Starbucks(SBUX) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 fiscal 2026, global revenue increased by 5% to $9.9 billion, with operating margins at 10.1% and EPS at $0.56, down 19% year-over-year [7][21][26] - North America revenue grew by 3% to $7.3 billion, with comparable store sales also increasing by 4% [7][22] - International revenue rose by 10% to $2.1 billion, with comparable store sales growth of 5% [16][24] Business Line Data and Key Metrics Changes - North America saw a 4% increase in comparable store sales, driven by a 3% growth in transactions [22] - The U.S. company-operated sales comps were up 4%, marking the first transaction growth in eight quarters [8][22] - The international segment's comparable sales growth was led by strong performance in China, Japan, and the U.K. [16][24] Market Data and Key Metrics Changes - Starbucks Rewards' 90-day active members reached a record 35.5 million, with both rewards and non-rewards transactions growing year-over-year for the first time in eight quarters [8][22] - In China, comparable store sales grew by 7%, reflecting strong momentum and effective marketing [16][24] Company Strategy and Development Direction - The company is focused on its "Back to Starbucks" plan, aiming for sustained growth and profitability through improved customer service and operational efficiency [6][20] - Strategic investments are being made to enhance technology and streamline operations, with a new Chief Technology Officer appointed to drive improvements [10][20] - The company plans to open approximately 600-650 net new coffeehouses in fiscal 2026, with a focus on international expansion, particularly in China [30][31] 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 [19][34] - The company anticipates that pressures from product and distribution costs will begin to ease in the latter half of the fiscal year [25][32] - Management highlighted the importance of maintaining customer engagement and brand relevance through innovative marketing and menu offerings [15][19] Other Important Information - A joint venture with Boyu Capital in China is expected to enhance Starbucks' growth potential in the region, with a 60% interest being sold to Boyu [27][28] - The company is implementing a new labor model and refining its supply chain to improve efficiency and reduce costs [9][44] 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][37] Question: Additional cost opportunities - The company has identified a plan to track down $2 billion in costs over the next two years, focusing on efficiency across the P&L [43][44] Question: Earnings guidance for fiscal 2026 - The higher end of earnings guidance is contingent on maintaining strong comp performance and effective execution of the Green Apron service model [46][47] Question: Same-store sales momentum and service versus innovation - Management emphasized that a strong operating foundation enhances the effectiveness of marketing and innovation efforts [66][69] Question: Afternoon execution and competition - The company sees significant opportunities in the afternoon daypart and plans to enhance its offerings to compete effectively [55][60]