Starbucks Corporation

Good afternoon and welcome to Starbucks fourth quarter and full fiscal year 2026 earnings call. All lines have been placed on mute to prevent any background noise. I will now turn the call over to Catherine 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 2026 results. Today's discussion will be led by Brian Niccol, Chairman and Chief Executive Officer, and Cathy 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 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. Thank you for joining us today. and for your calendar planning purposes, please note that our first quarter fiscal 27 earnings conference call is tentatively scheduled for Wednesday, January 27th, 2027. I'll now turn the call over to Brian.

Good afternoon and thanks for joining. We closed fiscal 2026 with another terrific quarter and a much stronger Starbucks than we had a year ago. Back to Starbucks started as a turnaround plan and now Back to Starbucks is our growth plan. In Q4, our net revenues were $9.1 billion, down 3.9% year over year, reflecting the mid-year transition of our China business to a licensed model. Global comps were up 7.2%, marking our fifth consecutive quarter of comp growth, and U.S. comps were up 7.7%. Consolidated operating margin expanded 450 basis points year over year to 14%, our third consecutive quarter of margin growth, and earnings per share grew approximately 54% to 80 cents. For the full year, consolidated net revenues grew to $37.9 billion, up 2.1%. Global company-operated comps were up 6.2%, with U.S. comps up 6.5% and international comps up 3.7%. Consolidated operating margin expanded 200 basis points to 11.9%, and earnings per share grew approximately 27% to $2.72, exceeding the high end of our guidance. These results reflect a relentless focus on executing our back to Starbucks strategy. Two years ago, we committed to getting back to Starbucks and delivering our brand promise more consistently. We put the customer at the center of every decision. We gave our partners more support. We got clear on what matters. We restored the third place and we put Starbucks back on its front foot. Our plan is working. More customers are visiting us because the Starbucks experience is better. Our coffee houses are coffee houses again. Our partners are creating more moments of connection. Our brand is more visible, relevant, and loved. Our licensed and channel development businesses are extending our reach to more places and occasions. And more of our sales growth is translating into earnings. For more than 50 years, we've grown by delivering on the Starbucks brand promise. Exceptional coffee, human connection, and a great customer experience in a true third place. It comes down to the fundamentals. When we execute them with excellence, we grow. That's what we saw in fiscal 26, and it's what gives me confidence in the durability of our performance for the future. We had a great quarter and a great year, and it put us ahead of schedule on our fiscal 28 framework. And as we focus on growth in fiscal 27, we have even more opportunity ahead. Let me walk you through some of the highlights for the quarter. Starting in North America, company operated comps grew 7.9% driven by double digit comps in Canada and strong comps in the US. That momentum is being driven by great execution in our coffee houses, a strong brand and a healthier portfolio. First, our coffee houses are coffee houses again. We're operating with greater discipline and consistency anchored by green apron service. In the quarter, more than 80% of our North America company-operated coffeehouses delivered positive comps, up from less than 50% a year ago. Average service times remained on target, and we continue to refine SmartQ and our operating routines to improve throughput and consistency across all access points. Inventory availability is at an all-time high, with daily delivery now reaching close to 90% of our North America company-operated coffeehouses, and our new quarterly coffeehouse incentive program is driving greater discipline Thank you. Thank you. Second, customers are responding to a stronger, more relevant brand and menu. Starbucks brand affinity is at near record levels as our menu innovation, marketing, and merchandise continue to create moments that drive culture and bring people into our coffee houses. Espresso, refreshers, matcha, and our artisanal bake case showed continued strength in the quarter. Our Unicorn launch in August united 34 markets for our first global coffee house activation and delivered a record sales weekend for our North America company operated business. We followed that with our strongest North America fall launch day and our global peanuts collaboration demonstrated the power of great merch delivering robust sales days around the world. Our US company operated comp growth remained balanced with contribution from both ticket and transactions. 90 day active Starbucks rewards members reached a record 36 million growing both year over year and sequentially from Q3. And sales growth remained broad based across income levels, generations and day parts. Together, these results tell us the Starbucks experience is resonating. Our coffee houses feel more like Starbucks too. As a fiscal year end, we surpassed our goal by completing more than 1,700 total uplifts across North America. bringing back warmth, comfortable seating, and the third place to our cafes. Uplifted coffee houses continue to show transaction lift across access points, day parts, formats, and loyalty groups, giving us confidence to continue our pace of work. Third, we're building a healthier coffee house portfolio. In North America, we closed coffee houses that didn't show a path to delivering the experience or financial performance we expect. We also unveiled our smaller format coffee houses in multiple markets, taking the concept we showcased at Investor Day from prototype to reality in less than a year. Customer and partner feedback has been terrific, and we'll learn from these early openings to help shape how we build for the future. International is an important growth engine for Starbucks. Our diversified portfolio remained a key strength in Q4, with comp sales growth across the majority of our licensed and company operated markets, led by the UK, Philippines, and Mexico. Our increasingly licensed international model, which combines the power of Starbucks with the deep market expertise of local operators, underpinned our unit growth. China exceeded its goals in fiscal 2026, we surpassed 6,000 coffee houses in Asia Pacific, and we grew to more than 1,900 in Latin America and the Caribbean, bringing Starbucks' premium coffee experience to nearly 500 new communities. Our progress through fiscal 2026 reinforces what we know. We know what makes Starbucks special. We know back to Starbucks drives growth, and we know how to win. For fiscal 27, we will raise the bar. We enter the new fiscal year on stronger operational footing and with momentum. At a high level, for fiscal 27, we expect North America comps of approximately 4%, consolidated operating margin of 13.5% to 14%, and EPS of $3.15 to $3.25. To deliver these results, five priorities will drive our work. First, win on the fundamentals in the coffee house through green apron service. That means building capacity to deliver exceptional green apron service to more customers. We see room to grow transaction across every day part in our coffee houses by extending our peak in the morning and creating a peak in the afternoon. To do this, we'll keep making SmartQ smarter, we'll improve production flow behind the bar to unlock throughput while maintaining great craft. We'll also begin Mistrena 3 espresso machine tests and exploring next-generation drive-through concepts to improve speed and connection. It means greater operating precision. We'll keep refining how we forecast and deploy labor and how we manage inventory and product waste. And we'll raise growth performance expectations while keeping our leaders focused on operating behaviors that create a meaningful third place full of community and connection and drive consistent results. and it means continued investment in our partners. Fiscal 27 will be a major tech modernization year. We'll roll out new staffing and scheduling and point of sale systems through the year that simplify tasks, improve speed of service and allow partners to spend more time engaging with customers. We're also transforming our supply chain with testing underway to improve demand forecasting, ordering accuracy and replenishment cycles. As this work scales, it will drive greater availability, less product waste and less work for our partners over time. Second, make our brand and menu even more relevant and loved. We'll drive mass reach through effective marketing to bring in new and lapsed customers while continuing to nurture our Starbucks rewards members. We'll keep winning the morning and earning the afternoon with planful innovation, building scalable platforms that can grow with us. These include functional and zero sugar beverages, new bakery items, more portable options and protein forward choices that meet more customer needs and wants throughout the day. Great innovation strengthens the ritual and gives customers more reasons to choose Starbucks. In fiscal 27, we'll bring beverages, food, and merchandise together in collections that create more compelling customer moments and drive greater attach. Merchandise remains a small part of our business today, but Q4 showed its potential. Both our pink and peanuts launches contributed to ticket growth in the quarter. We'll apply that same integrated approach to upcoming brand launches like holidays. We've learned a lot about what it takes to execute innovation well. In fiscal 27, we'll put even greater focus on operational readiness with thoughtful builds, better training, and the right staffing to help our partners deliver with excellence. Third, build the right experiences and capabilities for the future. Starbucks has built an exceptional digital experience in one of the world's most engaged customer communities. In the year ahead, we'll make our industry-leading Starbucks app even more intuitive for customers to order, customize, and have frictionless access wherever they are. We'll update the menu experience and build more personalized touchpoints through relevant content and recommendations tailored to customer tastes and preferences. In Q2, we'll begin to integrate delivery directly into the Starbucks app, and we'll extend the opportunity for customers to begin earning and redeeming stars on delivery orders. We are working on opportunities for AI to make search and discovery in the app more seamless, with the potential to support conversational and agentic ordering over time. and we're exploring ways to make it easier for customers to place mobile orders from their cars and through emerging AI platforms. We're also working to reimagine the drive-through experience to make it faster, more convenient and more personal. Roughly half of our customers use the drive-through, making it a significant opportunity. In fiscal 27, we'll begin testing background AI models in the drive-through that help our baristas input orders more accurately and efficiently as they interact with customers. The intent is to help our partners focus on connecting with customers while improving both throughput and speed of service. We're also exploring experiences that recognize participating customers as they arrive, present personalized digital menus, and make payment more effortless. We're early in this work and we'll test, learn, and scale what works. Fourth, grow with discipline in the US and around the world. We see significant long-term white space in North America with the opportunity to build around 5,000 additional coffee houses over time. We're focused on making disciplined decisions today that set us up for stronger, more durable growth in the future. Rebuilding our development pipeline will take time, which means we expect fewer company-operated openings in fiscal 27 and a stronger, healthier pipeline beyond that. As we do this work, we'll continue investing in our uplift program. We expect to complete more than 2,000 uplifts in fiscal 27. We'll also work to grow our North America licensed business, bringing the Starbucks experience to even more customers. We expect international to lead our global unit growth this fiscal year with net new coffee house openings accelerating by nearly 50% compared to fiscal 26. That translates to about three new coffee houses a day. Beyond fiscal 27, we see substantial room to grow our footprint outside North America from more than 23,000 international coffee houses today to nearly 40,000 over the long term. That includes the potential to double our presence in China and India with meaningful growth across other regions. Fifth, create more opportunity for partners. Our hourly partner turnover rate remains well below the industry average, driven by what third-party studies confirm are industry-leading pay and benefits, as well as improved staffing and flexible schedules that give partners the hours they want to work. And in fiscal 27, we'll expand coffeehouse coaches to more North American coffeehouses, giving experienced partners more opportunities for advancement while building a pipeline of talent to support future coffeehouse growth. will pair that with more training and development opportunities and better tools for leaders to build and manage strong teams. Taken together, these priorities give us clear direction and confidence in the path ahead. Back to Starbucks started as a turnaround plan, and it put us back in a position of strength. Today, Back to Starbucks is our growth plan. To conclude, fiscal 26 was a tremendous year of progress and results, and it gives us confidence in our trajectory. We're ahead of schedule in relation to our fiscal 28 framework, and we see a clear path to consistent comp growth and stronger earnings in fiscal 27. To our partners around the world, thank you. The progress we've made reflects your focus, ownership and belief in our brand promise. I'm confident we'll keep building on what is working, raising the bar and bringing the best of Starbucks to even more customers around the world. With that, I'll turn it over to Cathy to take you through our results in more detail and our fiscal 27 guidance.