Starbucks (SBUX) Q3 FY26 earnings call: guidance and Q&A

How long can Starbucks sustain its current same-store sales momentum, and what are the building blocks to exceed the 3% long-term target?

Brian Niccol attributed momentum to improved operating practices, Green Apron Service, better staffing, and consistent customer experiences. He noted significant room for transaction growth in both morning and afternoon dayparts, supported by relevant innovation in drinks, food, and merchandise. He expressed optimism for continued growth beyond current levels.

“I still think there is more to come on the innovation side of things, whether it's through our digital platforms or more of the traditional work that we've done on menu and marketing.”

asked by David Tarantino · answered by Brian Niccol

How has daypart growth evolved, particularly between morning and afternoon, and what are the future opportunities for each?

Brian Niccol stated that the morning daypart has been the biggest winner in absolute transactions due to improved execution. While transaction growth continues in the afternoon, it's not at the same level. He expects afternoon growth to accelerate through a combination of beverage and food innovation (like Refreshers and new food tests) and improved routines. Cathy Smith highlighted Refreshers as a key platform for afternoon beverages, catering to both caffeinated and decaffeinated preferences.

“In the morning, create the afternoon and break down any barriers we have that's preventing us from getting to great throughput in all the modes, whether it's drive-thru, cafe, mobile order pickup or delivery.”

asked by David Palmer · answered by Brian Niccol

Why is Starbucks slowing development and increasing closures now, given the current positive momentum in the coffee category and for Starbucks?

Brian Niccol explained that past development strategy led to difficult remodels or suboptimal store placements. The current focus is on 'cleaning up' and fixing underperforming stores to build a stronger foundation. He emphasized that the decision to close stores is about ensuring the right representation of Starbucks and achieving appropriate economics, not a lack of opportunity in the trade area. The goal is to build a pipeline of strong new stores in the right locations.

“And it is just one of those things where we either did really difficult remodels on stores or we potentially put the wrong store in the wrong place. And so we're having to clean that up and fix that up.”

asked by Andrew Charles · answered by Brian Niccol

What distinguishes Starbucks' Refresher platform amidst increasing competition, and how does this competitive dynamic affect the growth strategy, especially in new markets?

Brian Niccol asserted Starbucks as the 'original' in refreshers, differentiating through craft, customization, and delicious flavors. He noted strong performance despite increased activity from competitors, believing that as the category leader, Starbucks benefits when others advertise. He highlighted the trend towards cold beverages, with refreshers playing a strong role in the afternoon daypart. He also mentioned testing 'spritzers' (sparkling refreshers) and blended options.

“I'm really excited that we're getting ready to go test sparkling. We're calling it spritzers, so refreshers that have like spritzes. We've got those going in a couple of test markets.”

asked by Sara Senatore · answered by Brian Niccol

How are the uplifts contributing to performance, how is their success measured, and what are the characteristics of stores slated for closure?

Brian Niccol stated that uplifts are 'terrific performers,' driving transaction lift across all access points and dayparts, and positively impacting brand perception. He noted they are powerful for partner experience and pride. Cathy Smith added that uplifts are done overnight to avoid store closures, cost $150,000 on average, and provide a great return on investment. Regarding closures, Brian explained it's about performance, location, and the feasibility of remodeling versus building a new store, ensuring Starbucks earns appropriate economics.

“So the uplifts have actually been really terrific performers for us. And we're seeing the business respond frankly, which has been our ingoing hypothesis that would benefit kind of all day long, but it would also benefit all access points because people just feel better about even doing their mobile order pickup when they go to a coffee house versus a place that maybe wasn't up to our Starbucks standard.”

asked by Brian Harbour · answered by Brian Niccol

Has Green Apron Service optimized labor hours for current and future traffic, and what is the scope of the '24-hour operating model' mentioned?

Brian Niccol believes operators are effectively managing labor for current demand and sees further efficiency gains, especially at morning peak, and opportunity for additional hours as business grows. He clarified that the '24-hour operating clock' refers to supply chain efficiency, aiming for 24-hour replenishment to reduce out-of-stocks and optimize inventory, rather than opening more stores 24/7. He noted a handful of stores are already 24-hour, but it's not a current focus for expansion.

“Where what we want to do is make sure that we now have a system that can create pull through the supply chain and get replenishment done within 24 hours.”

asked by John Ivankoe · answered by Brian Niccol