Starbucks Corporation Q4 FY2025 earnings call

Management Statement and Operational Highlights:

• Launched the Back to Starbucks strategy a year ago, with 5% global revenue growth and 1% global comparable store sales growth in Q4, marking the first positive quarter in 7 quarters.
• Scaled Green Apron Service, with U.S. company-operated portfolio seeing more than tripled percentage of coffee houses with positive transaction comps. New standard went live across full U.S. company-operated portfolio in August.
• Reassessed North American portfolio, with net store counts declining by ~1% in fiscal 2025. Piloted new Coffee House prototype and ramped up uplift renovation program, aiming to complete over 1,000 uplifts by end of fiscal 2026.
• Overhauled marketing and menu innovation, introducing Protein Cold Foam and Lattes, driving stronger customer perception scores and market share growth in the U.S. Brand affinity measure accelerated, reaching highest point since 2023.
• International business reached record revenues of $2.1 billion in Q4, opened 316 net new coffee houses, and continued to expand global reach with flagship coffee houses.

Segment Performance:

• North America: Company-operated comps improved to flat year-over-year, with flat U.S. comp and positive comp growth in Canada. U.S. company-operated sales comp turned positive in September and remained positive through October. Transaction comps continued to improve sequentially.
• International: Delivered 3% comp sales growth in the fourth quarter, led by strength in top markets like Japan, China, the U.K., and Mexico. Ended the year with an all-time high of $7.8 billion in revenue.
• Channel Development: Q4 net revenues grew 16% year-over-year due to higher revenue from the Global Coffee Alliance.

Guidance:

• Focused on executing with excellence in fiscal 2026, doubling down on Green Apron Service, scaling assistant store manager roles, and simplifying store-level reporting to 5 KPIs.
• First quarter fiscal 2026 earnings call tentatively scheduled for January 28, 2026.
• Investor Day in late January 2026 to lay out more complete financial outlook.
• Expectations for strong holiday season in Q1 2026 with iconic offerings like Peppermint Mocha, Snowman Cookie, and new merchandise.

Risks:

• Inflation: Impacted margins, primarily driven by coffee prices and tariffs.
• Competition: Pressure from emerging beverage brands, requiring continued focus on differentiation.
• Macroeconomic Uncertainty: Potential headwinds from consumer spending behavior, especially among younger cohorts.

Question and Answer: Q: David Palmer from Evercore ISI asked about Back to Starbucks feeling like returning to old Starbucks and addressing comp energy.

A: Brian Niccol responded that Back to Starbucks is comprehensive, centered on customer connection, and seen in transaction growth with Green Apron Service, with visible transformation in customer experience.

Q: Danilo Gargiulo from Bernstein asked about reception of protein platform and pricing.

A: Brian Niccol said protein platform has positive feedback, with customers finding it delicious and value-driven, and awareness building.

Q: David Tarantino from Baird asked about Green Apron Service journey.

A: Brian Niccol stated Green Apron Service started in mid-August, with initial 650 stores outpacing others, and optimistic about continued build as teams and customers adjust.

Q: John Ivankoe from JPMorgan asked about defensive vs offensive element of Green Apron and communicating to customers.

A: Brian Niccol said it's a combination of fixing missteps and going on offensive, with consistent execution and innovation bringing customers back.

Q: Lauren Silberman from Deutsche Bank asked about morning transaction outperformance and future in energy category.

A: Brian Niccol said morning outperformance is due to better staffing and speed, with sequential improvement in afternoon as staffing improves.

Q: Brian Harbour from Morgan Stanley asked about incremental investment in Green Apron and product cost.

A: Brian Niccol and Catherine Smith discussed initial investment in Green Apron, with earnings lagging initially, and coffee prices remaining a headwind.

Q: Sara Senatore from Bank of America asked about coffee house closures and margin impact.

A: Catherine Smith said closures were due to lack of viable top line, with some sales transfer, and focus on great coffee houses for future.

Q: Jeffrey Bernstein from Barclays asked about fiscal '26 guidance and cost savings.

A: Catherine Smith said guidance to be provided at Investor Day, with top line growth expected and earnings lagging initially.

Q: Andrew Charles from TD Cowen asked about value perceptions and Q1 outlook.

A: Brian Niccol and Catherine Smith discussed strategic pricing and Q1 led by positive transaction comps, with earnings lagging due to ongoing investments.

Q: Hyun Jin Cho from Goldman Sachs asked about younger consumer spending and strategy.

A: Brian Niccol said strong response from younger cohorts, with focus on great experience and value to retain them.

Q: Andrew Barish from Jefferies asked about license business and streamlining.

A: Brian Niccol said opportunity for growth in license business, with tailored support for licensee partners.

Q: Christopher O'Cull from Stifel asked about impact of emerging beverage brands.

A: Brian Niccol said scale and unique customer experience position Starbucks well, with competition driving better execution.