Earnings Call Insights: Starbucks Corporation (SBUX) Q1 2026
Management View
- Brian Niccol, Chairman & CEO, emphasized the company’s “continued progress…on our Back to Starbucks plan and the momentum we’ve built across the business through Q1 fiscal 2026.” Niccol highlighted that “our turnaround plan is coming to life in the way we envision. First, turn around the top line and then earnings growth will follow.” Global revenue increased by 5% to $9.9 billion in Q1, with global comparable store sales up 4%. Niccol reported 128 net new coffeehouses globally, operating margins of 10.1%, and EPS of $0.56. North America revenue grew 3% to $7.3 billion, and international revenue rose 10% to $2.1 billion.
- Niccol noted, “transaction growth has shown us continued opportunities to strengthen our supply chain and reevaluate menu offerings to ensure product availability while reducing future waste.” He also pointed to technology investments and the hiring of a new CTO, Anand Varadarajan, to drive improvements across platforms.
- Green Apron Service and menu innovation were cited as catalysts for positive customer experience, with Starbucks Rewards 90-day active members reaching a record 35.5 million. Niccol stated, “Brand affinity in the U.S. remained strong during the quarter with continued improvements in visit consideration and Starbucks ranking as a customer’s first choice.”
- On the international front, Niccol highlighted a new partnership with Boyu in China and expansion goals in India, Latin America, and Mexico, stating, “International remains a powerful growth engine for amplifying the Starbucks brand.”
- Catherine Smith, Executive VP, CFO & Principal Accounting Officer, stated, “Our Q1 consolidated revenue was $9.9 billion, up 5% to the prior year, reflecting 1% net new company-operated store growth and a 4% increase in global comparable store sales, driven by strong performance across both our North America and International segments.”
Outlook
- Smith provided guidance for fiscal 2026: “we expect 3% or better global comp sales growth, led by 3% or better comp sales in the U.S. as well.” Starbucks plans for “approximately 600 to 650 net new coffeehouses,” with “150 to 175 net new U.S. company-operated coffeehouses” and “450 to 500 net new international coffeehouses, of which China comprises close to half.”
- The company expects “consolidated net revenues to grow at a similar rate to global comp growth for the full fiscal 2026.”
- Operating margins are expected to “grow slightly year-over-year, driven by improvements in the back half of the year.”
- EPS guidance for fiscal 2026 is set at “$2.15 to $2.40,” with Smith noting, “our guidance contemplates business as usual China operations in the second half of fiscal 2026.”
Financial Results
- Consolidated revenue for Q1 was $9.9 billion, up 5% year-over-year, with global comparable store sales up 4%.
- North America revenue reached $7.3 billion, up 3%, with 49 net new coffeehouses, and international revenue was $2.1 billion, up 10%.
- Operating margin was 10.1%, down 180 basis points from the prior year, mainly due to “investments in support of Back to Starbucks” and “product and distribution cost inflation, led by tariffs and elevated coffee pricing.”
- Q1 EPS was $0.56, down 19% from the prior year. Consolidated G&A in the quarter decreased 7%.
- Smith explained the impact of the China joint venture: “Upon closing, we expect Starbucks China’s retail operations will fully deconsolidate…and we expect to convert our 8,011 company-operated coffeehouses to licensed stores within our International segment.”
Q&A
- David Tarantino, Baird: Asked about North America traffic and the benefit from sales transfers after store closures. Niccol responded, “about 0.5 point was driven by…the sales transfer in the comp is what we’re seeing. So the strength really is broad-based.” Niccol also noted pilot stores with Green Apron Service “continue to outperform the fleet by about 200 basis points in comp.”
- Brian Harbour, Morgan Stanley: Inquired about cost savings. Niccol stated, “We’ve got a clear plan in place to basically track down about $2 billion of costs…over the next 2 years in front of us.”
- David Palmer, Evercore ISI: Asked about the earnings guidance range. Niccol replied, “the thing that gets us to the higher end is maintaining the performance on comp, first and foremost…it’s going to be driven by comp.”
- Lauren Silberman, Deutsche Bank: Asked about same-store sales momentum between rewards and non-rewards customers. Niccol explained, “our rewards customer user base is getting bigger…it’s through better engagement that we’re getting people to be active, not through discounting and couponing.”
- John Ivankoe, JPMorgan: Asked about daypart execution and competition. Niccol discussed plans to “daypart the menu” and focus on “customized energy” and “indulgent drinks” for the afternoon.
Sentiment Analysis
- Analysts maintained a positive to slightly positive tone, congratulating the company on progress and frequently seeking clarification on the trajectory of recovery, cost savings, and growth levers.
- Management projected confidence during prepared remarks, using phrases such as “we are pleased with our progress, and we believe we remain ahead of schedule, and we’re confident on our path forward.” In the Q&A, Niccol maintained an optimistic tone while addressing risks, repeatedly stressing “confidence” and the success of the turnaround plan.
- Compared to the previous quarter, both management and analysts displayed increased optimism, with greater emphasis on the sustainability of transaction gains and cost reduction initiatives.
Quarter-over-Quarter Comparison
- Management’s tone shifted from cautious optimism in Q4 2025 to more assertive confidence in Q1 2026, citing accelerating transaction and comp growth.
- Q1 saw the announcement of a $2 billion cost savings initiative, compared to a focus on foundational investments and store closures in Q4.
- Store traffic and transaction growth became more prominent, with Q1 marking “year-over-year for the first time in 8 quarters” for U.S. company-operated transaction comps.
- Guidance moved from preliminary comments in Q4 to specific fiscal 2026 targets in Q1.
- Analysts’ questions evolved from seeking assurance about the turnaround to probing the sustainability and scalability of new initiatives.
Risks and Concerns
- Smith warned that “our work isn’t done. We remain focused on driving top line performance and managing our costs to deliver sustainable, profitable long-term growth.”
- Ongoing risks include “product and distribution cost inflation, led by tariffs and elevated coffee pricing,” and the transition of China operations to a joint venture structure, which may introduce “variability in our results.”
- Management acknowledged that “the path forward [may not] be linear,” and that strategic investments “will take time to flow through to sustainable earnings growth.”
Final Takeaway
Starbucks management highlights sustained top line growth, robust transaction gains, and record Starbucks Rewards membership as evidence the Back to Starbucks turnaround plan is working. The company expects to deliver 3% or better global comp growth, expand its store base, and implement $2 billion in cost savings over the next two years. While investments and the China joint venture transition may temporarily weigh on margins and earnings, leadership remains confident in its strategy to drive durable, profitable long-term growth globally.