Starbucks (NASDAQ:SBUX) reported third-quarter fiscal 2026 results that management said reflected continued progress in its “Back to Starbucks” turnaround plan, including a fourth consecutive quarter of positive global comparable-sales growth and a second straight quarter of operating-margin expansion.
Consolidated net revenue totaled $9.3 billion, down 1% from the prior year primarily because the company transitioned its China retail operations to a joint-venture licensing structure during the quarter. Global comparable sales rose 7.9%, led by transaction growth of more than 4%, while diluted earnings per share increased about 70% year over year to $0.85.
North America Leads Comparable-Sales Growth
North America revenue was $7.4 billion, and comparable sales increased 8.1%. U.S. comparable sales rose 7.9%, with transactions increasing 4.2% and average ticket growing 3.6%. Chief Financial Officer Cathy Smith said pricing accounted for less than one percentage point of ticket growth.
Management attributed the U.S. results to broad-based growth across dayparts, income levels and customer access points. Food attachment reached a third-quarter record in U.S. company-operated stores, with the strongest gains occurring in the afternoon, according to Smith. Delivery, innovation-led drink modifications and food attachment supported average-ticket growth.
Starbucks had 35.8 million active U.S. Starbucks Rewards members over the prior 90 days, up both sequentially and from a year earlier. Niccol said the revised rewards program is encouraging members to advance through its membership tiers, while Smith said engagement and stored-value card reload amounts have exceeded management’s expectations.
The North America store base ended the quarter at 18,371 coffeehouses. Starbucks added 27 net new company-operated stores but recorded 41 net closures in its licensed portfolio. Licensed revenue was roughly flat year over year, while U.S. licensed stores posted positive systemwide comparable sales, led by travel and leisure locations.
Margins Expand as Sales Leverage and Cost Savings Build
Consolidated operating margin expanded about 430 basis points from the prior year to 14.4%, marking the second consecutive quarter of margin expansion. North America operating margin increased about 280 basis points year over year, its first year-over-year increase since the first quarter of fiscal 2024.
Smith said the margin gains were driven by sales leverage, cost savings efforts, lower inflation and reciprocal tariff refunds. She cautioned that the refunds largely offset tariffs incurred during the first three quarters of fiscal 2026, making the year-to-date product and distribution cost rate of 32.3% a more normalized measure than the third-quarter rate of 30.3%.
Even excluding tariff refunds, Smith said consolidated and North America margins expanded from the prior year. Consolidated general and administrative expenses fell approximately 20%, reflecting cost-saving actions, the deconsolidation of the China business and the comparison with prior-year leadership event expenses.
The company repaid about $1.8 billion in debt using part of the proceeds from the China transaction. Leverage declined to 2.9 times, which Smith said supports Starbucks’ investment-grade profile, business investment plans and dividend.
Operational Changes and Coffeehouse Uplifts
Niccol said the company’s Green Apron Service operating model has improved staffing, coaching, accountability and store execution. Two-thirds of North American company-operated coffeehouses reached four or more “shots” under Starbucks’ internal GROW reporting and ranking system, up more than five percentage points from the prior quarter and more than 40 points since the system launched last October.
Starbucks also reported that average service-time targets were achieved across access points during the quarter, despite transaction growth. Food availability approached 99%, roughly 10 percentage points above the level reported a year earlier.
The company completed more than 1,000 North American coffeehouse “uplifts” in the third quarter, reaching its fiscal 2026 target ahead of schedule. These projects add seating, warmth and other design elements at an average investment of about $150,000 per location, according to Smith. Management said early results showed transaction gains across dayparts, formats and customer segments.
Starbucks now expects to complete at least 1,500 uplifts by the end of fiscal 2026 and plans to accelerate the effort in fiscal 2027. Niccol said the company will balance speed with quality as it expands the program.
International Model Shifts as China Is Deconsolidated
International company-operated comparable sales rose 5.7%, supported by performance in Japan and the United Kingdom. Japan, now Starbucks’ largest international company-operated market, benefited from innovation associated with its 30th anniversary, including nostalgic beverages and marketing, Smith said.
International revenue was $1.3 billion and operating income was $300.9 million. Starbucks deconsolidated its China retail business beginning in the third quarter, reflecting its 40% joint-venture economics through income from equity investees. China contributed $53 million in reported international revenue during the quarter, and its reported operating margin exceeded 100% because of the licensing structure.
About 90% of Starbucks’ international portfolio is now managed through a licensed structure. Management said it remains confident the China joint venture can support sustainable growth and ultimately reach up to 20,000 coffeehouses over time. The international portfolio ended the quarter with 22,933 coffeehouses, including 189 net new openings.
Guidance Raised for Fiscal 2026
Starbucks raised its outlook for fiscal 2026, projecting U.S. comparable-sales growth of 6.5% or better in the fourth quarter. That outlook implies full-year U.S. comparable-sales growth of slightly more than 6% and global comparable-sales growth nearing 6%.
- Consolidated revenue is expected to be flat to slightly higher year over year, reflecting the China structure change.
- Consolidated operating margin is expected to exceed 11% for the full year.
- Adjusted earnings per share guidance was raised to a range of $2.55 to $2.65.
- Starbucks maintained its outlook for approximately 600 to 650 net new coffeehouse openings in fiscal 2026.
Management said North American company-operated unit growth may remain modest through fiscal 2027 as Starbucks identifies and addresses underperforming locations. Niccol said potential closures would be based on store performance, location quality and whether a remodel or a new location would provide better economics, rather than a lack of confidence in a trade area.
“We’re seeing really good things happen with the Starbucks business,” Niccol said, adding that the company sees further opportunity to grow traffic in both the morning and afternoon dayparts.
About Starbucks (NASDAQ:SBUX)
Starbucks Corporation is a global coffeehouse chain and roaster that operates, licenses and franchises coffee shops and related retail businesses. Founded in Seattle, Washington in 1971 by Jerry Baldwin, Zev Siegl and Gordon Bowker, the company grew from a single store focused on whole-bean coffee and equipment into a broad consumer-facing brand. Howard Schultz, who joined the company later and served in senior leadership roles, is widely credited with transforming Starbucks into a mass-market specialty coffee retailer and expanding its footprint internationally.
Starbucks’ core activities center on the retail sale of hot and cold specialty beverages, whole-bean and packaged coffees, teas and ready-to-drink products, along with complementary food items and merchandise such as mugs and brewing equipment.
