Starbucks Corporation

Good afternoon. My name is Diego, and I will be your conference operator today. I would like to welcome everyone to Starbook's fourth quarter fiscal year 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star, then the number two on your telephone keypad. I will now turn the call over to Katherine Park, Vice President of Investor Relations. Ms. Park, you may now begin your conference.

Good afternoon, and thank you for joining us today to discuss Starbucks' fourth quarter fiscal year 2025 results. Today's discussion will be led by Brian Nickel, Chairman and Chief Executive Officer, and Kathy Smith, Executive Vice President and Chief Financial Officer. This conference call will include forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factors discussed in our filings with the SEC, including our latest annual report on Form 10-K and quarterly report on Form 10-Q. Starbucks assumes no obligation to update any of these forward-looking statements or information. GAAP results in the fourth quarter fiscal year 2025 include restructuring and impairment charges, litigation settlements, and transaction costs that are excluded from our non-GAAP results. Revenue, operating income, operating margin, EPS growth, and GNA metrics on today's call are also measured in constant currency and represent non-GAAP measures. Please refer to the earnings release and our website at investor.starbucks.com to find reconciliations of these non-GAAP measures to the corresponding GAAP measures and supplemental financial information. This conference call is being webcast and an archive of the webcast will be available on our website through Friday, December 12th, 2025. Also, for your calendar planning purposes, please note that our first quarter fiscal year 2026 earnings conference call has been tentatively scheduled for Wednesday, January 28th, 2026. With that, I'll now turn the call over to Brian.

Good afternoon, and thank you for joining. A year ago, we launched our Back to Starbucks strategy to get us back to the exceptional craft, connection, and welcoming coffee houses that define the Starbucks experience and set us apart. Since then, we've been focused on executing our plan and accelerating it where we've seen opportunity. We took the significant step of scaling several key pieces of work during the quarter, and it's clear from our results that our plan is working and our turnaround is taking hold. We finished the fiscal year strong with 5% global revenue growth and global comparable store sales growth of 1% in the fourth quarter, making it our first positive quarter in seven quarters. Our North America company-operated comps improved to flat year over year, driven by flat U.S. comp and positive comp growth in Canada. And in both markets, transaction comps continued to improve sequentially from the third quarter. Across our U.S. company-operated portfolio, we more than tripled the percentage of coffeehouses with positive transaction comps from a year ago, with year-over-year transactions improving across all regions and day parts. And we're getting back to winning the morning, with flat morning day part transactions that outpaced our overall recovery in Q4. Notably, our U.S. company-operated sales comp turned positive in September, driven by transactions, and it's remained positive through October, reflecting the momentum taking shape in our business. Our international segment continued to demonstrate the resilience of our brand, delivering 3% comp sales growth in the fourth quarter, led by strength across our top markets, including Japan, which bounced back into positive comp territory in the quarter, as well as China, the U.K., and Mexico. Earnings per share of 52 cents in the fourth quarter continues to reflect the investments we're making in the business to execute our strategy. As I've said before, we expect to grow the top line first and then earnings will follow. These results demonstrate meaningful progress we've made on our Back to Starbucks plan as we bring our work to scale. And they show the early impact of investments we've made across three key areas in fiscal 2025 to deliver exceptional customer service, improve the look and feel of our community coffeehouses, and get back into culture with an overhauled approach to marketing and menu innovation. First, we've continued to invest in, and scale green apron service as the new standard for our coffee house customer experience. August was a milestone as we went live with the new standard across our full US company operated portfolio. We made much needed investments in staffing and hours to put more partners on the floor at the right times. We reassessed and extended hours of operations for about half of our US company operated portfolio so that nearly all are now open consistently at or before 5 a.m. We expanded rosters and maintained healthy hours per partner, and as a result, we had strong partner engagement, record low hourly partner turnover, and improved customer experience scores in the fourth quarter. Even though we're only two months in, we're seeing the results we want from Green Apron Service, and we're encouraged by the future opportunity we expected to create as our partners adopt the standard and our customers experience the difference. We set throughput goals to ensure customers get their order on time, every time, whether it's in cafe, mobile order, or in the drive-thru. As part of our Green Apron service rollout, we launched our SmartQ sequencing algorithm. Since implementation, more than 80% of our U.S. company-operated coffeehouses had cafe service times averaging four minutes or less. even with greater transaction volumes following our fall launch. Average drive-through service times are still below our four-minute target, and mobile order and pay remains highly accurate and on time. Our delivery business in the U.S. has also continued to expand rapidly, growing nearly 30% year-over-year in the fourth quarter and surpassing $1 billion in sales for the full fiscal year. And we will be nearly complete with the rollout of our Clover Vertica Brewer in our U.S. company-operated coffeehouses by the end of Q1, making it easier than ever for customers to get a fantastic and freshly brewed cup of coffee of their choice. Second, we're now delivering a great customer experience in coffeehouses that are more warm, welcoming, and connected to their communities. Earlier this year, we shared that we were reassessing our North American portfolio. The reality, as we came to learn, was that we were operating some coffee houses that didn't demonstrate a viable path to profitability or create a warm, welcoming space for our customers and partners. As a result, for the full year in fiscal 2025, our North America company-operated store counts declined by approximately 1% on a net basis. With a healthier base of coffeehouses, we see meaningful opportunity for growth. We're taking a disciplined approach to how, where, and what we build to improve both the customer experience and unit economics. We are piloting a new coffeehouse prototype with lower build cost and optimized space utilization that still deliver a full coffeehouse experience aligned to our brand. In fact, last month, we converted one of our pickup-only locations in New York into a small format version of this prototype. We're excited to test, learn, and iterate. Our teams are also working at pace to ramp up our uplift renovation program, bringing warmth, texture, and seating back into our coffee houses. As of the fourth quarter, we completed nearly 70 uplifts, primarily across New York and Southern California. It's a small sample size, but we are encouraged by the improvements to sales and transactions we've seen to date. We're working to complete more than a thousand of these uplifts by the end of fiscal 2026. Third, We've overhauled our marketing and our menu innovation, and it's driving stronger customer perception scores and market share growth in the U.S. On the heels of a successful fall launch, we introduced protein cold foam and protein lattes at the end of September. They taste great, and they're made from premium ingredients living up to the Starbucks standards. And they kick off a steady pace of disciplined, stage-gated innovation in our menu pipeline. We're only about a month in, and we're learning a lot. Customer awareness continues to build, and it is bringing less frequent customers into our coffee houses. We're excited about the incremental nature of this platform and its long-term role. Our measure for brand affinity accelerated in the quarter, reaching its highest point since 2023, and Starbucks' ranking as customer's first choice was a five-year record high. We saw the biggest gains in service time, connection, and care perceptions, demonstrating the power of Green Apron service. Non-Starbucks rewards customer transactions grew year over year for the second consecutive quarter across all day parts, validating our approach to marketing. And value perception strengthened across all generations in the fourth quarter and for the fiscal year, driven by our investment in Green Apron Service and our proactive moves to bring back the condiment bar, simplify our pricing architecture, and remove the extra charge for non-dairy milks. We know our value equation extends beyond pricing, and when we provide great customer service alongside handcrafted, personalized beverages made with high-quality ingredients, we provide unmatched value to our customers. Turning to international, our growth agenda and Back to Starbucks principles span well beyond North America. In the fourth quarter, our international business reached record revenues of $2.1 billion and ended the year with an all-time high of $7.8 billion. We continue to extend our global reach, opening 316 net new coffee houses in the fourth quarter for a total of more than 900 in fiscal 2025. We also opened brand-building Starbucks flagship coffee houses, including inside the legendary Santiago Bernabeu Stadium in Madrid, with more flagship coffee houses in store for 2026. We'll bring one-of-a-kind experiences centered on coffee and craft to even more customers around the world. In China, the team continues to drive demand in a competitive marketplace, delivering 2% comp growth in Q4, its second consecutive quarter of positive comps, and our portfolio crossed 8,000 stores. On the strategic front, we have had very strong interest from multiple high-quality partners, all of whom see significant value in the Starbucks brand and team. We expect to retain a meaningful stake in Starbucks China and remain confident in the long-term growth potential in the region. As I reflect on fiscal 2025, we did important work to rebuild our core and strengthen our foundation. And we're entering fiscal 2026 on stronger footing. Looking to Q1, the holiday season is a cherished moment for our customers and for our business. It's the first time we're bringing all our work together. Our coffee houses will be more warm and welcoming. They'll be better staffed. Orders will be better sequenced. We'll have a relevant menu with holiday classics like the peppermint mocha and snowman cookie. alongside returning favorites like the eggnog latte, which customers have been asking us to bring back for years. We'll have engaging new ads and great new merchandise that's worth gifting, like our limited edition Bearista glass mugs and Hello Kitty collaboration. And we'll have newly designed gift cards, which have become a holiday staple. As we bring it all together, I'm confident the holiday season at Starbucks will be iconic and our customers will see and feel the difference. Building on investments made in fiscal 2025, we're focused on executing with excellence and driving growth through innovation in fiscal 2026. Our intent is to become the world's best customer service company. To do this, we'll double down on green apron service by empowering our leaders in and above the coffee house. We'll scale the assistant store manager role across more company-operated coffee houses, and we'll dramatically simplify store-level reporting from nearly two dozen metrics down to a scorecard of just five KPIs that best correlate to comp growth. These are focused on the customer, the partner, transactions, inventory availability, and food safety. We are giving our partners the tools, roster, and processes to consistently deliver our standard. And as we work to deliver a consistent customer experience across every coffeehouse, we're also improving how we work with our licensee partners to provide more tailored support, drive operational excellence, and profitably grow together. Just last week, we hosted our North America licensee partners here at our support center, and we're excited for what's ahead. As we work to lead in culture, we're driving continued menu innovation that wins the morning and helps us earn the afternoon. In 2026, we'll introduce an up-leveled bake case that features new artisanal bakery products and elevated service wares to mirror our coffeehouse vibe. And building on our recent matcha reformulation, we'll continue to optimize and up-level our matcha menu with more customizable offerings that meet customer needs and stay true to our brand. Work continues on our supply chain to support our pace of innovation and improve inventory availability. And through 2026, you'll see us announcing improvements to our rewards program and mobile app and new brand activations. Our strategy is only as good as the people who are executing. And in over the past year, we underwent significant change and fast. We asked a lot of our partners across the company and they're delivering with excellence to build a stronger Starbucks. I would like to take a moment to thank our Green Apron and support partners who are working hard to bring our strategy to life every day. You really can feel the energy and excitement in our coffee houses and the change is real and our partners are leading it. Whether it's Melissa and her team in Austin that's built up such a strong community there, Jessica and Mary Beth in Nashville who are clearly dialed in to what it takes to deliver great customer service, or Oscar in New York and his commitment to coffee house excellence. Your focus on coffee, craft, and connection is truly making a difference. So as I conclude, let me put it simply. We set a plan, we're working the plan, and the plan is working. We have more work to do, but we're building momentum. Regardless of the headwinds and tailwinds we may encounter, I'm confident we have the right team and strategy to deliver long-term, sustainable growth. I'll now turn it over to Kathy to share more detail on our financial results.