Starbucks(SBUX) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 fiscal year 2026, global revenue increased by 5% to $9.9 billion, with operating margins at 10.1% and EPS at $0.56, down 19% from the prior year [5][18][24] - North America revenue grew 3% to $7.3 billion, with comparable store sales also increasing by 4% [5][19] - International segment revenue rose by 10% to $2.1 billion, with comparable sales growth of 5% [13][21] Business Line Data and Key Metrics Changes - North America saw a 4% increase in comparable store sales, driven by a 3% growth in transactions [5][19] - The U.S. company-operated transaction comps grew year over year for the first time in eight quarters, with Starbucks Rewards' active members reaching 35.5 million [6][20] - The international segment's comparable store sales in China grew by 7%, marking the third consecutive quarter of growth [13][22] Market Data and Key Metrics Changes - The U.S. licensed store portfolio revenue declined due to ongoing trends in grocery and retail channels, but growth was noted in business, college, and healthcare segments [21] - The international segment's growth was supported by strong performance in major markets like China, Japan, and the U.K. [21][22] Company Strategy and Development Direction - The company is focused on its "Back to Starbucks" plan, aiming for sustained growth and profitability through disciplined execution [4][5] - Strategic investments are being made to enhance operational foundations, with a focus on technology and supply chain improvements [8][19] - The company plans to open approximately 600-650 net new coffeehouses in fiscal 2026, with a significant portion in China [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround strategy, noting that top-line growth is expected to lead to improved margins and earnings [4][16] - The company anticipates that pressures from product and distribution cost inflation will begin to ease as the fiscal year progresses [23][29] - The outlook for fiscal 2026 includes expectations for 3% or better global comparable sales growth [27][30] Other Important Information - A joint venture with Boyu Capital was announced to enhance Starbucks' potential in China, with expectations to close the deal in spring 2026 [24][25] - The company has reduced its menu by approximately 25-30% to streamline offerings and focus on health and wellness platforms [78] Q&A Session Summary Question: North America traffic performance and Green Apron service model - Management noted that North America comp results were driven by transactions, with about 0.5 points attributed to sales transfer from closed stores [36] Question: Additional cost opportunities - The company is tracking down about $2 billion in costs over the next two years, focusing on efficiency across the P&L [41] Question: Earnings guidance for fiscal 2026 - Higher-end guidance is contingent on maintaining strong comp performance, supported by effective execution of the Green Apron service model [44][46] Question: Same-store sales momentum and non-rewards member growth - Management emphasized the importance of engaging both rewards and non-rewards customers, with a focus on broad marketing and menu innovation [48][50] Question: Afternoon execution opportunities - The company plans to enhance afternoon offerings with more relevant beverages and food, leveraging digital menu boards for better customer engagement [54][55]