Starbucks outlines acceleration of Green Apron Service to all U.S. stores by mid-August, signals $0.5B labor investment for FY26

Earnings Call Insights: Starbucks Corporation (SBUX) Q3 2025

Management View

Brian R. Niccol, CEO, stated that “Back to Starbucks is the right plan” and emphasized progress in transforming both the business and its culture. The company is “ahead of our expectations” and is moving quickly to establish a platform for innovation in 2026. Niccol noted, “We are building a better Starbucks, where everyone can experience the best of Starbucks, one that is stronger, more resilient and consistently growing.”
For the quarter, total company net revenue was $9.5 billion, with a global comparable store sales decline of 2%. The company reported a global operating margin of 10.1%, global net new store growth of 4%, and earnings per share of $0.50. In North America, Canada achieved its second consecutive quarter of positive comparable sales, while U.S. comparable sales declined 2%.
Niccol highlighted record-breaking quarterly revenue in the International segment, especially China, which delivered 2% comparable sales growth and 6% transaction growth. Delivery business transactions grew more than 25% year-over-year.
The CEO introduced the Green Apron Service, calling it “Starbucks’ biggest investment ever in operating standards and customer service.” This new operating model will be fully scaled across all U.S. company-operated coffeehouses in mid-August, enabled by SmartQ technology. Niccol added, “Coffeehouses using Green Apron Service have driven improvements in transactions, sales and customer service times.”
Starbucks plans to uplift at least 1,000 stores across North America by the end of 2026, introduce a new store prototype with 30% lower build cost, and sunset the mobile order and pickup-only concept in fiscal 2026.
Significant menu innovations are planned for 2026, including protein cold foam, a reimagined artisanal baked case, and a new 1971 dark roast coffee. The rewards program will also see major enhancements.
The company continues to evaluate strategic partnership options in China and expects to complete a North American portfolio review by the end of the fiscal year.
Catherine R. Smith, CFO, stated, “Our Q3 consolidated revenue was $9.5 billion, up 3% to the prior year, reflecting 6% net new company-operated store growth over the past 12 months, partially offset by a 2% decline in comparable store sales.”

Outlook

Management indicated no official guidance for the year but shared preliminary thoughts on Q4, emphasizing a conservative outlook given the uncertain consumer environment.
Smith noted, “We are pleased to be ahead of schedule with key foundational programs like Green Apron Service, and we are confident that 2026 will continue to improve as we see the effects of our Back to Starbucks strategy begin to scale.”
Starbucks will invest over $0.5 billion of additional labor hours into its U.S. company-operated portfolio over the next year, starting with the Green Apron Service rollout in mid-August.

Financial Results

Q3 consolidated revenue was $9.5 billion. Global operating margin was 10.1%. EPS for the quarter was $0.50.
Operating margin contracted 650 basis points from the prior year, primarily due to “deleveraging and investments in support of Back to Starbucks, including additional labor hours and Leadership Experience 2025.”
North American U.S. transaction comps were down less than 4%, but the company saw improvements in non-Starbucks Rewards member transactions year-over-year for the first time since the post-pandemic recovery.
International segment delivered over $2 billion in quarterly revenue for the first time, with China showing 2% comparable store sales growth and 6% transaction growth.
Channel Development segment reported 10% year-over-year revenue growth.

Q&A

David E. Tarantino, Baird: Asked about cost offsets to the $0.5 billion labor investment and margin impact. Smith responded that Starbucks is working across the entire P&L and sees “lots and lots of opportunity,” but is not yet ready to quantify the exact offset. The company aims for “durable, sustainable activities” to address costs long term.
David Sterling Palmer, Evercore ISI: Inquired about the path back to pre-COVID margin levels and long-term margin aspirations. Smith referred to 2019 as a “good guidepost” and said, “We’ll see as we approach that guidepost, if there’s more room past that.”
Brian James Harbour, Morgan Stanley: Asked about the pace and scope of Green Apron Service rollout. Niccol confirmed rollout begins mid-August and includes assistant managers as part of the roster, emphasizing internal promotion.
Sara Harkavy Senatore, BofA Securities: Sought clarification on drivers of sequential improvement in transactions and lessons from Canadian food innovation. Niccol credited both marketing and operational improvements and highlighted plans to leverage successful food innovations from Canada globally.
Lauren Danielle Silberman, Deutsche Bank: Asked about traffic lift from Green Apron Service and upcoming rewards program changes. Niccol noted early transaction growth in mornings and all day, and explained the new rewards program will be less about discounting and more about tailored recognition.
John William Ivankoe, JPMorgan: Asked how Starbucks will balance innovation with operational speed. Niccol said innovation must “not negatively impact” the 4-minute service goal and will be co-developed with baristas.
Andrew Michael Charles, TD Cowen: Requested details on Mobile Order and Pay store count and cost reduction incentives. Niccol said there are “roughly like 80, 90 stores” in the mobile order pickup space and outlined the organizational incentives for cost reduction.
Hyun Jin Cho, Goldman Sachs: Inquired about the expedited Green Apron Service rollout. Niccol cited strong pilot results and the ability to scale ahead of the fall season.
Jeffrey Andrew Bernstein, Barclays: Asked about U.S. comp growth challenges. Niccol emphasized focus on brand value and the unique Starbucks customer service experience as key differentiators.
Christopher Thomas O’Cull, Stifel: Asked about the China partnership strategy. Niccol said Starbucks seeks a partner with shared values and local market expertise, not capital.
Jon Michael Tower, Citi: Asked about value and pricing architecture for new product innovation. Niccol said pricing is “always the last lever” and will be used minimally.
Danilo Gargiulo, Bernstein: Questioned traffic declines and macro pressures. Niccol identified the Green Apron Service model and innovation as “mission-critical” for growth and emphasized the company’s control over key growth initiatives.

Sentiment Analysis

Analysts displayed a neutral to slightly positive tone, focusing on cost offsets, margin trajectory, and operational investments. Questions were generally constructive, with some probing on long-term profitability and competitive positioning.
Management’s tone was confident during prepared remarks and remained measured but optimistic during Q&A. Smith used phrases like “we are confident” and Niccol emphasized being “excited by what I see” and “I believe more than ever in our Back to Starbucks plan.” There was no significant defensiveness or hesitation, and the tone was more upbeat compared to the previous quarter.
Compared to last quarter, both analysts and management showed increased focus on operational execution and confidence in turnaround progress, with management displaying greater enthusiasm about early results and scalability.

Quarter-over-Quarter Comparison

Guidance language remains conservative, reflecting ongoing uncertainty in the consumer environment, but management provided more details on strategic investments and timelines.
Strategic focus shifted from piloting operational changes to full-scale rollout, particularly with Green Apron Service and SmartQ technology.
Analysts continued to focus on labor investments, cost offsets, and margin recovery, but there was a greater emphasis on scalability and long-term profitability this quarter.
Key metric improvements included a rise in global net new store growth, a record-breaking international revenue milestone, and early signs of transaction growth in targeted segments.
Management’s confidence increased, with more explicit timelines for innovation and operational initiatives. Analysts’ tone shifted slightly positive as turnaround efforts produced more tangible results.
Strategic priorities evolved from foundational improvements to preparing for a wave of menu and digital innovation in 2026.

Risks and Concerns

Management cited the “uncertain consumer environment” and ongoing margin pressure due to investments in labor and operational initiatives.
Smith noted, “Our margins in the near term are impacted by critical investments in our stores, partners and customers.”
Tariff and coffee price volatility remain risks, although the company is mitigating exposure and increasing coffee coverage as prices decline.
Analysts raised concerns about the ability to fully offset labor investments, competitive pressures in the U.S., and the risk of traffic declines if macro conditions worsen.

Final Takeaway

Starbucks leadership emphasized that the company is ahead of schedule in scaling operational improvements, most notably through the Green Apron Service model, which will roll out to all U.S. stores by mid-August. Strategic investments in labor and technology are expected to lay the foundation for sustained innovation and growth in 2026. While near-term financial performance reflects ongoing investments and margin pressures, management expressed strong confidence in the turnaround plan, pointing to early signs of progress in key operational and international metrics. The company is focused on disciplined cost management, store portfolio optimization, and accelerated innovation to drive long-term value for stakeholders.

Read the full Earnings Call Transcript