Detailed Narrative
Back to Starbucks Plan Driving Top-Line Momentum
Starbucks' "Back to Starbucks" plan is successfully driving top-line growth, with global revenue up 5% to $9.9 billion and global comparable store sales accelerating to 4%. This growth is transaction-led, with U.S. company-operated transaction comps growing year-over-year for the first time in 8 quarters, and both rewards and non-rewards transactions increasing. The company attributes this to disciplined execution, improved Green Apron Service standards, and effective marketing and menu innovation.
North America Performance and Operational Improvements
North America revenue grew 3% to $7.3 billion, with U.S. comparable store sales up 4%, driven by a 3% increase in transactions. The Green Apron Service standard, including bigger rosters and new customer service standards, has led to improved customer comments, increased throughput during peak hours, and accurate mobile orders. The company is also refining its labor model, implementing technology solutions like Green Dot Assist, and rolling out the Grow program to improve coffeehouse performance through 5 key metrics.
International Growth and China Strategy
International revenue increased 10% to $2.1 billion, with comparable store sales growing 5%, led by strong performance in China, Japan, and the U.K. China was a standout, with comps accelerating to 7%, marking its third consecutive quarter of transaction-led growth. Starbucks announced a joint venture with Boyu Capital for its China retail operations, with Starbucks retaining a 40% interest. This partnership aims to expand into more cities and strengthen Starbucks' position in the region, with the transaction expected to close in spring.
Menu Innovation and Brand Relevancy
Starbucks' overhauled approach to marketing and menu innovation is enhancing brand relevancy. The holiday offering, including the Barista Mug, generated significant buzz and drove traffic. Brand affinity and value perception scores remained strong, while visit consideration, connection scores, and convenience scores improved. The company plans to continue building on seasonal strengths with engaging marketing, on-trend menu innovation, and seamless digital experiences, focusing on platforms like health and wellness, personalized energy, and artisanal bakery items.
Margin Pressures and Cost Management
Consolidated operating margin contracted 180 basis points to 10.1%, primarily due to North America's margin decline of approximately 420 basis points. This was driven by investments in the "Back to Starbucks" plan and product/distribution cost inflation, including tariffs and elevated coffee pricing. Management expects these pressures to abate in the back half of FY26, along with the anniversarying of Green Apron Service investments. The company is also pursuing a $2 billion cost savings program over the next 2-3 years and expects FY26 consolidated G&A dollars to be below FY23 levels.
New Unit Growth and Store Uplift Program
Starbucks opened 128 net new coffeehouses globally in Q1, including 79 internationally. The company is on track to complete over 1,000 store uplifts by the end of fiscal 2026, primarily in Southern California and New York City, to enhance the cafe experience and reclaim the "third place." Management sees thousands of opportunities for new unit growth in the U.S. and globally, supported by new cost-effective building formats (Ristretto, Tall, Grande, Pico) and a rebuilt people capability system with "coffeehouse coaches" to support new store openings.