Starbucks swings to profit growth as US turnaround offsets China-linked revenue drop

Starbucks Corp. said fourth-quarter adjusted profit rose sharply from a year earlier and comparable sales climbed for a fourth consecutive quarter, as the coffee chain's two-year effort to rebuild its North American business showed further signs of taking hold. The results, disclosed in a filing with the Securities and Exchange Commission after markets closed on Thursday, also showed total revenue declining, a result the company attributed almost entirely to the sale of a majority stake in its China retail operations earlier this year. Starbucks had announced in advance that it would release the results and hold a conference call Thursday afternoon.

For the 13 weeks ended September 27, Starbucks reported adjusted earnings of 80 cents a share, up 54 percent from a year earlier. On a GAAP basis, earnings per share were 59 cents, up 392 percent from the prior year. Consolidated net revenue fell 4 percent to $9.1 billion. Global comparable store sales — a closely watched measure of sales at outlets open at least a year — rose 7.2 percent, with gains split between a 5.2 percent rise in average ticket size and a 1.8 percent increase in customer visits, according to the Form 8-K Starbucks filed with the SEC disclosing the results.

A China deal reshapes the numbers

The revenue decline was driven almost entirely by a transaction completed earlier this year, in which Starbucks sold a majority stake in its mainland China retail business to funds managed by Boyu Capital, converting roughly 7,991 company-operated stores there into a licensed joint venture in which Starbucks retains a 40 percent interest along with its brand license. Because those China stores are no longer consolidated the same way on Starbucks' books, year-over-year revenue comparisons show a drop even though underlying demand, by the company's own measure, improved: comparable sales in the international segment that now includes China rose 0.9 percent in the quarter. The China transaction had already produced a pretax gain of roughly $536 million and net proceeds of about $2.54 billion for Starbucks earlier in the fiscal year, according to the company's SEC filing.

North America, still Starbucks' largest and most closely watched segment, was the stronger story. Comparable sales in the region rose 7.9 percent, and segment operating income jumped 191 percent to $898.4 million as margins recovered from a weak year-earlier quarter. Full fiscal-year revenue came to $37.9 billion, up 2 percent, with non-GAAP operating margin for the year reaching 11.9 percent, up 200 basis points, and non-GAAP earnings per share for the full year at $2.72, up 28 percent.

Store closures continue alongside new openings

Even as it reported improving sales, Starbucks said it closed about 250 company-operated stores in North America in September as part of the ongoing "Back to Starbucks" restructuring effort launched under chief executive Brian Niccol, who took over in 2024. The company's SEC filing described the shuttered locations as stores that "do not deliver the coffeehouse experience and financial performance expected of the brand." The closures came alongside continued expansion elsewhere: Starbucks opened 303 net new coffeehouses in the quarter and 617 for the full fiscal year, ending with 41,607 locations worldwide, about 68 percent of them licensed rather than company-operated. Restructuring and impairment charges tied to the overhaul totaled $272.8 million for the quarter and $688.6 million for the year, both down from the prior year's charges.

• Fourth-quarter adjusted EPS: $0.80, up 54% year over year; GAAP EPS: $0.59, up 392%
• Consolidated net revenue: $9.1 billion, down 4%, largely due to the China joint-venture conversion
• Global comparable store sales: up 7.2%; North America comparable sales: up 7.9%
• About 250 North American store closures in September; 303 net new stores opened globally in the quarter

Who is affected

The results carry implications beyond Starbucks' roughly 361,000 employees and its shareholders. Franchisees and licensed-store operators in the roughly two-thirds of the company's locations that are not company-operated depend on the chain's traffic trends, which the quarter's 1.8 percent rise in comparable transactions suggests have begun to stabilize after a prolonged slump in customer visits. Baristas at the closed North American locations will be affected by the September closures, though the earnings release did not disclose a specific headcount tied to those closures. Suppliers and commercial landlords tied to Starbucks' roughly 41,600-store footprint, and the new Chinese joint-venture partner Boyu Capital, now share more directly in the performance of the chain's mainland China business, which Starbucks no longer fully consolidates.

"Back to Starbucks started as our turnaround plan. Now, it's our growth plan," Brian Niccol, Starbucks' chairman and chief executive, said in the earnings release.

Chief financial officer Cathy Smith said in the same release that "in fiscal 2026, we returned to comp growth, expanded margin and delivered stronger earnings," adding that the company's recently increased dividend and plans to resume share repurchases in fiscal 2027 "underscore our confidence" in the business. The board declared a quarterly dividend of 63 cents a share, payable November 27.

What's next

Starbucks issued financial guidance for fiscal 2027, a 53-week year, projecting non-GAAP earnings per share of $3.15 to $3.25, non-GAAP operating margin of 13.5 to 14 percent, and roughly 1,200 net new coffeehouses globally, with growth weighted toward markets outside North America. The company said consolidated net revenue is expected to decline by about 1 percent next year, a figure that includes roughly $700 million in extra revenue from the additional week in the fiscal calendar. Management also said it plans to resume share buybacks in fiscal 2027 after pausing them during the restructuring. Shares of Starbucks trade on the Nasdaq under the ticker SBUX; the market's reaction to the results will not be clear until regular trading resumes Friday.