Starbucks Corporation (SBUX Quick QuoteSBUX - Free Report) reported mixed fourth-quarter fiscal 2026 results, with adjusted earnings beating the Zacks Consensus Estimate but net revenues missing the mark. The company's "Back to Starbucks" efforts supported stronger sales leverage and lower costs, while the shift to a licensed business in China weighed on reported revenues. Following the release, shares declined 0.9% in the post-market trading session.

Adjusted earnings of 80 cents per share surpassed the consensus estimate of 73 cents by 9.6% and increased 53.8% year over year. Net revenues of $9.14 billion missed the consensus mark of $9.27 billion by 1.4% and declined 4.5%. Global comparable coffeehouse sales rose 7.2%.

SBUX's Q4 Margins Expand on Better Cost Control

Starbucks' GAAP operating income increased 256.5% year over year to $991.8 million. GAAP operating margin expanded 790 basis points to 10.8%, benefiting from lower restructuring costs and sales leverage.

Restructuring and impairment expenses declined to $272.8 million from $755 million a year earlier. General and administrative expenses fell 19.4% to $517.3 million, while product and distribution costs decreased 4.8% to $2.92 billion. Non-GAAP operating margin improved 460 basis points to 14%.

Management indicated that more than half of its $2 billion gross cost-savings program had been achieved, with additional product-cost benefits expected in fiscal 2027 and fiscal 2028.

Starbucks North America Benefits From Higher Spending

North America net revenues grew 6.2% year over year to $7.33 billion, supported by higher company-operated coffeehouse sales. Comparable sales increased 7.9%, comprising a 5% increase in average ticket and a 2.7% rise in transactions.

U.S. comparable sales advanced 7.7%, with a 5.2% gain in ticket and 2.4% transaction growth. Product mix, food attachment, pricing and delivery supported spending. The Starbucks Rewards program reached a record 36 million 90-day active members.

North America operating income surged to $898.4 million from $308.5 million. GAAP operating margin expanded to 12.3% from 4.5%, reflecting lower restructuring costs and stronger sales leverage.

SBUX's International Revenues Reflect China Transition

International segment net revenues fell 36.9% year over year to $1.31 billion, primarily due to the conversion of Starbucks' China retail operations to a licensed joint venture during the third quarter. The shift reduced company-operated revenues while increasing sales to licensees and royalty revenues.

International comparable sales increased 0.9%. Average ticket rose 3.7%, offsetting a 2.8% decline in transactions. Operating income increased 15.1% to $256.9 million, while operating margin expanded to 19.7% from 10.8%, aided by the China transition and lower restructuring costs. International coffeehouse count reached 23,431, up 3% year over year.

Starbucks Channel Development Faces Sales Pressure

Channel Development net revenues decreased 8.9% year over year to $494.4 million from $542.6 million. The decline primarily reflected lower revenues from the Global Coffee Alliance.

Operating income was nearly flat at $264.3 million compared with $265.2 million a year ago.

Operating margin expanded 460 basis points to 53.5%, supported by favorable mix shifts and higher North American Coffee Partnership joint venture income relative to segment revenues.

SBUX Adds Cash While Reshaping Its Store Base

Starbucks ended fiscal 2026 with cash and cash equivalents of $3.68 billion, up from $3.22 billion at fiscal 2025-end. Long-term debt declined to $11.78 billion from $14.58 billion.

For fiscal 2026, operating cash flow totaled $4.99 billion, compared with $4.75 billion a year ago. Capital expenditures were $1.26 billion, down from $2.31 billion, while cash dividends paid totaled $2.82 billion.

The company added 303 net coffeehouses in the fiscal fourth quarter, ending with 41,607 locations globally, 68% of them licensed. Starbucks also closed approximately 250 North America company-operated locations under its portfolio restructuring efforts.

Starbucks Sets FY27 Earnings and Expansion Targets

For fiscal 2027, management expects non-GAAP earnings of $3.15-$3.25 per share and a non-GAAP operating margin of 13.5%-14.0%. North America comparable sales are projected to grow approximately 4%, reflecting the company's focus on service, menu innovation and delivery.

Consolidated net revenues are forecast to decline approximately 1% due mainly to the China business transition. The outlook includes roughly $700 million in revenues and slightly more than 10 cents in earnings per share from a 53rd week.

Starbucks expects about 1,200 net new coffeehouses globally, including roughly 1,100 internationally. Management also plans more than 2,000 coffeehouse uplifts and approximately $1 billion in share repurchases. The quarterly dividend was increased to 63 cents per share.

SBUX’s Zacks Rank

Starbucks currently carries a Zacks Rank #2 (Buy).

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