Starbucks (SBUX) Q4 2026 earnings review
Starbucks profit margins rise, while customer traffic growth slows
Starbucks finally turned higher cafe sales into wider store profit margins, even as shifting China to a joint venture shrank reported revenue. Global sales at established company-operated coffeehouses rose 7% in the fourth quarter, and operating margin excluding one-offs reached 14% because North America store operating costs fell as a share of sales. Chief executive Brian Niccol and finance chief Cathy Smith introduced a fiscal 2027 plan that keeps margins near 14% while North America same-store sales growth moderates to 4%.
| Global same-store sales | +7.2% 5.2% ticket, 1.8% transactions |
|---|---|
| Total revenue | $9.14B -4.5% from a year ago (China shift) |
| Operating margin, excluding one-offs | 14.0% +4.6 percentage points from a year ago |
| FY27 profit per share outlook, excluding one-offs | $3.15–$3.25 +18% at the middle of the range |
⚖️ Verdict: 🟢 Bullish
The story got better because the coffee chain proved its store cost base can deliver margin expansion once the initial wave of barista staffing investments passed its one-year mark, while a 53% jump in full-year free cash flow by our math allows buybacks to resume in fiscal 2027. One caution: fourth-quarter customer visits slowed in North America and turned negative in International, leaving same-store growth leaning heavily on a 5% rise in average bill size and another 250 North America store closures.
The question now is whether Starbucks can keep customer visits growing as it laps last year's turnaround gains and relies less on price and sales transferred from closed stores. Either the new fiscal 2027 outlook of 4% North America same-store sales growth is a cautious floor that steady traffic beats, or foot traffic stalls and forces the chain to lean even harder on ticket increases to hit its $3.15 to $3.25 profit per share target. First-quarter North America transaction growth will tell.
🐂 Bull Case
Store Cost Leverage Lifted Operating Margin
Starbucks spent the past year adding barista hours under its turnaround plan, which kept coffeehouse operating expenses (store wages, rent and utilities) high through the third quarter. In August the coffee chain passed the one-year mark of that staffing rollout, so fourth-quarter sales growth finally outpaced store costs.
- North America coffeehouse operating expenses: 54.0% of company-operated store sales, down 2.2 percentage points from a year ago
- General and administrative expenses (corporate overhead): 5.7% of total revenue, down 1.0 percentage point
- Operating margin excluding one-offs: 14.0% in Q4, up 4.6 percentage points from a year ago
- Full-year 2027 operating margin outlook, excluding one-offs: 13.5% to 14.0%, up from 11.9% in fiscal 2026
The fourth-quarter margin also held up without the one-time tariff refunds and low tax rate that helped the third quarter, because product and distribution costs (coffee, dairy and logistics) stayed flat at 32.0% of revenue. By setting the full-year 2027 margin outlook near the fourth-quarter level, finance chief Cathy Smith indicates that the cost savings are sticking.
What to watch: North America coffeehouse operating expenses as a share of company-operated store sales in the first quarter of fiscal 2027. A reading below last year's 57.0% would show that store labor leverage holds when seasonal sales slow.
Free Cash Flow Funds Buyback Return
In fiscal 2025 Starbucks paid $2.77 billion in dividends while generating $2.44 billion of free cash flow, and it went two full years without buying back a share. In fiscal 2026 free cash flow jumped 53% to $3.72 billion by our math, covering $2.82 billion of dividend payments with $900 million to spare.
Lower capital spending did most of the work, as additions to property, plant and equipment fell 45% to $1.26 billion (3.3% of revenue, down from 6.2% in fiscal 2025) after the chain shifted to cheaper overnight store renovations and handed its China stores to a joint venture. The board raised the quarterly dividend to $0.63 per share, and finance chief Cathy Smith said "Our recently increased dividend and plans to resume share repurchases in fiscal 2027 underscore our confidence and disciplined focus on driving sustainable long-term value."
What to watch: share repurchase dollars in the first-quarter cash flow statement. Actual buybacks would confirm that free cash flow still exceeds the dividend as the company accelerates store renovations in fiscal 2027.
Licensee Shift Boosts International Margin
After converting 7,991 company-operated coffeehouses in China into a licensed joint venture with Boyu Capital in the third quarter, licensed stores now make up 68% of Starbucks' 41,607 global locations. In the fourth quarter International segment revenue fell 37% from a year ago to $1.31 billion because Starbucks now collects royalties and product sales instead of full retail receipts, but segment operating profit rose 15% to $256.9 million and segment operating margin jumped 8.9 percentage points to 19.7%.
Partner-funded expansion also resolved a standing risk that the chain would miss its full-year store opening target. Starbucks added 303 net new stores in the fourth quarter (498 in International, including 467 licensed locations, against 195 net closures in North America) to finish fiscal 2026 with 617 net additions, and its fiscal 2027 plan doubles the pace to about 1,200 net new coffeehouses, led by international licensees.
What to watch: International licensed store revenue and equity investee income in the first quarter of fiscal 2027. Rising royalty and joint venture income would prove that partner store openings add dollar profit even while total segment revenue shrinks.
Positives this quarter didn't test
Three standing drivers from earlier quarters are not disclosed in the fourth-quarter earnings release and await the conference call or annual filing.
- Green Apron service scorecard: the share of North America stores meeting the four-shot service standard is not in the release; management updates it on the earnings call.
- North America coffeehouse uplifts: cumulative completions against the 1,500 fiscal-year target (and per-store sales lift on the $150,000 cost) are not in the release; the call remarks will give the year-end count.
- Starbucks Rewards active members: the 90-day active U.S. member count and card reload trends following the March tier launch are not in the release; the annual report or call remarks will show whether membership grew from 35.8 million.
🐻 Bear Case
Same-Store Growth Relies More on Ticket
"Back to Starbucks started as our turnaround plan. Now, it's our growth plan," chief executive Brian Niccol said. Yet fourth-quarter comparable coffeehouse sales (sales at company-operated stores open at least 13 months) leaned much harder on bigger bills than on customer visits, and the new outlook points to a step-down.
- North America Q4 comparable transactions (customer visits): up 2.7%, slowing from 4.5% in Q3
- North America Q4 average ticket (spend per visit): up 5.0%, up from 3.5% in Q3
- International Q4 comparable transactions: down 2.8%, reversing a 2.6% gain in Q3
- Fiscal 2027 North America comparable sales outlook: about 4.0%, down from 6.6% in fiscal 2026
Starbucks said North America ticket grew on "strength in product mix and customer food attach, pricing and higher delivery sales". Because the chain also closed 269 North America stores in the quarter and removes closed locations from the comparable base the following month, sales transferred from shut stores helped support the remaining coffeehouses. Guiding fiscal 2027 North America comparable sales to 4.0% confirms that growth cools once the initial turnaround bounce passes.
What to watch: North America comparable transaction growth in the first quarter of fiscal 2027. A drop toward 1% would show that the 4.0% full-year outlook depends on price and food add-ons rather than rising foot traffic.
Store Closures and Restructuring Charges Persist
Starbucks excludes restructuring, impairment and transformation charges from its headline profit figures because management says those efforts finish within a set period. Instead, the Seattle-based chain launched another round of closures in September 2026, shutting about 250 North America company-operated coffeehouses "that do not deliver the coffeehouse experience and financial performance expected of the brand".
Those closures, along with consulting fees "to support the further optimization of our global support organization", kept the gap between reported profit and profit excluding one-offs wide. Fourth-quarter adjustments totaled $285.1 million before tax ($272.8 million of restructuring and impairments, $6.8 million of transformation costs, and $5.5 million of China transaction costs), leaving reported operating margin at 10.8% against 14.0% excluding one-offs. Full-year pre-tax adjustments reached $821.6 million, and the fiscal 2027 outlook already builds in another $0.13 per share of restructuring charges.
What to watch: North America company-operated store closures and restructuring charges in the second half of fiscal 2027. Continued charges after the first half would mean store portfolio cleanup is an ongoing operating cost rather than a temporary reset.
Risks this quarter didn't answer
Three standing concerns received no update in the fourth-quarter earnings release.
- China joint venture performance: the release gives no comparable sales, ticket or store count for the 40%-owned China business (International equity investee income was $20.6 million in Q4); the annual Form 10-K footnote on equity investments is the next check.
- Afternoon traffic gap: whether afternoon customer visits stopped lagging the morning rush is not in the release; management commentary on the earnings call will address daypart trends.
- Macroeconomic and commodity pressures: how consumer discretionary spending, coffee bean prices, and the end of tariff refunds affect fiscal 2027 costs is not quantified in the release; the call Q&A will test those assumptions.
💲 Other KPIs
Packaged coffee and ready-to-drink sales outside Starbucks cafes fell 8.9% from a year ago, reversing three quarters of growth (+19.8% in Q1, +38.8% in Q2, +21.5% in Q3). Lower revenue in the Global Coffee Alliance (its packaged-coffee partnership with Nestlé) drove the drop, though joint-venture income lifted segment operating margin by 4.6 percentage points to 53.5%.
Total debt minus cash and short-term investments fell 25.3% from a year ago by our math, down from $12,608 million at the end of fiscal 2025. Starbucks used $2,544 million of cash proceeds from the China joint venture sale to help repay $2,816 million of long-term debt during the year, cutting fourth-quarter interest expense by 17.2% to $120.7 million.
Cash loaded onto Starbucks gift cards and loyalty accounts plus long-term licensing advances (current $1,758 million and long-term $5,583 million) declined 3.6% from a year ago by our math, after falling 2.1% in Q3 and 1.4% in Q2. Removing China customer card balances upon the third-quarter joint venture closing caused the year-over-year drop.
🔮 Guidance
New. The plan calls for total revenue to dip about 1% from fiscal 2026's $37.91 billion, even with roughly $700 million of extra sales from a 53rd calendar week in the fourth quarter. By our math, that leaves 52-week revenue down about 2.8%, because the first half of fiscal 2027 compares against periods before China stores moved to a licensed joint venture.
New. Management forecasts underlying store sales growth in North America (measured on a 52-week basis) to slow to about 4.0%, down from 7.9% in the fourth quarter and 6.6% for full-year fiscal 2026. The coffee chain is now comparing against quarters that already include last year's service upgrades and menu changes.
New. The full-year operating margin outlook, excluding one-offs, steps up by 1.85 percentage points at the middle of the range (13.75%) compared with 11.9% in fiscal 2026. That keeps full-year profitability right in line with the 14.0% margin Starbucks just delivered in the fourth quarter.
New. Profit per share excluding one-offs is set to grow 17.6% at the $3.20 middle of the range from $2.72 in fiscal 2026 (reported profit per share is planned at $3.07 to $3.17, including $0.13 of restructuring charges). By our math, stripping out the slightly more than $0.10 benefit from the 53rd week leaves 52-week growth near 14%.
New. Global net store additions are planned to nearly double from 617 in fiscal 2026 to about 1,200 in fiscal 2027, expanding the 41,607-store footprint by 2.9% by our math. International markets and licensed partners will drive the openings while North America focuses on store renovations.
❓ Key Questions
How much did store closures lift North America same-store sales?
Starbucks closed 269 North America stores in the fourth quarter after shutting 584 a year ago, and closed stores leave the comparable base the following month. Investors need to know how much of the 2.7% transaction gain came from customers transferring from shut locations.
What are the same-store sales and store counts in China?
Since deConsolidating its 7,991 China stores into a 40%-owned joint venture in the third quarter, Starbucks has stopped reporting China comparable sales, average ticket and store openings. Without those figures, outside readers cannot track the health of its second-largest market.
Did North America renovations pass 1,500, and what is the return?
Management previously aimed to complete at least 1,500 store uplifts in North America by the end of fiscal 2026 at an average cost of $150,000. The release does not give the final count or quantify the sales lift those renovated coffeehouses generate.
Why did Channel Development revenue drop 9% in the fourth quarter?
After growing more than 20% for three straight quarters on higher coffee prices, Channel Development revenue fell 8.9% to $494.4 million due to the Global Coffee Alliance. Management did not say whether lower coffee price pass-through or weaker grocery volume caused the drop.