Starbucks (SBUX) Q2 FY26 earnings call: guidance and Q&A

Inquired about current service time performance, the impact of algorithm changes, and how scheduled ordering will further improve service times.

Brian Niccol stated that 80% of stores are hitting service time targets (4 min cafe, 4 min drive-thru, <12 min MOP). Scheduled ordering is expected to improve MOP predictability. The company is also learning to sequence mobile orders better for on-premise customers.

“we've got about 80% of our stores or better hitting the metrics.”

asked by Brian Harbour · answered by Brian Niccol

Asked about the persistence of innovation's impact on COGS and why the EPS guidance raise was not more bullish given the comp beat and raise.

Cathy Smith explained that the EPS guidance is prudent due to macro uncertainties. Coffee price elevation and tariff implications are expected to abate in H2 FY26, improving COGS. The company is pleased with labor and menu performance.

“It's almost not quite, but I think it's almost $1 a pound year-over-year change. And then the implications of tariffs as they run through our inventory, obviously, both of those we expect to abate toward the back end of the year.”

asked by Sara Senatore · answered by Catherine Smith

Asked how much more comp upside can come from operational improvements and how original Green Apron Service pilot stores are performing.

Brian Niccol noted significant runway, with nearly 40% of stores not yet at "4 shots" on the Grow scorecard. Uplifts in 300 stores are driving positive feedback, with 1,000 expected by year-end. Lead stores continue to lead, providing learning.

“We still have close to 40% of our stores where they're not at 4 shots.”

asked by David Tarantino · answered by Brian Niccol

Inquired about comp cadence through Q2 and April, and what would drive EPS to the top vs. bottom of the raised guidance range.

Brian Niccol stated strong comp performance all quarter long, continuing into April, with no significant macro impact on consumer behavior at Starbucks yet. Cathy Smith clarified that hitting the top end of EPS guidance would require comps leaning "plus" on 5%+, continued abatement of coffee prices, and effective management of fuel costs and COGS innovation performance.

“we've continued to see that strengthen our operating performance. And we've also continued to see the consumer stay in the business, consistent with what we saw in the Q2 for our company.”

asked by Lauren Silberman · answered by Brian Niccol

Asked why Starbucks is successful in engaging lower-income cohorts when other QSRs struggle.

Brian Niccol attributed success to providing a unique, differentiated, and "worth it" experience, perceived as a "little touch of luxury" or indulgence, resonating across all income levels. The customizable refresher platform also appeals broadly.

“when you give them an experience that they feel is unique, differentiated, special, a little touch of luxury, it goes a long way.”

asked by Chris O'Cull · answered by Brian Niccol

Asked about the future trajectory of labor dollars per operating week and potential efficiency gains from existing labor hours.

Brian Niccol emphasized productivity through increased throughput, not cutting labor. Focus is on technology, equipment, and processes to support existing labor. Cathy Smith added that total hours won't necessarily decrease, but efficiency will come from optimizing non-customer-facing tasks and improving throughput during covered hours.

“We don't see our way forward with cutting. We see our way forward with being creating technology or creating equipment or creating processes to support the labor hours we have in the store to be more productive, meaning more transactions, more throughput.”

asked by John Ivankoe · answered by Brian Niccol

Inquired about the primary drivers of operating margin expansion for the 25%+ EPS growth target through FY28, specifically the $2 billion savings, and if the Q2 EPS raise flows through to the FY28 target.

Cathy Smith confirmed op margin expansion is key, driven by half top-line growth and half the $2 billion cost savings program (multi-year through FY28). The program's initiatives have grown. The FY28 targets are not being changed at this time, as it's "really early."

“The cost savings program is a multiyear program, the $2 billion, you're seeing it probably not as obviously this year because we've got a fair amount of savings, but it's helping to offset some of those investments we're making with Green Apron Service.”

asked by Jeffrey Bernstein · answered by Catherine Smith

Asked how Starbucks plans to maintain operational momentum, whether scorecards are fluid, and what safeguards are in place to quickly address operational shortfalls.

Brian Niccol stated that as more coffeehouses meet performance standards, the standard will be raised. The Grow scorecard provides clarity and is correlated to performance. The organization is more in tune with coffeehouses and customers, with leadership actively visiting stores to gather feedback.

“as we get more and more people close or more and more coffeehouses close to the performance standard, we raised the standard.”

asked by Sharon Zackfia · answered by Brian Niccol