Starbucks (SBUX.US) FY26Q3 conference call: Global same-store growth exceeds expectations by 7.9%, and China's long-term store target is up to 20,000

The Zhitong Finance App learned that Starbucks (SBUX.US) held an FY26Q3 earnings conference call. The company's consolidated net revenue for Q3 was US$9.3 billion (-1% YoY). The decline was mainly due to the Chinese retail business shifting to a new joint venture licensing structure this quarter; global same-store sales +7.9% YoY continued to improve month-on-month. Among them, transaction volume increased by more than 4%, making global same-store correction for the fourth consecutive quarter. Channel Development (CPG) net revenue of $587.9 million (+22% YoY), partly driven by coffee inflation.

The company announced an increase in FY2026 guidelines. US same-store growth is expected to be 6.5% or better in Q4, implying that the same stores in the US are slightly higher than 6% for the whole year and close to 6% for the same stores globally. FY2026 Consolidated net revenue for the full year is expected to remain flat year over year to slightly increase (continuing to reflect the impact of China's new structure). The consolidated operating margin guidelines were raised above 11%. Both ends of the EPS guidance range were simultaneously raised to $2.55—$2.65. Expectations of 600-650 new stores remained unchanged throughout the year, mainly contributed by international business; although overall performance in North America is improving, increased visibility into some inefficient stores may result in some closures. The Q4 effective tax rate assumes a return to a normal level of around 25%.

In terms of profit margin and cost structure, Q3 profit margin expansion mainly comes from sales leverage, and is supported by cost savings, slowing inflation, and equal tariff refunds. The refunds received this quarter largely offset the relevant tariffs that have already occurred in the first three quarters of FY2026, so the year-to-date scale is more representative — quarterly product and delivery costs account for 30.3% of net revenue, while 32.3% from year to date is a reference for more normalized COGS levels.

In terms of balance sheets and shareholder returns, a portion of China's transaction proceeds was used to repay approximately $1.8 billion of debt, and the leverage ratio was further reduced to 2.9 times, supporting investment-grade credit conditions and enhancing financial flexibility, so it is possible to continue investing in the business, maintain competitive dividends, and create long-term shareholder value.

Since this quarter, retail operations in China have been reported in consolidated statements and reported according to authorized business. 40% of the financial benefits of joint ventures held by the company are reflected in investment income in joint ventures, which is the main driver of year-on-year changes in international division statements. To facilitate modelling, the Q3 International Division P&L's net revenue attributable to China was US$53 million, and the corresponding operating margin was above 100%, reflecting the structure's increasing profit margin; economic benefits from China are expected to gradually accumulate as the joint venture moves out of the transition period and is scaled up. The long-term target for stores in China is a maximum of 20,000.

Q&A Q & A

Q: How long can the current same-store sales momentum continue? The long-term plan is 3% per year. What is the step in the process of recovering sales volume, and what are the components of maintaining this momentum or higher than 3% in the next few years?

A: The source of kinetic energy is better operational practices. Take the Green Apron Service model as an example. Currently, staffing is more reasonable, and daily processes and coaching mechanisms are in place, so that all customers can have a better experience every day.

Judging from the business itself, whether in the morning or afternoon, there is still plenty of room to continue to increase transaction volume. Significant progress has been made in both periods, but there is still plenty of room for growth. In terms of innovation, the marketing team has introduced highly relevant innovations in drinks, food, and surrounding areas, and this line has only just begun.

As a result, daily operations are improving, customers can see, feel, and experience this change, and the consistency of the partner implementation Green Apron service experience continues to improve. As you can see from talking to customers who have experienced it, their feedback has been positive; whether through digital platforms or more traditional jobs such as menus and marketing, there is still more room for innovation.

Q: If you separate the morning and afternoon, what is the growth performance of each period over the past year? What do you think of the year ahead and beyond? Did improvements in store throughput bring excess revenue to the more concentrated morning hours, and when will the afternoon take over as a source of excess growth?

A: From the beginning, the Back to Starbucks strategy made it clear that the morning was won first, then the afternoon session was created. This is how the store partners implemented it — they did a good job in scheduling and personnel deployment, and then provided a quality experience in the morning to win the ceremony every morning. In terms of absolute trading volume, the morning session was the biggest winner.

As time progresses to the latter part of the day, it can be seen that the increase in trading volume has not reached the level of the morning. To get the same momentum in the afternoon, it is necessary to combine two aspects: one is the combination of drinks and food products, and the other is to improve the afternoon operation process. Therefore, the implementation of the strategy progresses exactly according to the established path — winning the morning, creating the afternoon, and breaking all the barriers that prevent the formation of throughput in various pickup channels, whether it is drive-in, in-store, mobile order pickup, or delivery. All pickup channels and all hours of the day are making good progress, and the biggest gain still comes in the morning, where it was originally the biggest bottleneck.

Additionally, Refreshers performed very well this quarter, which was as expected, and it provided a great occasion for afternoon drinks — many customers chose decaffeinated products in the afternoon, and basic Refreshers only contained very little caffeine. Meanwhile, refreshers containing extra caffeine or energy have begun to form a habit in the morning. This means that Refreshers, along with the matcha menu, provides a great platform for the afternoon; when combined with products being tested on the food side (such as wraps), the expansion scene during the afternoon period will be more complete.

Q: Coffee doesn't seem like a zero-sum game. Unlike the competitive logic of categories such as hamburgers, fried chicken, and pizza, how do you view the current pattern of the coffee category?

A: I'm excited about the momentum of the business. Even after observing the situation at the end of the quarter, business picked up speed again. Starbucks is experiencing positive changes in its own business and coffee category.

Q: Since the current momentum of the industry and company is very good, why did they choose to slow down store openings and step up efforts to close inefficient stores at this time?

A: Looking back at two or three years ago, the company's store development strategy was not ideal — either the store was renovated very difficult or the store was opened in the wrong location. These problems must now be cleaned up and fixed. The good news is that as business picks up, the real problem stores will emerge more clearly. This was clear from the beginning: fix these stores first, then establish a store opening pipeline based on choosing the right store.

At the same time, strong categories and strong Starbucks business mean that future store openings will be high quality stores. This is essentially a kind of healthy business hygiene, and as a result, Starbucks will have a more stable position in the future.

Q: Refreshers is a prominent platform, but now almost all brands are making similar products. What differentiates Starbucks from customers? When large QSR (non-beverage specialty brands) advertise, does it have an aura effect on Starbucks?

A: Starbucks is the original creator of the Refreshers category. Handmade craftsmanship, flavors, and the variety of ways that can now be customized make this platform truly different, and the growth performance is excellent. The platform was a bit complacent in the past, but now it has received a very positive market response after being reactivated.

It's worth noting how customers use Refreshers — from complete decaffeination to complete caffeine boosting, to meet the needs of different occasions. Young or older customers can be covered in the morning or afternoon, and the platform resonates very well. Next, the test bubble version (internally called spritzers) has been rolled out in several test markets; blended practices have also been added recently, and the future will see experiments with more ways to experience it. The core of differentiation lies in the handmade process and the customization capabilities provided around this process. The team is also very good at finding delicious flavors relevant to customers.

So it's a strong platform. The last quarter continued to perform well despite various competitive activities in this field. This also confirms the previous judgment: as a category leader, when other players start advertising on this track and you continue to do it well yourself, the goal is not only to get your due share, but to get more than your due share. This is the team's mission in this matter.

Q: Will the competitive landscape change as growth strategies are adjusted — including entering markets that already specialize in coffee, but Starbucks has yet to deploy —?

A: The clear trend is cold drinks, but cold drinks are also made with coffee and espresso, and retain the customization customers expect from traditional coffee drinks. At the same time, the Refreshers business played a good role throughout the morning to afternoon session, and will continue to be a powerful tool as the afternoon session grows. It is true that competition on this track is also clearly heating up. Overall, I'm very satisfied with the current position, and I'm also looking forward to the upcoming innovation—Refreshers has always been seen as a big platform with plenty of room for innovation, and is now implementing this innovation.

Q: How much has the Uplift transformation contributed to the current performance of the US? How to measure its effectiveness at the single-store level?

A: The Uplift store performed very well, and the business did respond. This is consistent with the initial assumption: the transformation not only brings revenue at all times of the day, but also benefits all pickup channels — because even customers who place mobile orders and pick up their own products will experience significantly better than a store that meets Starbucks standards.

Therefore, it can be seen that the transformation of stores brought in transaction volume, and also had a positive effect on brand perception and customer experience. Based on this, we will continue to accelerate the uplift project and raise all stores to the standard that Starbucks should have, meeting both customer expectations for Starbucks experience and the level of experience partners want to provide — this is just as important, because partners are now truly proud of their stores.

Added from the data: Just over 300 stores were renovated in the last quarter, which means that more than 650 stores were completed this quarter. The overall sample is still in its early stages, but we can see a positive halo effect across all store types, all channels, all time periods, and all city levels, including in-store and drive-through, which puts the brand in a stronger position — the brand health index has been at a five-year high this quarter. These elements work with a complete premium customer experience and have been verified on uplift. Furthermore, the return on investment in the transformation continues to be good, with an average investment of around $150,000 per store, which is a high return. Another point is critical: the team carried out the transformation without stopping the business. Uplift was completed at night, without changing the customer's daily movements, and the store did not need to go offline.

Q: What are the characteristics of additional stores that may be closed?

A: Judging criteria are mainly performance, location selection, and sometimes the condition of the property assets themselves — that is, whether renovation is cost-effective, or whether it is better to build a new store. This is not about judging whether Starbucks can do business in this business district, but rather whether this store is the correct presentation of the Starbucks brand and whether its economic benefits have reached the level Starbucks deserves. If the answer isn't positive, be honest with yourself, solve the problem now, and build the right Starbucks in the same business district.

Q: How to assess the gap between North American self-operated stores and authorized stores in the same store's sales and operation performance? What are some ways to close the operational performance gap between the two?

A: The good news is that authorized stores also performed well this quarter, mainly driven by the travel scene. The licensing business as a whole is introducing the same level of management rigor as self-operated stores: the grow reporting system has been implemented, only corresponding adjustments have been made to the licensing model; at the same time, very specific expectations have been given for “what is the Starbucks experience”.

The goal is that the Starbucks experience should not be substantially different, whether in a self-operated store or an authorized store. As can be seen, there are more and more cases that meet this goal, while there are fewer and fewer cases where there is a clear gap. Authorized stores have performed very well, and self-operated stores are continuing to make progress. The direction of work is to continue to ensure that no matter what kind of store customers choose, the Starbucks experience is no different.

Q: How much did store-side initiatives such as extended business hours, store closures, and delivery each contribute to the same store in Q3? What is the ratio compared to brand initiatives?

A: The impact of measures such as extending business hours is actually quite limited. Of the 7.9% same-store growth, about half or slightly less half came from sales transfers and delivery growth due to store closures; the rest came from improved store performance, menu, and innovation. Among them, the contribution of the adjustment of business hours was very small, only a few basis points.

Q: Are customs refunds still available in Q4? How many relevant assumptions are included in the guidelines?

A: This quarter's operating margin expansion is still valid even if tariff refunds are excluded. As mentioned earlier, the correct way to look at product and delivery costs (COGS) is to look at year-to-date performance, as this measure largely hedges the impact of rising tariffs and subsequent refunds. Judging at present, the refund due has basically been recovered, so it is more appropriate to use the year-to-date performance as an anchor.

Q: Does Green Apron Service have a perfect match in terms of manual working hours? Considering the current passenger flow and the likely increase in the future, will the number of working hours remain relatively stable, or will there still be room for efficiency improvement as passenger flow increases?

A: Store operators have done a good job in managing schedules and ensuring a quality experience for the volume of business they undertake. There is still room for further growth in the morning and afternoon. Among them, labor investment during peak hours in the morning can also bring more efficiency gains; as time progresses to the later part of the day, the same opportunities will also arise, and eventually the business will “earn” additional working hours to match the growth.

The team did a good job of managing working hours, meeting business needs without capping growth — this is important to all. There is still room for growth in the morning, there is still room for growth in drive-in speed, and there is still room for growth in mobile orders and self-pickup, both in the morning and afternoon. These judgments are well-founded because different groups of stores have shown what level they can achieve. Therefore, we are very optimistic about the next growth path and how to make good use of the new Green Apron service model and the resulting artificial configuration.

Q: What is the meaning of the 24-hour operating model mentioned by management? Does that mean some stores will be open 24 hours a day? What is the potential contribution of the average extended business hours to the US system if fully rolled out and optimized?

A: 24 hours refers to the goal at the supply chain level: to establish a system that can drive the supply chain and complete replenishment within 24 hours. Currently, it is true that a small number of stores are operating exactly 24 hours a day, but the focus of the statement at the time was to be able to complete store replenishment within 24 hours, so that goods can never be delivered; at the same time, it is hoped to reduce the back-floor area, place the right inventory in the right place at the right time, and greatly improve the efficiency of the entire supply chain process. This is the current direction of progress. If demand itself proves that more stores should be open 24 hours a day, that's naturally a good thing, but that's not the focus right now; the focus is on the supply chain.

Q: What is the year-over-year situation of marketing expenses? Under the positioning of “being part of a cultural dialogue”, is there still room to increase the proportion of advertising investment in sales, or more to continue optimizing the media mix?

A: The team has done a good job in using the marketing budget. Currently, marketing investment is slightly higher than 2% of sales. As the business grew, the company did not cap this expenditure, nor did it see the marginal return on investment diminish. The team is making sure that money is invested in places that drive transactions, drive brands, build loyalty and affection, and make consumers understand Starbucks' claims. Judging from the degree of cultural fit, the delivery is accurate; the effectiveness of brand communication is at one of the best stages in a long time.

Marketing budgets continue to grow as the business grows, and teams are responsible for the return on these expenses, and they can deliver every time the topic is discussed. So we're in a good position right now, and we're looking forward to the rest of this fiscal year and our plans for 2027.

Q: What is the current penetration rate of digital menu boards? How has the performance changed during the afternoon session in the stores that have already been installed? What can a digital menu board bring to the afternoon session?

A: By around September, digital menu boards are expected to cover around 80% — 90% of stores. The current practice is to switch the menu board content according to the time period, which works very well. This helps nurture the afternoon session because afternoon products are better displayed and recommended. The team continues to optimize the way the digital menu board is used to better drive timesharing communication. The effect will be better when the entire system is fully deployed with a digital menu board. In addition, every uplift store will be equipped with a digital menu board simultaneously during the transformation, in parallel with the existing digital menu board promotion project. Marketing teams are taking full advantage of this technology and its ability to adjust content over time.

Q: Store transformation is clearly ahead of schedule in FY2026, and FY2027 will accelerate. What is the upper limit of transformation capacity? When will it be possible to cover the entire system? What is the approximate acceleration in 2027?

A: The goal is to be completed as soon as possible, while balancing the speed of progress with other investment directions. There will be a significant acceleration from FY2026 to FY2027, and it will continue to advance as soon as possible thereafter. We are currently building a larger transformation capacity than this year, and we'll see how to further expand the scale in the future — but we don't want to sacrifice quality in order to seek speed; we must be both fast and excellent. This is a balance that must be struck, because the results of the transformation project are really good, and the last thing you should do is damage quality performance in order to bring speed to a certain level. As a result, FY2027 will clearly speed up, then evaluate how much faster it can be, and hope to complete all modifications within a reasonable period of time.

Q: As the penetration rate of delivery increases, how do you view its incremental nature and the alternative relationship with in-store consumption? What is the impact on channel margins?

A: There are currently no trade-offs in terms of profit margins, and we haven't seen any meaningful encroachment effects from delivery channels. So I'm very confident in this business. Delivery will soon be connected to its own app and use a white label partner model, which will make the platform more appealing — because delivery orders can also accumulate membership benefits and stars at that time, and currently it is not possible to participate in the Star Program when using delivery. As a result, there is still plenty of room for growth in delivery, and there are currently no trade-offs in terms of profit margins.