; U.S. store count down ~1% in FY25.
Cathy Smith (CFO): “Q4 was a turning point…we’re encouraged by our trends to date in Q1 as we focus on sustainable, durable long-term growth.”
Segment Snapshot
U.S.: Morning daypart flat but outperformed overall; mix shifting to non-discounted transactions; Rewards active members 34.2M (+1% QoQ/YoY).
International: Record revenue; Japan back to positive comps; China comps +2% on +9% transactions.
Market Insights
U.S. travel locations (airports) and college/university channels grew; grocery/retail licensed revenue softened.
At-home/RTD (ready-to-drink) share leadership maintained via Global Coffee Alliance; protein beverage innovation expanding across markets.
Consumer Behavior & Sentiment
Brand affinity reached its highest since 2023; Starbucks ranked customer’s first choice at a five-year high. Value perception improved across generations, aided by service, condiment-bar return, simplified pricing, and no upcharge for non-dairy milks.
Brian Niccol (CEO): “We provide unmatched value when great service meets handcrafted, personalized beverages made with high-quality ingredients.”
Strategic Initiatives
Menu & Marketing: New Protein Platform (protein cold foam & lattes) to drive frequency, particularly among lower-frequency cohorts.
Store Experience: Prototype small-format cafés with lower build cost; >70 “uplift” remodels complete, targeting 1,000+ by end of FY2026.
Digital & Loyalty: Rewards and app enhancements planned through 2026; focus on five simplified KPI (Key Performance Indicator) scorecard tied to comps.
Capital Allocation
Dividend: Board declared a $0.62 per-share dividend payable Nov 28, 2025; 62 consecutive quarters of dividends with ~18% CAGR over that span. Management also noted the 15th straight year of annual dividend increases.
Buybacks: No Q4 repurchases disclosed in the release; cash dividends paid $2.77B in FY2025.
Debt & Liquidity: Cash and equivalents $3.22B at year-end; active long-term debt issuance and repayment maintained.
The Bottom Line
Starbucks exits FY2025 with improving traffic, positive comps, and a clearer service playbook—yet margins remain pressured as investments annualize and commodity/tariff headwinds persist. Investors should watch:
(1) sustained U.S. transaction rebuild and afternoon daypart,
(2) International mix and China partner outcome,
(3) margin recapture as G&A resets and café uplifts scale. Valuation context will hinge on credibility of 2026 comp acceleration and operating-margin rebuild.
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