Operator: Good afternoon, and welcome to Starbucks' Q4 and full fiscal year 2026 earnings call. All lines have been placed on mute to prevent any background noise. I will now turn the call over to Catherine Park, Vice President of Investor Relations. Ms. Park, you may now begin your conference.
Catherine Park: Good afternoon, and thank you for joining us today to discuss Starbucks' Q4 fiscal year 2026 results. Today's discussion will be led by Brian Niccol, Chairman and Chief Executive Officer, and Cathy Smith, Executive Vice President and Chief Financial Officer. This conference call will include forward-looking statements which are subject to various risks and uncertainties that could cause actual results to differ from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factors discussed in our filings with the SEC. Starbucks assumes no obligation to update any of these forward-looking statements or information. Certain metrics referenced on today's call are non-GAAP and measured in constant currency. Please refer to the earnings release on our website at investor.starbucks.com to find reconciliations of these non-GAAP measures to the corresponding GAAP measures and supplemental financial information.
Catherine Park: This conference call is being webcast, and an archive will be available on our website through Friday, 11 December 2026. For calendar planning purposes, please note that our Q1 fiscal 2027 earnings conference call is tentatively scheduled for Wednesday, 27 January 2027. I will now turn the call over to Brian.
Brian Niccol: Good afternoon, and thanks for joining. We closed fiscal 2026 with another terrific quarter and a much stronger Starbucks than we had a year ago. Back to Starbucks started as a turnaround plan, and now Back to Starbucks is our growth plan. In Q4, our net revenues were $9.1 billion, down 3.9% year over year, reflecting the midyear transition of our China business to a licensed model. Global comps were up 7.2%, marking our fifth consecutive quarter of comp growth, and US comps were up 7.7%. Consolidated operating margin expanded 450 basis points year over year to 14%, our third consecutive quarter of margin growth, and earnings per share grew approximately 54% to $0.80. For the full year, consolidated net revenues grew to $37.9 billion, up 2.1%. Global company-operated comps were up 6.2%, with US comps up 6.5% and international comps up 3.7%.
Brian Niccol: Consolidated operating margin expanded 200 basis points to 11.9%, and earnings per share grew approximately 27% to $2.72, exceeding the high end of our guidance. These results reflect a relentless focus on executing our Back to Starbucks strategy. Two years ago, we committed to getting back to Starbucks and delivering our brand promise more consistently. We put the customer at the center of every decision. We gave our partners more support. We got clear on what matters. We restored the third place, and we put Starbucks back on its front foot. Our plan is working. More customers are visiting us because the Starbucks experience is better. Our coffeehouses are coffeehouses again. Our partners are creating more moments of connection. Our brand is more visible, relevant, and loved.
Brian Niccol: Our licensed and channel development businesses are extending our reach to more places and occasions, and more of our sales growth is translating into earnings. For more than 50 years, we have grown by delivering on the Starbucks brand promise. Exceptional coffee, human connection, and a great customer experience in a true third place. It comes down to the fundamentals. When we execute them with excellence, we grow. That is what we saw in fiscal 2026, and it is what gives me confidence in the durability of our performance for the future. We had a great quarter and a great year, and it put us ahead of schedule on our fiscal 2028 framework. As we focus on growth in fiscal 2027, we have even more opportunity ahead. Let me walk you through some of the highlights for the quarter.
Brian Niccol: Starting in North America, company-operated comps grew 7.9%, driven by double-digit comps in Canada and strong comps in the US. That momentum is being driven by great execution in our coffeehouses, a strong brand, and a healthier portfolio. First, our coffeehouses are coffeehouses again. We are operating with greater discipline and consistency, anchored by Green Apron Service. In the quarter, more than 80% of our North America company-operated coffeehouses delivered positive comps, up from less than 50% a year ago. Average service times remained on target, and we continue to refine Smart Queue and our operating routines to improve throughput and consistency across all access points. Inventory availability is at an all-time high, with daily delivery now reaching close to 90% of our North America company-operated coffeehouses.
Brian Niccol: Our new quarterly coffeehouse incentive program is driving greater discipline around staffing and product waste while keeping teams focused on great customer service. Our leadership pipeline is also getting stronger. We now have more than 3,000 coffeehouse coaches enrolled across our US company-operated business, and they have all been hired from within the company. These positions improve leadership stability and execution, give our partners new pathways to grow, and help build the next generation of leaders to support our future growth. Second, customers are responding to a stronger, more relevant brand and menu. Starbucks brand affinity is at near record levels as our menu innovation, marketing, and merchandise continue to create moments that drive culture and bring people into our coffeehouses. Espresso, Refreshers, matcha, and our artisanal bake case showed continued strength in the quarter.
Brian Niccol: Our Unicorn launch in August united 34 markets for our first global coffeehouse activation and delivered a record sales weekend for our North America company-operated business. We followed that with our strongest North America fall launch day, and our global Peanuts collaboration demonstrated the power of great merch, delivering robust sales days around the world. Our US company-operated comp growth remained balanced with contribution from both ticket and transactions. 90-day active Starbucks Rewards members reached a record 36 million, growing both year over year and sequentially from Q3. Sales growth remained broad-based across income levels, generations, and day parts. Together, these results tell us the Starbucks experience is resonating. Our coffeehouses feel more like Starbucks, too. As of fiscal year-end, we surpassed our goal by completing more than 1,700 total uplifts across North America, bringing back warmth, comfortable seating, and the third place to our cafes.
Brian Niccol: Uplifted coffeehouses continue to show transaction lift across access points, day parts, formats, and loyalty groups, giving us confidence to continue our pace of work. Third, we are building a healthier coffeehouse portfolio. In North America, we closed coffeehouses that did not show a path to delivering the experience or financial performance we expect. We also unveiled our smaller format coffeehouses in multiple markets, taking the concept we showcased at Investor Day from prototype to reality in less than a year. Customer and partner feedback has been terrific, and we will learn from these early openings to help shape how we build for the future. International is an important growth engine for Starbucks. Our diversified portfolio remained a key strength in Q4, with comp sales growth across the majority of our licensed and company-operated markets, led by the UK, Philippines, and Mexico.
Brian Niccol: Our increasingly licensed international model, which combines the power of Starbucks with the deep market expertise of local operators, underpinned our unit growth. China exceeded its goals in fiscal 2026. We surpassed 6,000 coffeehouses in Asia Pacific, and we grew to more than 1,900 in Latin America and the Caribbean, bringing Starbucks premium coffee experience to nearly 500 new communities. Our progress through fiscal 2026 reinforces what we know. We know what makes Starbucks special. We know Back to Starbucks drives growth, and we know how to win. For fiscal 2027, we will raise the bar. We enter the new fiscal year on stronger operational footing and with momentum. At a high level for fiscal 2027, we expect North America comps of approximately 4%, consolidated operating margin of 13.5% to 14%, and EPS of $3.15 to $3.25. To deliver these results, five priorities will drive our work.
Brian Niccol: First, win on the fundamentals in the coffeehouse through Green Apron Service. That means building capacity to deliver exceptional Green Apron Service to more customers. We see room to grow transaction across every day part in our coffeehouses by extending our peak in the morning and creating a peak in the afternoon. To do this, we will keep making Smart Queue smarter. We will improve production flow behind the bar to unlock throughput while maintaining great craft. We will also begin the Mastrena 3 espresso machine test and exploring next generation drive-through concepts to improve speed and connection. It means greater operating precision. We will keep refining how we forecast and deploy labor, and how we manage inventory and product waste. We will raise growth performance expectations while keeping our leaders focused on operating behaviors that create a meaningful third place full of community and connection, and drive consistent results.
Brian Niccol: It means continued investment in our partners. FY27 will be a major tech modernization year. We will roll out new staffing and scheduling and point of sale systems through the year that simplify tasks, improve speed of service, and allow partners to spend more time engaging with customers. We are also transforming our supply chain with testing underway to improve demand forecasting, ordering accuracy, and replenishment cycles. As this work scales, it will drive greater availability, less product waste, and less work for our partners over time. Second, make our brand and menu even more relevant and loved. We will drive mass reach through effective marketing to bring in new and lapsed customers while continuing to nurture our Starbucks Rewards members. We will keep winning the morning and earning the afternoon with planful innovation, building scalable platforms that can grow with us.
Brian Niccol: These include functional and zero sugar beverages, new bakery items, more portable options, and protein-forward choices that meet more customer needs and wants throughout the day. Great innovation strengthens the ritual and gives customers more reasons to choose Starbucks. In FY27, we will bring beverages, food, and merchandise together in collections that create more compelling customer moments and drive greater attach. Merchandise remains a small part of our business today, but Q4 showed its potential.
Brian Niccol: Both our Pink and Peanuts launches contributed to ticket growth in the quarter. We will apply that same integrated approach to upcoming brand launches like holiday. We have learned a lot about what it takes to execute innovation well. In FY27, we will put even greater focus on operational readiness with thoughtful builds, better training, and the right staffing to help our partners deliver with excellence. Third, build the right experiences and capabilities for the future.
Brian Niccol: Starbucks has built an exceptional digital experience in one of the world's most engaged customer communities. In the year ahead, we will make our industry leading Starbucks app even more intuitive for customers to order, customize, and have frictionless access wherever they are. We will update the menu experience and build more personalized touch points through relevant content and recommendations tailored to customer tastes and preferences. In Q2, we will begin to integrate delivery directly into the Starbucks app, and we will extend the opportunity for customers to begin earning and redeeming stars on delivery orders. We are working on opportunities for AI to make search and discovery in the app more seamless, with the potential to support conversational and agentic ordering over time. We are exploring ways to make it easier for customers to place mobile orders from their cars and through emerging AI platforms.
Brian Niccol: We are also working to reimagine the drive-through experience to make it faster, more convenient, and more personal. Roughly half of our customers use the drive-through, making it a significant opportunity. In FY27, we will begin testing background AI models in the drive-through that help our baristas input orders more accurately and efficiently as they interact with customers. The intent is to help our partners focus on connecting with customers while improving both throughput and speed of service. We are also exploring experiences that recognize participating customers as they arrive, present personalized digital menus, and make payment more effortless. We are early in this work, and we will test, learn, and scale what works. Fourth, grow with discipline in the US and around the world. We see significant long-term white space in North America with the opportunity to build around 5,000 additional coffeehouses over time.
Brian Niccol: We are focused on making disciplined decisions today that set us up for stronger, more durable growth in the future. Rebuilding our development pipeline will take time, which means we expect fewer company operated openings in FY27 and a stronger, healthier pipeline beyond that. As we do this work, we will continue investing in our uplift program. We expect to complete more than 2,000 uplifts in FY27. We will also work to grow our North America license business, bringing the Starbucks experience to even more customers. We expect international to lead our global unit growth this fiscal year, with net new coffeehouse openings accelerating by nearly 50% compared to FY26. That translates to about three new coffeehouses a day. Beyond FY27, we see substantial room to grow our footprint outside North America from more than 23,000 international coffeehouses today to nearly 40,000 over the long term.
Brian Niccol: That includes the potential to double our presence in China and India with meaningful growth across other regions. Fifth, create more opportunity for partners. Our hourly partner turnover rate remains well below the industry average, driven by what third-party studies confirm are industry leading pay and benefits, as well as improved staffing and flexible schedules that give partners the hours they want to work. In FY27, we will expand coffeehouse coaches to more North American coffeehouses, giving experienced partners more opportunities for advancement while building a pipeline of talent to support future coffeehouse growth. We will pair that with more training and development opportunities and better tools for leaders to build and manage strong teams. Taken together, these priorities give us clear direction and confidence in the path ahead. Back to Starbucks started as a turnaround plan, and it put us back in a position of strength.
Brian Niccol: Today, Back to Starbucks is our growth plan. To conclude, FY26 was a tremendous year of progress and results, and it gives us confidence in our trajectory. We are ahead of schedule in relation to our FY28 framework, and we see a clear path to consistent comp growth and stronger earnings in FY27. To our partners around the world, thank you. The progress we have made reflects your focus, ownership, and belief in our brand promise. I am confident we will keep building on what is working, raising the bar, and bringing the best of Starbucks to even more customers around the world. With that, I will turn it over to Cathy to take you through our results in more detail and our FY27 guidance.
Cathy Smith: Thank you, Brian, and thank you all for joining us today. In fiscal 2026, we strengthened the fundamentals of our business, and that work is increasingly showing up in our financial performance. I would like to also thank our partners whose focus and dedication were critical to delivering our Back to Starbucks priorities. Now to our Q4 results and outlook. Q4 consolidated net revenues were $9.1 billion, down 3.9% year over year, primarily reflecting Starbucks China’s transition from company operated to a licensed joint venture. Global comps grew 7.2%, our fifth consecutive positive quarter. North America net revenues grew 6.3% to $7.3 billion, led by strong company operated comps in both the US and Canada. US comps grew 7.7% with a healthy balance of transactions up 2.4% and ticket up 5.2%. Contribution from transactions moderated from Q3, particularly as we began to lap the growth from last year.
Cathy Smith: On a 2-year basis, US transaction comps improved sequentially from Q3, a sign that customers continue to choose us more often. As Brian mentioned, we delivered growth across all dayparts, income levels, and access points. Ticket growth continued to reflect balanced contribution from pricing, attach, mix, and delivery growth, with pricing and mix, including merchandise, driving most of the sequential improvement from Q3. We have been very pleased with our delivery performance in the US, with revenues more than tripling over the past 5 years. These transactions have been largely incremental. Expanding delivery to more coffeehouses supported our growth in fiscal 2026, and with delivery soon to be fully integrated into the Starbucks app, we see additional runway in fiscal 2027. We are also driving the engagement we want to see in our Starbucks Rewards program. 90-day active members reached a record 36 million in the quarter.
Cathy Smith: More members are moving into higher frequency tiers, and Starbucks Rewards members led our transaction and sales growth in the quarter. North America licensed revenues grew 2.6% in Q4, reflecting a third consecutive quarter of positive system-wide comps and strength across broader retail, travel, and leisure. We ended the quarter with 18,176 coffeehouses in North America. This reflects 247 company operated net closures, primarily from last month's portfolio actions, and partially offset by 52 net licensed openings. Moving to international, the segment delivered Q4 net revenues of $1.3 billion and operating income of $261.3 million, with positive system-wide comps across our diversified portfolio. International company operated comps, which are now largely comprised of Japan and the UK, grew 0.9%. We had exceptional performance in the UK, balanced by tougher comparisons in Japan.
Cathy Smith: As a reminder, Starbucks China's retail operations are now deconsolidated from our financials and reported as a licensed business. With our 40% joint venture economics reported in income from equity investees. This transition will continue to be the driver of year-over-year changes in international through the H1 of fiscal 2027. International drove our unit growth in fiscal 2026, ending Q4 with 23,431 coffeehouses, including 498 net new openings in the fourth quarter. This demonstrates our continued confidence in the long-term opportunity to grow our brand globally. In total, we ended fiscal 2026 with 41,607 coffeehouses globally, with 617 net new openings for the full year, well ahead of our most recent expectations. In channel development, Q4 net revenues declined 8.9% to $494.4 million, led by the Global Coffee Alliance and the absence of coffee price-related tailwinds we saw in the first three quarters.
Cathy Smith: Operating income was about flat year-over-year, despite the lower revenue base. With consumers remaining choiceful in their spending, we and our partners will continue to lean into innovation and marketing activations to maintain our number 1 position in at home and ready to drink coffee in North America, and to build new occasions with offerings like Refreshers and protein. Moving to margin, Q4 consolidated operating margin expanded 450 basis points to approximately 14%. This was our third consecutive quarter of margin expansion, with improvement across every segment. North America operating margin expanded 440 basis points to approximately 16%, driven primarily by sales leverage, disciplined execution, and cost savings. We also lapped our Green Apron Service labor investments in August, which are now a part of our base. These benefits were partially offset by higher product and distribution costs, mainly from product mix.
Cathy Smith: Coffee price impacts were roughly neutral in the quarter. Consolidated G&A declined approximately 20%, reflecting our cost savings efforts and China deconsolidation. Together, these results reflect stronger execution with more of our sales growth flowing to the bottom line. Interest and other income of $59.2 million benefited from net gains on certain investments in Q4. Our effective tax rate was in line with our expectations at 24.7%. All in, Q4 EPS was $0.80, up approximately 54% year-over-year. Our Q4 and full year results showcase our focus on executing Back to Starbucks to strengthen the business, and our earnings recovery is well underway. Turning to our outlook. In fiscal 2027, we see multiple drivers of growth and a clear path to stronger earnings as we continue advancing our long-term priorities. As a reminder, fiscal 2027 is a 53-week year.
Cathy Smith: Our guidance includes the extra week, except for sales comps, which are on a comparable 52-week basis. Starting at the top of the P&L, we expect full year consolidated net revenues to decrease by approximately 1% year-over-year, including approximately $700 million of revenues related to the 53rd week. The expected decline is primarily driven by our international segment as we lap Starbucks China's retail operations, which were company operated in H1 of the year. Our revenue expectations also include modest coffee deflation and the impact of fewer new North America coffeehouse openings. We expect full year North America net revenue growth to slightly exceed comp growth, driven by the impact of the 53rd week. During the first three quarters of the year, we expect North America net revenue growth will trail the segment's comp growth, reflecting the recent company-operated coffeehouse closures.
Cathy Smith: In addition, we expect channel development net revenues to decline by approximately 10%, also heavily influenced by coffee price trends. In the US, consumers are increasingly prioritizing experiences that feel worth it. That reinforces our focus on quality, craft, and connection, and on delivering a consistently great customer experience. We expect fiscal 2027 North America comps to grow approximately 4%, led by beverage and food innovation, Green Apron Service, delivery, and a small contribution from uplifts and sales transfer from coffeehouse closures. Any pricing will remain focused and well below CPI. We expect fiscal 2027's cadence of US comps to be more balanced across the quarters than fiscal 2026. Specifically, we expect less variability between Q1 and the rest of the year. Also moving forward, we will focus our annual comp guidance on our North America company-operated business.
Cathy Smith: It is the primary driver of our underlying comp performance as our international portfolio is now predominantly licensed. We expect fiscal 2027 consolidated operating margin of 13.5% to 14%, up approximately 190 basis points at the midpoint. This is led by our North America business and supported by sales leverage and our focus on disciplined coffeehouse execution. In addition, we remain on track with our cost savings work, which we expect to continue realizing through fiscal 2028. To date, we have realized roughly half of those gross savings. We expect benefits to operating margin to become more evident in fiscal 2027, as we now have lapped our labor investments in Green Apron Service. In G&A, we continue to realize savings from actions we took last year and expect consolidated G&A dollars to be flat to slightly down year-over-year.
Cathy Smith: For international, we expect operating margin to begin the year at around 20% and improve slightly through the year, supported by sales leverage and our capital efficient licensed model. In channel development, we expect operating margin to remain in the mid to high 40% range over the longer term. For tax, we expect our effective tax rate will be roughly in line with or slightly below fiscal 2026. Putting it all together, we expect EPS of $3.15 to $3.25, growing close to 18% year over year at the midpoint. Our guidance includes a benefit of slightly more than $0.10 related to the 53rd week. Finally, we expect approximately 1,200 net new coffeehouses globally in fiscal 2027. International is expected to drive much of this growth at approximately 1,100 net new openings, with China contributing about half.
Cathy Smith: In North America, we expect 90 to 100 net new coffeehouses for the year. About half is expected to come from our licensed portfolio. The balance is expected to come from our company-operated business as we rebuild the development pipeline Brian discussed. Fiscal 2027 is an important step toward our fiscal 2028 framework. We are tracking ahead of pace toward our 2028 goals, and we remain focused on building from here. Our capital allocation priorities remain investing in the business with discipline, maintaining our investment grade balance sheet, and supporting a competitive dividend. We recently raised our quarterly dividend to $0.63 per share, our 16th consecutive annual increase. We also expect to deploy approximately $1 billion towards share repurchases, reflecting our confidence in the business and our plan.
Cathy Smith: In fiscal 2027, we expect capital expenditures to be approximately 5% of net revenues, primarily as we continue investing in uplifts and our Back to Starbucks priorities. To conclude, fiscal 2026 demonstrated the meaningful progress we are making and gives us confidence in the path ahead. Back to Starbucks has moved us from turnaround to growth, and our priorities are clear. We are focused on executing with discipline and delivering sustainable growth and long-term shareholder value. With that, we are now ready to take your questions.
Operator: We will now begin our question and answer session. If you would like to ask a question, press star, then the number 1 on your telephone keypad. In order to allow as many questions as possible, we ask you to please limit yourself to one question at a time. We will come back for follow-up questions as time allows. Your first question comes from Brian Harbour with Morgan Stanley. Please state your question.
Brian Harbour: Yeah, thanks. Good afternoon, guys. In guiding 4% same-store sales this year, that is very specific. You had kind of the 3% plus algo. Should we think about that as being, you essentially view this as an on algo year plus, maybe some of the benefit from closures and uplifts that you stated? I guess could you just comment on whether you are seeing something akin to that right now as we enter the fiscal Q1 and just, I guess, more broadly, what do you view as kind of the most important incremental layers as we go into this year?
Brian Niccol: Yeah. Look, thanks for the question. No, the way to think about it is our guidance for FY27 is really built on the strength of the fundamentals of the business. Really driven by Green Apron Service, coupled with a really strong Starbucks Rewards and digital program, and then obviously the marketing menu innovation that we have going on. So, the way I look at it is we are probably a year ahead of schedule relative to the guidance we gave for FY28. We just see strength in the business that gave us the confidence to commit to 4% comps. Obviously, I think our goal always is to continue to build on the strength that we have. The good news is that strength is coming through the fundamentals. I cannot emphasize that enough. Hopefully, you heard that in my prepared remarks.
Brian Niccol: The business is on really strong footing, and it is driven by operational health.
Operator: Thank you. Your next question comes from Danilo Gargiulo with Bernstein. Please state your question.
Danilo Gargiulo: Great. Thank you. I was wondering if you can comment on the evolution of margins in 2027. How should we think about the puts and takes? I heard you say expectations on deflationary coffee. If you can also indulge us in maybe expanding on the $2 billion saving opportunities that you have identified in the past. If you could give us some examples of incremental savings that you could be unlocking from here on, excluding the sales leverage that is coming with that. And congrats.
Cathy Smith: Thanks, Danilo. I'll appreciate the congrats. Thank you. So a little bit of color on 2027 margin. As we shared in the prepared remarks, you won't see as much variation as you saw in 2026. As you know, we had a lot of change moving through our P&L last year. Going into 2027, it'll be a little bit more balanced. I guess all in, probably about a little bit better than 40% to 45% or so is in the H1. The remainder's in the H2. But it's fairly balanced throughout the course of the year. To really answer about savings, we're really pleased with our savings program. As we shared in the prepared remarks, we're over 50% of the $2 billion gross savings program achieved. This year, more towards G&A, as we always shared.
Cathy Smith: Next would be OpEx and then cost of goods sold. Cost of goods sold is the one that we always said would be more into 2027 and 2028, and that's exactly what we're going to see. You're going to start to see it weight more there because of just the realities of getting new products online, with new vendors. Sometimes we have to let existing contracts finish. Just getting that to pull through our business, the cost of goods sold start to show up in 2027 and 2028 more. But we're on track. We feel very, very good. Still have a very robust pipeline. The team continues to add to that every day. You're going to see a little bit more in cost of goods sold and then operating expenses. Lastly would be G&A because you've seen the most of that this year.
Cathy Smith: We'll have a little bit of benefit from the calendarization of the work we did this year.
Brian Niccol: Yeah. The only thing I would add to what Cathy said is just if you remember at our investor day, we targeted the idea of 13.5% to 15% margins by FY28. I think the fact that we are already believing we will achieve that low end of that guidance in FY27 speaks to, I think, the excellent work on the cost, but also the fundamentals that are driving the top line in transaction. The fact that we are already hitting what we were guiding for 2028, the low end, in 2027, I think just speaks to the strength of the business and the operating discipline that we have on cost.
Operator: Your next question comes from David Palmer with Evercore ISI. Please state your question.
David Palmer: Thanks. Wanted to ask a question about the company unit growth in the United States Americas. I think your comment was net unit growth would be something south of 100, I think maybe closer to 40 to 50 this year. Could you speak to maybe the ramp that you see going into longer term going forward? I know there is capabilities that have to be added back. If I could throw in one other thing, the technology test that you are talking about sounds like a lot of that is going to help the drive-thru. Could you just give us a sense of timetable if that works? If it does work, what metrics do you think that will affect sales or profitability and when that could hit? Thank you.
Brian Niccol: Yeah. I will start on the first part of your question, just in regard to new units in the US specifically. We think it is going to be in that, call it 100 net new range, or a little below there. That is really driven by the fact that we had to reset the pipeline. Obviously, we had to do some closures. What I am really excited about is how the pipeline is building for 2028. I think we showed you guys our prototype at Investor Day. I am happy to say that that prototype is now up and running in a couple markets. We are seeing great response both in the cost to build and then the way that our teams are able to operate. Our partners are providing great experiences for our customers. The feedback on the new unit has been really positive.
Brian Niccol: Obviously, it is early days on the performance, but they have all opened really well. As you look out into fiscal year 2028, we want to get back into building new units north of 300 or so in the US. We believe that is what gets us going towards that opportunity of 5,000 or more in North America. So lots of opportunity on the new unit side of things. It does take a little bit of time to reset the pipeline, but I believe we now have done all the hard work. Now it is in the business of executing against the pipeline and getting the units built. On your question about drive-through, we are just getting started in some of these ideas.
Brian Niccol: It will be exciting to see how these things test out. Once we have better understanding of the testing, our goal is, David, that we will improve throughput. You know how this works. If you can improve throughput, a lot of good things happen from there, both on the top line and bottom line. So more to come. It would be premature to get specific on this, but the whole rationale behind it is to give a better customer experience and also a better partner experience, which then results in more throughput that ultimately drives the top and bottom line.
Operator: Your next question comes from Chris O'Cull with Baird. Please go ahead with your question.
Chris O'Cull: Yeah. Good afternoon, and congrats to the team for the progress it is making. I had a follow-up question about the North American margin. The profit flow through was much better than we expected in Q4. Beyond higher sales, what were the biggest drivers of the leverage? Looking ahead, what does guidance assume for the North America and international operating margins next year? Are there any unusual items that could make the quarterly progression uneven?
Cathy Smith: Thanks, Chris. Starting to Q4 2026's North America margin, as you just said, the biggest driver is always sales leverage. The 7.7% comp we did in the US, that obviously helps a ton with the sales leverage. That is the biggest driver of the margin expansion we saw. We are also rolling over our Green Apron Service investments we did last year, remember, in mid-August timeframe. So we get the benefit of rolling over those investments as well. A little bit of a few other things. We had some pricing benefit. We had some supply chain savings come through. All of that is helping with that margin expansion. I would go back to where Brian was earlier, though, and it is all on the fundamentals.
Cathy Smith: If you think about what we are doing to drive the durability of both the top line and the bottom line, everything we are talking about are going to help us to continue with that progress, which obviously then shows up in our guidance for this next year for FY27. Then maybe moving to FY27. I am going to knock on wood about one-timers or unusual things. I am hoping not. We do know we have got some benefits of coffee, should be helping us year over year. Obviously, we were a little bit higher in coffee prices this last year. It started to moderate throughout the course of the year.
Cathy Smith: By the time it got to Q4, there was no impact. That will help us with a little bit of a tailwind this next year. All of the fundamental work we have done around cost savings will continue to help. The biggest driver of the profit this next year, again, will always be that comp guide that we just gave. That is always going to help with the leverage. We are optimistic with the progress we are making, and that should be showing up in the guidance we just gave.
Operator: Your next question comes from Sara Senatore with Bank of America. Please proceed.
Sara Senatore: Oh, thank you. Just, I guess a question maybe about longer term growth. Cathy, first, do you mind just sharing the benefits perhaps from sales transfer, store closures? Just trying to think about the balance between traffic and ticket over time. I think your check, obviously, a nice mix of attach and maybe a little bit of price. Next year, 4% comp, I think would imply maybe less ticket, I am assuming, and a bit more of a balance with traffic. So just the components there. Then I think, Brian, at one point it seems like you have kind of narrowed your expectations for how many stores that North America could support over time. Any changes or what has changed perhaps from maybe earlier commentary where maybe the number was a bit higher than the 5,000 you cited? Thank you.
Cathy Smith: Maybe I will start, Sara. Good afternoon. So I will start with first Q4 comps to help break down the growth we saw. As you said, you asked about store closures or transfers there. It is consistent with the previous quarter. About 200 basis points helped us there. Pricing and delivery were about half of the ticket, and then the attach and mix were the other half of ticket. So again, we had a 5.2% ticket in US, and that was about half pricing delivery and about half attach and mix.
Cathy Smith: As we move into FY27, we are going to weight a little bit more towards ticket than transaction as we continue to see the strength of all the work the team is doing in attach and mix. We continue to see really good progress both there in attach and mix. We will see some price continue to come through. It will be below CPI.The remainder of that comp growth will be in transactions, continue to be led by our great operations.
Brian Niccol: Yeah, the only thing I would add to that is the thing that gives us a lot of confidence in pushing the guidance up in 2027 versus just a long-term guidance of 3% or better is the fact that we continue to have really good strength in transactions. So that's the foundational elements that are driving the business. Then I think we've made great progress in food attach and mix, as Cathy mentions. On your question around new units, the way I would describe it is we've got clear line of sight on the 5,000. Obviously, as we get closer down the road, I'm guessing there's going to be more upside to that number. But for now, as we've done all the market planning, we feel really good about saying we see line of sight on the 5,000 additional units.
Operator: Your next question comes from Andrew Charles with TD Cowen. Please state your question.
Andrew Charles: Great. Thank you very much. Just one quick clarification, then a question. Curious, what drove the expectation that Q1 North America same-store sales could run pretty consistent with Q2 to Q4, given that there's an easier comp in the first quarter? My real question is, Brian, the proxy calls out a successful new platform launch in the US by the end of the fiscal year. I'm curious, of the priorities laid out, what fits this criteria? You've spoken in the past about how win in the morning and the afternoons can be your bigger focus. So perhaps the revamped afternoon food platform is going to satisfy that criteria. But curious if you could expand just more on your thoughts.
Cathy Smith: Well, I'll start, Andrew, on the cadence of our comp guidance throughout the course of the year. Yes, Q1 is the easiest lap if you just look at last year. But if you look at absolute transactions, we were actually fairly consistent through the year. One thing the team's done a lot of work on is trying to take some of the seasonality out of our business. So we have a strong product lineup that happens. The cadence of it is less. In the past we used to have, I think, a little bit more very distinct seasons. We've been trying to make sure that we smooth that out. You saw it a little bit last year. You'll see it a little bit more this year. But they've worked really hard at pulling the seasonality.
Cathy Smith: The other thing is I just look at the absolute transaction volume per quarter. It is actually far more consistent throughout the year. That is what gives us the guidance that we did, which is fairly consistent through the year. Obviously, there will be a little bit of variation.
Brian Niccol: Yeah, then to your question of platforms. Protein would be an example of a platform. Obviously, the Energy Refreshers is an example of a platform. Then some of the work that we have done on the food front. You will be seeing some platforms roll out on the food side of things around our leveraging our bites business, moving that from just a morning idea to also an afternoon idea. Then there are still opportunities on health and wellness to go beyond just protein. So we feel really good about the initiatives we have got coming down the pike on call it platforms, then also the platforms that we have already gotten out the door. So, you will continue to see us have both, I would call like LTO ideas and then also platform ideas. Those working together are doing a nice job of driving transaction and sales.
Operator: Thank you. Your next question comes from John Ivankoe with JPMorgan Chase & Co. Please state your question.
John Ivankoe: Hi. Thank you. I wanted to talk about the implications of 7-day a week delivery, which I think is also going to have 24-hour fulfillment if it does not already. So Brian or Cindy, can you talk about the implications specifically in the afternoon, but also the morning, and what that might mean for beverages, what might that mean for food, what that might mean to the grab-and-go case? In other words, how big of an unlock might we be just on the cusp of relative to the legacy Starbucks distribution platform into the store's back end? Thank you.
Brian Niccol: Yeah. Look, great question. We do believe supply chain is going to be a nice advantage for us once we get the replenishment schedule there. We are getting closer on the daily deliveries. We are going to continue to improve on the replenishment schedule. It helps in exactly those areas that you talked about. We have this mantra of we want to have the right product at the right place, at the right time. What this allows us to do is just that. Each of our coffeehouses behave differently on various elements of the business, whether it is food or beverage that is in the cold case that you can grab and go, whether it is the food platform that we heat up for people and give you that fresh food experience or the beverages that we make by craft for everybody.
Brian Niccol: To have the ability to get the daily deliveries within a signal for the replenishment within 24 hours is going to be a big advantage for us to make sure that we keep all of those things in stock, at the right cadence for our customers and our partners to serve it. We believe there is still a lot of upside to be had there. The team is making great progress. We have made a lot of progress already on the daily deliveries, and we are going to be getting to the replenishment here in the next, call it 6 to 12 months.
Operator: Your next question comes from Lauren Silberman with Deutsche Bank. Please state your question.
Lauren Silberman: Hey, thanks for the question, and congrats. You guys have mentioned a couple of times that you are running ahead of schedule. I know approaching the low end of the FY28 guide. What elements have been faster, like sales, margins, cost savings, anything else that we do not necessarily see? Can we interpret this as potential upside to FY28 targets? Thank you.
Brian Niccol: Well, look, the good news is you kind of listed off all the things that are ahead of schedule, sales, margins, and earnings. That is why you see us guiding already to the low side of FY28. Look, the other thing I would tell you is the guidance for FY28, I think we said this at Investor Day, is just a point in time on our journey. We have no expectations that that is an endpoint. Our goal is obviously to always continue to figure out how we grow the business smartly. That is exactly what is happening. We are doing it the right way through the fundamentals of operations, then obviously surrounding it with, I think, the right innovation, whether it is digital, menu, then obviously, I think, the creative solutions we are going to have in the asset too.
Brian Niccol: I think we are hitting on all cylinders, and that is why you heard me say, really Back to Starbucks as a strategy is switch gears from a turnaround plan to a growth plan. I could not be more optimistic about where we are headed.
Operator: Your next question comes from Sharon Zackfia with William Blair. Please state your question.
Sharon Zackfia: Hi. Thanks. I am curious whether you are seeing a continued correlation between the growth scorecard and individual unit comp performance. If you look at those small percentage of locations that are comping negatively, is that typically related to growth scorecard deficiencies and things you can do operationally, or are there more idiosyncratic issues?
Brian Niccol: The good news is the growth scorecard continues to be a great indicator of performance. I will tell you, the stores that we are not comping, there are some idiosyncratic issues, like the road is under construction or we might have been moving delivery around to make sure we allocate delivery to the right stores. There are a handful of stores that we know we need to be operating better, whether that means we need more stability in the team or we may have some issues with above store leadership. There are opportunities. The good news is the scorecard gives us clear feedback so we know where to spend our time on those stores. I think our operators and Mike and the team are doing a great job of dialing that in going forward.
Brian Niccol: It is going to continue to be the tool that we use. Actually, just as an aside, I got a great email just the other day from one of our coffeehouse leaders. Her name is Maddie. She runs a store in northern Idaho. She told me from when we started the growth scorecard with Green Apron Service, she was one of the stores that was number 1,574. Her goal was to get into the top 5. She sent me an email just this week to let me know that she is now number 3 in the entire system. Of course, I had to call her and find out what she did. You know what she told me? She focused on Green Apron Service, and she focused on that growth scorecard.
Brian Niccol: As a result, Mike and I are going to be heading out to go see her because I want to celebrate leadership like that. We have got more of those stories every day at Starbucks. It is a very powerful tool. It is a very effective tool, and it is also a tool that I think our coffeehouse leaders understand how to use and use it in a way that is very productive and enables them to lead correctly.
Operator: Your next question comes from Jacob Aiken-Phillips with Melius Research. Please state your question.
Jacob Aiken-Phillips: Hey, good afternoon, everybody. With CapEx at approximately 5% sales next year, if development acceptance accelerate in the following year, how much of the spending establishes capabilities that can support the next phase of growth? Can the higher opening pace fit within the similar capital envelope, or should we expect another step up? Thank you.
Cathy Smith: Yeah. Hi. This next year, we are going to be, as you would look at, I think, when you see our full filings, our CapEx was actually a lower percent of revenue this last year, really, I think, reflecting the fewer new openings. As we move into this next year, we are ramping up our uplifts. We want to bring that great coffeehouse experience to more and more stores. As we said, we are going to continue to increase that. That is where some of the CapEx will go this next year, and then obviously supporting the new store openings that we communicated. Going beyond that, though, into the following year, we still believe we should be in that 5% of revenue range, plus or minus. We will continue to use that as our guide.
Cathy Smith: When you ask about what amount is going for new capabilities, maybe for the future, it is actually fairly small. If you think about where our supply chain is, we do not need a lot of incremental capital. There is some, obviously, to continue to invest there, but it is not massive amounts. Traditionally, our biggest capital goes into the support of our coffeehouses.
Operator: Your next question comes from Jon Tower with Citi. Please state your question.
Jon Tower: Great. Thanks for taking the question. Just curious, maybe, obviously uplifts are a big part of the story or a bigger part of the story next year than they were in 2026. Curious if you could kind of shed some light on what you are seeing with respect to absolute lifts on the stores so far.
Jon Tower: How it is actually showing up in the business, are you seeing a nice balance between traffic and ticket, or is one kind of over-indexing? Just a second question, you had mentioned the idea of being more asset light across the world outside of North America. When thinking about the Japanese business, do you guys have any thoughts on if and when you do something with that and turn it into a licensed model?
Brian Niccol: To answer, I will start with the first part of your question on the uplifts. The uplifts continue to do exactly what we want. It is brand building, and it is transaction driving, and it shows up in the total results for the business. I am really excited for the fact that we are going to get going and be able to do more than 2,000 in this coming fiscal year. The feedback, and I do not know if you have had the opportunity to go into one of our coffeehouses that have gone through an uplift, but the feedback both from our partners and our customers is, "This feels like Starbucks again. Thank you for bringing back my third place." It does a lot for, I think, the brand.
Brian Niccol: Then obviously we love what we are seeing from the impact on transactions and then obviously, the total sales results. That, by all accounts, is a winner for us, and we are going to keep driving that really hard. To your question on international, the thing I would tell you is we had another great year international. I think this is now seven consecutive quarters of comp growth. If you exclude China, our revenue was up 5%. The team did a tremendous job around the world. I am really excited about the growth opportunities that are in front of us. Specifically to Japan, I got to give the Japan team a lot of credit. They had another terrific year, and it is a really great business. I think we have said this consistently. We always evaluate what is the right ownership strategy.
Brian Niccol: If and when the time comes where that should change, we will share that with you. I am really proud of the way that the team delivered, and I am really proud of how our international business is performing. I am really confident for the new unit growth that we have coming down for this fiscal year and into the out years.
Operator: Thank you. Your next question comes from Peter Saleh with BTIG. Please state your question.
Peter Saleh: Great. Thanks for taking the question and congrats on the performance. I wanted to ask about the Rewards program. You have had a couple of quarters now under your belt with the change in the Rewards program. I know you mentioned 36 million active users, but can you give us a little bit more sense on how they are performing in terms of frequency, spend? Any more detail you can provide there would be great. Thanks.
Brian Niccol: Yeah, look, that is one of those initiatives that continues to, I think, meet and exceed our expectations. The way we have done the new tiering, with Green, Gold, and Reserve, we are continuing to see people move up from Green to Gold and Gold to Reserve, and that is really driven by, first and foremost, frequency. Then I think as we get better with our personalization, we are also going to see ticket continue to have an impact. But the early days, the first big moves we are seeing are in the frequency world. So not surprising, a lot of the new users that first come into Green start out at a lower frequency level, and then as they spend more time in the program, we see their frequency levels increase, and then we see people moving up from Green to Gold and obviously Gold to Reserve.
Brian Niccol: The program is working exactly the way we would hope. Customers are giving us feedback that they are enjoying the program. They love being able to redeem the stars at 60 stars for the $2 offer. The team is doing a great job of figuring out how to take advantage of what is the next step in the evolution of that Rewards program, which is going to be more around additional personalization.
Operator: Thank you. Your next question comes from Margaret-May Binshtok with Wolfe Research. Please state your question.
Margaret-May Binshtok: Hi, thank you for taking my question. Brian, I know you have talked about creating a second peak in the afternoon as a priority for FY27. Can you talk a little bit about where the afternoon stands today, perhaps versus a year ago? What you see the biggest drivers are from here on the afternoon, and any update on how Energy Refreshers have trended since you launched? Thank you.
Brian Niccol: Yeah. Thanks for the question. This is something that I am really excited about. We are in the early days of a lot of our efforts. But one of the things that has been really great is with the upgrades that we have made to our food and our pastry case, the biggest place where we have seen an increase of attach has been in the afternoon, in the PM. So we have seen a nice little pickup in afternoon attach. The Refreshers program, the thing that is great is, and we still have more work to do on this, but energy has actually skewed more towards the morning. But the fact now that you can get caffeine-free Refreshers is driving some nice growth in the afternoon.
Brian Niccol: We have some work coming down this fiscal year where you will see us now highlight for people that there is a caffeine-free Refresher program, which I think you are going to see play really well in the afternoon. We also have some work around a tea platform where we are going to put some health and wellness into our teas, which I am really excited about. We are making really great progress in the afternoon. TSDs are up versus a year ago. I think you heard me say this in our early remarks, they are up all day in every day part. It is great to see that the morning is increasing, the afternoon is increasing, and the initiatives that we have targeted to the afternoon are actually working the way we had hoped they would work.
Cathy Smith: Maybe I will just put a plug in as well for another favorite in the afternoon is our matcha business and our matcha platform. Our matcha business is now over a billion-dollar platform, and it is growing tremendously year over year. What started as probably just a more simple matcha beverage, now almost everyone puts a Cold Foam on it, and it is sought after more often in the afternoon. That has also been a great addition as we continue to evolve the matcha business.
Brian Niccol: Yeah. Actually, as you mentioned, the other thing to think about too for the afternoon that has been great is our cold beverage innovation has really connected. To Cathy's point, those cold beverages, a lot of them have Cold Foam. As we talk about the mix that we are seeing, the combination of customers moving to cold, which also results in usually a little bit bigger size, and then the idea of modifying with Cold Foam, whether it is matcha, Cold Brew, Iced Coffee, or Iced Americanos, continues to see a really nice impact in the afternoon.
Operator: Thank you. The last question comes from Brian Bittner with Oppenheimer & Co. Please state your question.
Brian Bittner: Thanks for sneaking me in. Question is, now that the Green Apron Service investments really have been fully in the base for some time, look, it clearly was the right strategy, that is obvious. But is there now potentially an opportunity, Brian, to go back and surgically reanalyze the footprint and potentially see if maybe there are pockets where you can find opportunities to perhaps get more efficient now that you have had time with all this learning? If so, could this potentially be a lever for maybe additional operating leverage moving forward? Thanks.
Brian Niccol: Yeah. Thanks for your question. I could not agree more that the Green Apron Service labor investment was the absolute right thing for the business. The thing that is great to see is, and I am going to get a little technical with you here, but we have got right now a 3-hour peak in the morning. The good news is the way we are seeing the business respond to being staffed, deployed correctly in the morning, it is giving us confidence that that 3-hour peak can actually become a 4-hour peak in the morning. The reason why that is important is obviously we are earning our way into having additional labor to support more transactions at a peak type performance. I think you are going to see the same thing happen in the afternoon.
Brian Niccol: It will start out as an hour, then we will stretch it into 2 hours, then ideally it will get to 3 hours. If you look at Starbucks historically, way back when, we actually had a 4-hour morning peak. So we are getting back to what we know we can do. That is what I get excited about. When you mention getting surgical, that is what I think about getting surgical, which is driving and extending the peaks so that we give customers better service and our partners are staffed and deployed to meet the demand that we know and see at those times of day. So we are going to continue to fine-tune it, but I really think we are fine-tuning it from a standpoint of driving more growth, more throughput, and bigger peaks. So I think that was the last question?
Operator: Yes, that was our last question. I will turn it over to Brian Niccol for closing remarks.
Brian Niccol: Okay. So look, thanks everybody for your time. I would like to wrap up. There are a couple things I just want to leave you with. First, we had a terrific quarter and a great year. We got back to, I think, winning on the fundamentals. As a result, our core business is stronger. We are ahead of schedule, and the improvements we have made are going to be lasting improvements because they are built on the fundamentals of the business. The second thing is, Back to Starbucks, I mentioned this earlier. It started as a turnaround plan. It really is now our growth plan. We delivered 5 consecutive quarters of positive comps, 3 consecutive quarters of margin expansion. We are seeing the TSDs perform in the peaks, both in the morning, the afternoon, and all day.
Brian Niccol: We are continuing to feel really confident in what our growth plan is all about. The third thing is, I think it is really important as we look at FY27, we are focused on delivering consistent comp performance that is going to be driven by, I think, the fundamentals of the business with great innovation, both in menu, digital, and obviously across our assets. So we know when we get really good top line, we have the ability to expand the bottom line, and I think we demonstrated that as we closed out FY26. I think that is what you are going to continue to see us do going forward. So we have got a clear strategy, really proud of our teams, in every single coffeehouse. I think the Seattle Support Center is dialed in and focused on absolutely the right work.
Brian Niccol: We have got a growth plan that we are going to continue to execute and deliver durable results. So I am super excited about what is ahead. The other thing I will let you know too is holiday kicks off next week. I have got an insider's look at what our merchandising looks like for that. All the merchandise looks fabulous. I have not been here that long, but I think it is the best I have ever seen. So I cannot wait to get out into the stores next week, see the stores turn red with the great holiday merchandise.
Brian Niccol: If you have never had a Tiramisu Latte, get ready to have a Tiramisu Latte from Starbucks because I think that is also fabulous. So hopefully you can get out there, celebrate with your family and friends. I know I will be out there celebrating with our partners as we launch holiday. So look forward to seeing everybody in a few months, and I am sure we will be talking soon. So thank you and take care.
Operator: This concludes Starbucks' Q4 and full fiscal year 2026 conference call. You may now disconnect.
