Starbucks Corporation SBUX used its fiscal third-quarter call to argue that the Back to Starbucks plan is producing a more durable recovery in traffic, service and margins.
The company raised its full-year outlook, though management also stressed that store portfolio cleanup, labor investments and consumer variability still require disciplined execution.
SBUX Raises Guidance as Traffic Broadens
Starbucks reported non-GAAP earnings of $0.85 per share, above the Zacks Consensus Estimate of $0.66. Revenues of $9.32 billion fell short of the $9.44 billion consensus estimate.
Starbucks Corporation Price, Consensus and EPS Surprise
Starbucks Corporation price-consensus-eps-surprise-chart | Starbucks Corporation Quote
Chairman and chief executive officer Brian Niccol highlighted 7.9% global comparable-store sales growth, led by a 4.2% increase in transactions. Non-GAAP operating margin expanded 430 basis points to 14.4%.
Executive vice president and chief financial officer (CFO) Cathy Smith raised fiscal 2026 non-GAAP earnings guidance to $2.55-$2.65 per share. Starbucks now expects U.S. comparable-store sales growth slightly above 6%, global growth near 6%, flat to slightly higher revenues and non-GAAP operating margin above 11%.
Starbucks Rebuilds Coffeehouse Operations
Niccol said Green Apron Service has become the operating foundation of the turnaround by improving staffing, routines, coaching and accountability. Two-thirds of North American company-operated coffeehouses now score at least four shots in the GROW system.
Target service times were achieved across access points during the quarter despite transaction growth. Food availability approached 99%, about 10 percentage points better than a year earlier.
Coffeehouse leadership stability also improved, with the share of North American leaders in role for at least two years rising about seven points. Niccol tied that continuity to better execution and stronger store performance.
SBUX Targets Afternoon and Digital Growth
Niccol told an Evercore ISI analyst that morning transactions remained the largest growth driver, while afternoon demand offers further runway. Management plans to build that daypart through beverages, food and tighter operating routines.
Refreshers delivered double-digit U.S. revenue growth, while S’mores beverages became the strongest summer coffee limited-time launch in several years. Starbucks Rewards reached 35.8 million active U.S. members.
Niccol said digital menu boards were on track to reach 80-90% of stores by September, enabling more daypart-specific merchandising. He also told a BNP Paribas analyst that delivery has shown no meaningful cannibalization or margin trade-off.
Starbucks Accelerates Store Uplifts
Starbucks completed more than 1,000 North American coffeehouse uplifts and raised its fiscal year-end target to at least 1,500. Management plans a further acceleration in fiscal 2027.
Responding to Morgan Stanley, Smith said the upgrades average about $150,000 and are generally completed overnight without closing stores. Early results show positive transaction effects across formats, channels, dayparts and customer groups.
A TD Cowen analyst pressed management on closures. Niccol said stronger system performance is making weak locations easier to identify, while modest North American company-operated unit growth may persist through fiscal 2027 as the company fixes or replaces underperforming assets.
SBUX Defends Margin Quality and China Shift
Smith said sales leverage, cost savings and lower inflation supported margin expansion, while tariff refunds amplified the quarter. North American margin still improved more than 100 basis points excluding those refunds.
The CFO said Starbucks remains on track for $2 billion of gross savings through fiscal 2028. Consolidated general and administrative expenses declined about 20%, and coffee cost pressure should become largely immaterial to year-over-year comparisons in the fourth quarter.
Niccol positioned the China joint venture as part of a capital-light international model, with about 90% of the portfolio now licensed. Smith said China contributed $53 million of quarterly revenues and an operating margin above 100% under the new structure.
Starbucks Keeps Recovery Focused on Execution
Management’s tone was confident but measured. Niccol said the company still has work ahead, with priorities centered on throughput, service consistency, afternoon occasions and coffeehouse quality.
The next phase includes faster replenishment, fiscal 2027 technology modernization and stricter development discipline. Starbucks is seeking to preserve traffic momentum while improving store economics and building a more scalable licensed international platform.
Zacks Signals Show Selective Strength
SBUX carries a Zacks Rank #3 (Hold). Its Growth Score of A, Momentum Score of A and VGM Score of B indicate stronger growth and momentum characteristics, while the Value Score of D points to a less favorable valuation profile.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Style Scores are designed to complement the Zacks Rank, with A and B scores generally more favorable than lower grades. The current signals are mixed rather than decisive, and the Zacks Rank can change as analyst estimates are revised after the reported results.
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