A Clean $0.80, a $1B Buyback and an FY27 Guide Above the Street: Everything We Asked For Arrived Except a Better Price

Results vs. Consensus

Q4 FY2026 Scorecard

Year-over-Year Detail (8-K Exhibit 99.1 income statement)

Sequential Detail (Q4 FY26 vs. Q3 FY26)

Full-Year Detail (FY26 vs. FY25)

The four reported quarters of FY26 revenue ($9,915.1M, $9,531.5M, $9,322.7M and $9,141.2M) sum to the reported full year within $0.1M of rounding. Quarterly non-GAAP EPS of $0.56, $0.50, $0.85 and $0.80 sums to $2.71 against the reported $2.72, a per-share rounding difference on changing share counts.

Revenue

Reported revenue fell 4.5% (3.9% in constant currency) to $9,141.2M. As in Q3, the decline is the China deconsolidation and nothing more. Company-operated revenue fell 5.5% because roughly 8,000 China coffeehouses now sit in a licensed joint venture, while licensed revenue rose 9.4% on the product sales and royalties that replace them. In an answer about International, the CEO said revenue excluding China rose 5%. North America revenue rose 6.2% to $7,328.4M.

The $90M miss against the $9.23B consensus came alongside a North America comp beat, so the shortfall most likely sits in two places. International company-operated comp was +0.9% against +3.2% expected, and Channel Development revenue fell 8.9% to $494.4M as the Global Coffee Alliance revenue line lost its coffee-price tailwind. Both matter more for FY27 than for this quarter, and both show up in the FY27 revenue guide of about -1%, which sits about 240 bps below the Street.

Margins

The non-GAAP operating margin of 14.0% is the most important number in the release because it is clean. In Q3 the CFO told the Street to normalize the 30.3% product-and-distribution cost rate to the 32.3% year-to-date rate, which put the underlying Q3 margin near 12.4%. In Q4 the cost rate was 32.0%, essentially flat with the prior year's 32.1%, and coffee was "roughly neutral." The 14.0% therefore stands as reported, which is about 160 bps above the normalized Q3 on a like basis.

The sources are identifiable and mostly repeatable. Coffeehouse operating expenses fell to 44.1% of revenue from 45.3%, and to 54.3% of company-operated revenue from 55.1%. Depreciation fell 17.0% with the China assets gone. G&A fell 19.4% as reported and about 20% on a non-GAAP basis ($507.6M against $633.8M), on cost savings and the deconsolidation. Product-and-distribution costs were the one offset, rising in North America on product mix.

EPS

GAAP EPS of $0.59 sits $0.21 below non-GAAP because of $272.8M of restructuring and impairments ($0.24 a share), almost all of it in North America ($270.2M) and almost all of it the ~250 coffeehouses closed in September. Transformation costs added $0.01 and the tax effect of the adjustments ran ($0.04). For the full year, GAAP EPS of $2.21 reflects a $0.47 China divestiture gain, a $0.24 tax charge from changing the indefinite reinvestment assertion, and $0.72 of restructuring, transaction and transformation costs.

There was again no buyback support. Diluted shares were 1,144.6M against 1,140.9M a year ago, and the full-year cash flow statement shows no repurchase line. That changes in FY27.

Segment Performance

Segment margins in the release are GAAP. North America non-GAAP operating income of about $1,169M adds back $270.8M of restructuring and transformation costs, and International's $261.3M adds back $4.4M. Both non-GAAP figures match what management cited on the call.

Full-Year Segment View

North America: The Margin Holds Without the Refund

North America revenue rose 6.2% to $7,328.4M on a comp of +7.9% (transactions +2.7%, ticket +5.0%). The U.S. comp was +7.7% (transactions +2.4%, ticket +5.2%), and Canada posted double-digit comps. Company-operated revenue rose 6.5% while licensed revenue rose 2.6%, a third straight quarter of positive licensed system comps.

The margin story is a single line. Coffeehouse operating expenses fell to 54.0% of company-operated revenue from 56.2%, a 220 bps improvement in the quarter that began to lap the mid-August 2025 Green Apron Service labor investment. That is the line the labor-reinvestment bear case was built on. The offset was product and distribution costs, which rose to 28.7% of segment revenue from 28.2% on product mix. Segment G&A fell to $91.8M from $119.4M, and Corporate G&A also fell, to $393.2M from $436.4M, so this quarter's segment gain is not an allocation shift.

"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. Coffee price impacts were roughly neutral in the quarter." — Cathy Smith, Executive Vice President and CFO

Operationally the breadth is the strongest datapoint. More than 80% of North America company-operated coffeehouses posted positive comps, up from fewer than 50% a year ago. Daily delivery now reaches close to 90% of the company-operated base, and inventory availability is at an all-time high. The store count fell to 18,176 from 18,311, with 247 net company-operated closures in the quarter against 52 net licensed openings.

Assessment: Q3 left us asking for one clean quarter, without refunds and without allocation shifts, before we would extrapolate the North America margin. This is it: roughly 16% without refunds, held flat sequentially from a Q3 that had them. The prior-year quarter already carried about six weeks of the added labor, so the 220 bps of coffeehouse-cost improvement came mainly from what management called its biggest driver, sales leverage. From Q1 FY27 the labor comparison is simply neutral. FY27 expansion therefore has to come from leverage on a ~4% comp and from cost savings. That is the right shape for a 13.5% to 14.0% consolidated guide, and it is not the shape for a margin that keeps compounding at 400 bps a year.

International: Units Accelerate, Comps Stall

International revenue fell 36.9% to $1,305.8M on the China deconsolidation, while operating income rose 15.1% to $256.9M and the margin rose to 19.7% from 10.8%. The comp is now a Japan and U.K. number, and it slowed to +0.9% from +5.7%, with transactions down 2.8% and ticket up 3.7%. Management credited exceptional U.K. performance and blamed tougher comparisons in Japan.

"International company-operated comps, which are now largely comprised of Japan and the U.K. grew 0.9%. We had exceptional performance in the U.K., balanced by tougher comparisons in Japan." — Cathy Smith, Executive Vice President and CFO

The unit engine went the other way. The segment added 498 net new coffeehouses in the quarter and 752 for the year, ending at 23,431, and management expects about 1,100 more in FY27, with China contributing about half. Licensed revenue rose 18.4%. Equity income in the segment, which is now essentially the 40% China stake, was $20.6M against $22.8M in Q3.

Assessment: The comp miss is a two-market comparison issue rather than a portfolio problem, and the systemwide comps management cited were positive. The more important change is that International is now a unit-growth and royalty business with a guided margin of about 20%, and its comp no longer drives much. The sequential dip in China equity income is small, but it is the only China number available, and it went the wrong way.

Channel Development: The Coffee Tailwind Turns Into a Headwind

Channel Development revenue fell 8.9% to $494.4M, led by the Global Coffee Alliance and the absence of the coffee-price tailwind that lifted the first three quarters. Operating income was essentially flat at $264.3M, so the margin rose to 53.5% from 48.9%. Equity income from the North American Coffee Partnership was $84.3M, or 17.1% of segment revenue, and it is booked against no revenue. Excluding it, the segment margin was about 36% against about 33% a year ago.

"In addition, we expect Channel Development net revenues to decline by approximately 10%, also heavily influenced by coffee price trends." — Cathy Smith, Executive Vice President and CFO

Assessment: We warned in Q3 that the coffee-inflation tailwind in this segment cut both ways, and the other edge has arrived. A 10% revenue decline in FY27 on a segment that earns a mid-to-high-40s margin removes something like $100M of operating income at the guided margin, which the consolidated margin guide has to absorb. The asset is still high-quality and asset-light. It is simply not a growth contributor in FY27, and we have moved the pillar to At Risk.

Key KPIs

Key Topics & Management Commentary

Overall Management Tone: Assured and, for the first time in this turnaround, forward-quantified. Management retired the turnaround framing outright ("now Back to Starbucks is our growth plan"), gave a full FY27 framework with numbers it declined to give in July, and repeatedly claimed to be a year ahead of the FY28 targets. Where Q3's most important disclosures came only under questioning, this call put more of the comp composition in the prepared remarks, although the closure figure again came in Q&A. The posture thinned only where it always has, on China and on the cost of the FY27 technology program, both of which stayed qualitative.

1. The First Clean Quarter Beat Anyway

Our Q3 downgrade rested partly on the view that about $0.15 of the $0.85 would not repeat, and that the implied Q4 of $0.64 to $0.74 was what a clean quarter looked like. The clean quarter came in at $0.80. The refund is gone (product-and-distribution costs at 32.0% versus 30.3%), the tax rate is back at 24.7%, coffee was neutral, and EPS still rose 54% year-over-year and roughly $0.10 above our normalized Q3.

"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." — Brian Niccol, Chairman and CEO

The one qualification is below the line. Interest income and other rose to $57.8M from $31.5M, and management attributed part of it to net gains on certain investments. The most that could be is about $0.02 a share. Everything else in the beat came from operations.

Assessment: This is the most important disconfirmation of our Q3 view. We said Q4 would show what the business earns without help, and the answer is more than we modeled. The run-rate earnings power entering FY27 is higher than we had it, and we have raised the bottom of our FY27 range as a result.

2. North America Margin: Leverage, Not Refunds

North America non-GAAP margin of roughly 16% (+440 bps) held flat sequentially despite losing the refund that supported Q3. The mechanism is the coffeehouse operating expense line, which fell 220 bps to 54.0% of company-operated revenue as the August Green Apron Service investment entered the base. Management named sales leverage first, the labor lap second, and pricing and supply-chain savings as smaller contributors.

"So the 7% comp we did in the U.S., that obviously helps a ton with the sales leverage. So that's the biggest driver of the margin expansion we saw. We also are rolling over our Green Apron Service investments we did last year, remember in August, mid-August time frame, so we get the benefit of rolling over those investments as well." — Cathy Smith, Executive Vice President and CFO

In our Q3 note we sized the underlying North America improvement at "more than 100 basis points" because that was the company's own figure excluding refunds. Q4's ~440 bps is far larger and had no refund in it. It also came while the added labor was in only one of the two periods for roughly half the quarter, so the rollover was a partial benefit at most. From Q1 FY27 the labor comparison is neutral: it stops being a headwind, and it does not become a tailwind.

Assessment: Bull 3 is confirmed and strengthened. The open question moves from whether the margin recovers to how much leverage a ~4% comp can generate once the comparison is neutral. Management did not give a North America margin for FY27 when asked, which leaves that question for the Q1 print.

3. Traffic Nearly Halves While Ticket Carries the Comp

The U.S. comp was steady at +7.7% against +7.9% in Q3, but its composition changed sharply. Transactions slowed to +2.4% from +4.2% while ticket rose to +5.2% from +3.6%. Management's explanation is lapping: on a two-year basis U.S. transactions improved to +1.5% from +0.5%, which we verified against the prior-year releases.

"U.S. 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. On a 2-year basis, U.S. transaction comps improved sequentially from Q3, a sign that customers continue to choose us more often." — Cathy Smith, Executive Vice President and CFO

The CFO then split the ticket: about half pricing and delivery, about half attach and mix, with "pricing and mix, including merchandise" driving most of the sequential step. Separately, she put closures and sales transfer at about 200 bps of the comp. Sales transfer moves customers from a closed store to a surviving one, so most of it should land in transactions. If it does, the organic transaction gain was well under the reported 2.4%.

Assessment: The two-year stack is real counter-evidence, and four straight quarters of positive U.S. transactions is a genuine recovery. But the pillar we underwrote was transaction-led growth, and the FY27 guide says the mix will "weight a little bit more towards ticket than transaction." We move Bull 1 to At Risk, not because traffic failed, but because the company has told us it will not lead.

4. Another 250 Closures, and the Comp Keeps the Credit

On September 22 the board approved closing about 1% of the North America fleet, roughly 250 company-operated coffeehouses (212 of them in the U.S.), with about $300M of charges, $200M of it cash. Most of it landed in Q4: North America restructuring was $270.2M. The September 8-K also cut the FY26 net new unit guide to about 440 from 600 to 650. The company then delivered 617, on stronger international openings.

"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." — Cathy Smith, Executive Vice President and CFO

The closures matter three ways. They feed the comp through sales transfer. They pull reported revenue below the comp, which management guided explicitly for the first three quarters of FY27. And they are not finished: the FY27 GAAP-to-non-GAAP bridge in the release carries $0.13 a share of restructuring, roughly $150M before tax, a charge nobody mentioned on the call.

Assessment: Pruning the fleet is the right decision, and the CFO's ~200 bps figure is the first clean number on its comp effect. But this is the second fall in a row with a large closure program, and FY27 carries another restructuring line. We keep Bear 2 at Emerging. The contribution is now sized and guided as "small" for FY27, but it is still recurring.

5. FY27 Guidance: The Number We Asked For

The single largest gap in the Q3 call was the absence of any FY27 contour. It is now filled: North America comp of about 4%, non-GAAP operating margin of 13.5% to 14.0% (about +190 bps at the midpoint), EPS of $3.15 to $3.25, revenue down about 1%, about 1,200 net new coffeehouses, capex at about 5% of revenue, and roughly $1B of buybacks. The EPS range sits above the $3.14 consensus and inside our prior $3.15 to $3.40 range.

"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." — Cathy Smith, Executive Vice President and CFO

The CEO framed the margin guide against the January Investor Day, where the FY28 target was 13.5% to 15%. Guiding to the low end of the FY28 range in FY27 is the basis for the "year ahead of schedule" claim. The CFO added that a little better than 40% to 45% of the year falls in the first half, which we read as the earnings split.

Assessment: The guide is credible and probably conservative, given that this CFO has finished above the top of her own range for a full year. But it confirms our FY27 estimate rather than exceeding it. A guide at the bottom of our old range is good news for our model and neutral news for the stock, which was already priced for it.

6. The 53rd Week Is Doing More of the Work Than the Headline Shows

FY27 has 53 weeks. The company includes the extra week in revenue (about $700M), margin and EPS (slightly more than $0.10), and excludes it only from comps. On a like-for-like 52-week basis, guided revenue is about -2.8% and guided EPS is roughly $3.04 to $3.14.

That changes the growth math. The headline is "close to 18%" at the midpoint. On a 52-week basis it is roughly 12% to 15%. That is still strong, but about a fifth of the headline EPS growth is calendar. The phasing also matters. If the CFO's 40% to 45% first-half phasing applies to earnings, as we read it, H1 EPS of about $1.28 to $1.44 compares with $1.06 in FY26, while H2 of about $1.76 to $1.92 compares with $1.65. That $1.65 included Q3's refund, and the H2 range includes the extra week.

Assessment: The first half of FY27 should look very strong, because it laps the two lowest-margin quarters of FY26, which still carried company-operated China. The labor investment is in both years, so it adds nothing to H1 growth. The second half laps a refund-flattered Q3 and leans on the extra week. We would expect the stock to get credit for H1 and to face its real test in H2, and we have added a new bear point for headline growth that leans on the calendar.

7. Capital Return Resumes, Modestly

The release and the CFO confirmed plans to resume share repurchases in FY27, with about $1B planned, and the quarterly dividend rose to $0.63 from $0.62. That answers the open question in our Q3 note, where we said we would treat a buyback authorization at this print as genuine upside to our rating.

"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, Executive Vice President and CFO

The scale is the qualifier. At $103.67, $1B buys about 9.6M shares, or about 0.8% of the 1,140.1M outstanding, and share-based compensation added about 3M shares in FY26. The dividend (about $2.9B a year) plus the buyback slightly exceeds FY26 free cash flow of $3.7B, before a capex step-up of about $0.6B to ~5% of revenue.

Assessment: It is upside, and we have credited it: the buyback is in our share count and supports the price target. It is not a re-rating event. Net of dilution it shrinks the share count by perhaps half a percent, and with free cash flow likely lower in FY27 on higher capex, it is close to the limit of what the cash flow funds without new debt. We retire Bear 5, but the capital-return case is now modest, not missing.

8. International Slows and China Stays Dark

The CEO said China "exceeded its goals in fiscal 2026" and that the company surpassed 6,000 coffeehouses in Asia Pacific, but no goal, comp, revenue or unit-economics figure accompanied the claim. The only China number in the release is the segment's equity income, which fell to $20.6M from $22.8M in Q3. China is expected to supply about half of FY27's ~1,100 international openings.

"Beyond fiscal '27, 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. That includes the potential to double our presence in China and India with meaningful growth across other regions." — Brian Niccol, Chairman and CEO

Asked whether Japan, now the largest company-operated international market, might follow China into a licensed structure, the CEO said the company always evaluates ownership and would share any change. That is not a denial. The company-operated International comp, which is now mostly Japan and the U.K., just slowed to +0.9% on what management called tougher comparisons in Japan.

Assessment: The long-term unit ambition is large and plausibly licensed-funded. The near-term earnings contribution from China remains immaterial and unmeasurable, and Bear 4 stays at Emerging. A Japan structure change would be the next capital-light step and a potential source of proceeds. We do not model it.

9. The Cost Program Is Past Halfway, and the COGS Leg Is Still Ahead

Management said more than 50% of the $2B gross savings program through FY28 is realized. The FY26 savings came mostly from G&A, which fell to $2,372.9M on a GAAP basis, below the $2,441.3M of FY2023. That meets the commitment made on the Q3 call. The next leg is product and distribution costs, which the CFO said would weight toward FY27 and FY28 as vendor contracts roll.

"Cost of goods sold is the one that we always said would be more into '27 and '28, and that's exactly what we're going to see as you're going to start to see it weight more there because of just the realities of getting new products online with new vendors." — Cathy Smith, Executive Vice President and CFO

G&A dollars are guided flat to slightly down in FY27, so the remaining savings have to show up in the cost of goods and operating expense lines. Modest coffee deflation should help the same COGS line in FY27, but it also cuts Channel Development revenue.

Assessment: The program is tracking, and the shift to COGS savings is consistent with what was promised in January. It also means FY27's margin expansion depends on a savings category that is harder to verify from outside. A North America product-and-distribution ratio that keeps rising on mix, as it did this quarter, would be the tell that the savings are being reinvested rather than banked.

10. A Technology Year That Does Not Dent the Margin Guide

In our Q3 note we flagged FY27 as an unquantified spending year: technology modernization, accelerating uplifts, an international support rebuild and a new partner incentive, all previewed without numbers. The guide now quantifies the outcome, if not the components. Staffing and scheduling systems, new point-of-sale systems, supply-chain forecasting, Mastrena 3 espresso machine tests, AI-assisted drive-thru tests and in-app delivery (starting in Q2) all fit inside a 13.5% to 14.0% margin and a capex budget of about 5% of revenue.

"Fiscal '27 will be a major tech modernization year. We'll 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." — Brian Niccol, Chairman and CEO

Capex at ~5% of revenue implies roughly $1.9B, up about 48% from FY26's $1.26B, with more than 2,000 uplifts the main use. The CFO said the capability spending within that is "fairly small."

Assessment: Bear 3 moves to Contained. The spending is real but sits in capex and inside a margin guide that still expands about 190 bps. Our remaining concern is the gap between capex and margin: depreciation on an uplift and systems cycle will build through FY28, which is one reason our FY28 margin sits below the top of the framework.

11. North America Development: A Reset Year, Then 300-Plus

North America will add only 90 to 100 net new coffeehouses in FY27, about half licensed, as the company rebuilds a pipeline that management said on the Q3 call was built on poor site and remodel decisions. The CEO then said the company wants to get back to building more than 300 new U.S. units in FY28, toward line of sight on about 5,000 additional North America coffeehouses over time. A smaller-format prototype from the Investor Day is now open in several markets.

"Rebuilding our development pipeline will take time, which means we expect fewer company-operated openings in fiscal '27 and a stronger, healthier pipeline beyond that." — Brian Niccol, Chairman and CEO

Assessment: For FY27 the North America algorithm is comp plus margin with almost no unit contribution, and part of the comp is transfer from the stores just closed. FY28 is where units return. That sequencing is why we are more comfortable with the FY27 guide than with FY28 consensus, which needs both the unit ramp and the margin to land early.

12. Loyalty and the Afternoon: Frequency First

U.S. 90-day active Rewards members reached a record 36M, and Rewards members led transaction and sales growth in the quarter. Management said the redesigned tiers are moving members from Green to Gold and Gold to Reserve, driven first by frequency, with personalization expected to lift ticket later. The afternoon is the growth daypart: attach gains are largest after noon, caffeine-free Refreshers are growing there, and the matcha platform has passed $1B in sales.

"Our Matcha business is now over $1 billion platform, and it's growing tremendously year-over-year." — Cathy Smith, Executive Vice President and CFO

Assessment: The loyalty redesign continues to do no visible harm and some measurable good, and the afternoon initiatives are producing attach rather than traffic. That is consistent with a ticket-led FY27. It is a sound mix strategy, and it is also the reason we no longer describe this recovery as traffic-led.

Guidance & Outlook

The guide pairs a conservative top line with a confident margin. The CFO walked through the revenue bridge explicitly: International falls as it laps six months of company-operated China, coffee deflation reduces revenue, and fewer North America openings slow the base. North America revenue should trail its comp for three quarters because of the September closures, then exceed it in Q4 on the extra week. Against that, the margin guide rests on sales leverage, the remainder of the cost program and lapping the labor investment.

"We expect fiscal '27 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." — Cathy Smith, Executive Vice President and CFO

Implied ramp: The CFO gave the 40% to 45% first-half split in an answer about margin, and we read it as the earnings split. On that reading, the $3.20 midpoint implies H1 EPS of about $1.28 to $1.44 against $1.06 in FY26 (growth of roughly 21% to 36%), and H2 of about $1.76 to $1.92 against $1.65 (roughly 7% to 16%, including the extra week). The guide therefore front-loads growth into the half that laps FY26's two lowest-margin quarters, which still carried company-operated China, and it asks much less of the half that laps the refund-flattered Q3. A Q1 print near $0.70 or better would put the first half on track.

Street at: Pre-print FY27 consensus was $3.14, so the $3.20 midpoint is about 2% above it. Revenue consensus at +1.4% sits well above the ~-1% guide and will come down. Post-print FY28 consensus near $3.75 needs about 17% growth on the reported FY27 midpoint, or about 21% on a 52-week basis, which is above our estimate.

Guidance style: Conservative, and now with a track record. The CFO raised the FY26 range twice and then finished $0.07 above the top of the second raise. She guided Q4 U.S. comp to "6.5% or better" and delivered 7.7%. The September unit cut to ~440 was followed by 617. We assume FY27 lands at or slightly above the top of the range, which is where our $3.20 to $3.30 sits.

Analyst Q&A Highlights

Whether the 4% Comp Guide Is the Algorithm Plus Closures

The opening question went straight at the composition of the new guide: whether ~4% should be read as an on-algorithm year (the long-term plan is 3% or better) plus the mechanical benefit of closures and uplifts. Management rejected that framing and attributed the guide to operating fundamentals, without sizing the mechanical pieces. The prepared remarks had already said the transfer and uplift contribution would be "small."

Q: "In guiding 4% same-store sales this year. I mean that is very specific. You had kind of the 3% plus algo. So 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."
— Brian Harbour, Morgan Stanley

A: "No, the way to think about it is our guidance for fiscal year '27 is really built on the strength of the fundamentals of the business, really driven by Green Apron Service, coupled with really strong rewards and digital program and then obviously the marketing menu innovation that we've got going on. So the way I look at it is we're probably a year ahead of schedule relative to the guidance we gave for fiscal year '28 and we do see strength in the business that gave us the confidence to commit to 4% comps."
— Brian Niccol, Chairman and CEO

Assessment: A firm "no," but not a quantified one. If transfer runs near its Q4 level of about 200 bps for even part of FY27, the underlying comp inside a 4% guide is closer to the 3% algorithm than the answer implies. We model 4.0% to 4.5% reported and treat the sizing of the transfer as the key Q1 question.

How Much of the Comp Came From Closures, and What Is in the Ticket

A question on the long-term balance of traffic and ticket produced the quarter's cleanest decomposition, and it was more specific than in Q3. Closures and sales transfer added about 200 bps, consistent with the prior quarter. Within the 5.2% U.S. ticket, about half was pricing and delivery and about half attach and mix. The answer then contradicted the questioner's assumption that FY27 would tilt toward traffic.

Q: "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'm assuming, a bit more of a balance with traffic."
— Sara Senatore, Bank of America

A: "So as you said, you asked about store closures or transfers there. It's 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 a ticket. So again, we had a 5.2% ticket in U.S. and that was about half pricing delivery and about half attach and mix. As we move into FY '27, we're 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."
— Cathy Smith, Executive Vice President and CFO

Assessment: The most useful answer on the call. It sizes the closure effect cleanly for the first time and confirms it recurred at the same scale. It also tells us FY27 will be ticket-weighted, which is why we moved the transaction-recovery pillar to At Risk. Delivery was again bundled with pricing, so the stricter Q3-style underlying comp still cannot be computed exactly.

FY27 Margin Phasing and Where the Remaining Savings Come From

Questioning on the FY27 margin bridge asked for the puts and takes and for examples of savings beyond sales leverage. The answer gave a first-half share of the year and confirmed that the savings mix now shifts from G&A to cost of goods. The CEO followed by tying the margin guide to the FY28 framework.

Q: "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. And if you can also indulge us in maybe expanding on the $2 billion saving opportunities that you have identified in the past. So 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."
— Danilo Gargiulo, Bernstein

A: "So going into 2027, it will 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 first half, the remainder is in the back half. But it's fairly balanced throughout the course of the year. And then 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."
— Cathy Smith, Executive Vice President and CFO

Assessment: Helpful on phasing and honest about the mix shift, but no examples of specific savings were given. With G&A now largely harvested, FY27's cost leverage depends on procurement and vendor transitions that outsiders cannot track until they show in the product-and-distribution ratio.

What Drove the North America Flow-Through, and Whether FY27 Has One-Timers

A question noting that Q4 profit flow-through exceeded expectations asked for the drivers beyond sales, the FY27 segment margin assumptions and any unusual items. The answer named sales leverage and the labor lap, and added pricing and supply-chain savings. It did not give a North America or International segment margin for FY27 beyond the prepared ~20% International starting point.

Q: "The profit flow-through was much better than we expected in the fourth quarter. Beyond higher sales, what were the biggest drivers of the leverage? And then looking ahead, what does guidance assume for the North American international operating margins next year? And are there any unusual items that could make the quarterly progression uneven?"
— Christopher O'Cull, Baird

A: "I'm going to knock on wood about onetimers or unusual things, I'm hoping not, we do know we've 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. By the time it got to the fourth quarter, there was no impact. But that will help us with a little bit of a tailwind this next year."
— Cathy Smith, Executive Vice President and CFO

Assessment: The flow-through answer was complete. The segment-margin half of the question went unanswered, which matters because coffee turns into a tailwind for store margins in FY27 and nobody sized it. Coffee is a tailwind to store margins and a headwind to Channel Development revenue at the same time.

The North America Unit Ramp After the Pipeline Reset

A question on U.S. unit growth asked for the ramp beyond FY27 and the timing of the drive-thru technology tests. The answer put FY27 U.S. net new units at about 100 or a little below and gave the first explicit FY28 target. On technology, management declined to quantify.

Q: "I wanted to ask a question about the company unit growth in the United States, Americas. I think your comment was that 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's capabilities that have to be added back."
— David Palmer, Evercore ISI

A: "Just in regard to new units in the U.S. specifically, we think it's going to be in that, call it, 100 net new range or a little below there. And that's really driven by the fact that we had to reset the pipeline. Obviously, we had to do some closures. [...] And then as you look out into fiscal year '28, we want to get back into building new units north of 300 or so in the U.S."
— Brian Niccol, Chairman and CEO

Assessment: A useful marker that we add to the checklist. The answer's "100 net new range or a little below there" for the U.S. sits above the questioner's 40 to 50 and roughly matches the 90 to 100 North America figure from the prepared remarks, so the U.S. company-operated contribution is small either way. The 300-plus FY28 target is the number to grade next year.

Why Q1 Should Not Benefit From the Easiest Comparison

A clarification asked why management expects Q1 North America comps to run in line with the rest of the year when Q1 laps the weakest prior-year quarter. The answer pointed to absolute transaction volumes that were steadier through FY26 than the percentages suggest, and to deliberate efforts to smooth seasonality.

Q: "Curious, what drive the expectation that 1Q in North America same-store sales to run pretty consistent with 2Q to 4Q, given that there's an easier comp in the first quarter?"
— Andrew Charles, TD Cowen

A: "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 has done or a lot of work on is trying to take some of the seasonality out of our business."
— Cathy Smith, Executive Vice President and CFO

Assessment: A reasonable answer and a sign of caution. Guiding a flat comp cadence against the easiest comparison of the year leaves room to beat in Q1, and it reinforces our view that the ~4% guide is set to be exceeded rather than met.

Uplift Returns and Whether Japan Goes Licensed

A two-part question asked for measured uplift lift, split between traffic and ticket, and whether Japan might move to a licensed model after China. The uplift answer was qualitative again. The Japan answer was a careful non-denial.

Q: "Curious if you could kind of shed some light on what you're seeing with respect to absolute lifts on the stores so far. [...] And then just a second question, you'd mentioned the idea of being more asset light across the world outside of North America. So 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 license model?"
— Jon Tower, Citi

A: "Specifically to Japan, I got to give the Japan team a lot of credit. They had another terrific year, and it's a really great business. And I think we've said this consistently. We always evaluate what is the right ownership strategy. And if and when the time comes where that should change, we'll share that with you."
— Brian Niccol, Chairman and CEO

Assessment: For the second straight quarter, the uplift program was described in brand terms with no lift percentage or payback, even as it becomes the main use of a capex budget rising about 48%. The Japan answer leaves a licensing transaction open. We would treat it as optionality, not as a forecast.

Labor Efficiency Now That Green Apron Is in the Base

The final question asked whether, with the labor investment fully in the base, the company could now trim hours surgically for extra leverage. Management reframed efficiency as throughput: extending the morning peak from three hours to four and building an afternoon peak, with labor added only as demand earns it.

Q: "But is there now potentially an opportunity, Brian, to go back and surgically reanalyze the footprint and potentially see if maybe there's pockets where you can find opportunities to perhaps get more efficient now that you've had time with all this learning? And if so, could this potentially be a lever for maybe additional operating leverage moving forward?"
— Brian Bittner, Oppenheimer

A: "The thing that's great to see is -- and I'm going to get a little technical with you here, but we've got right now a 3-hour peak in the morning. And the good news is the way we're seeing the business respond to being staffed deployed correctly in the morning, it's giving us confidence that, that 3-hour peak can actually become a 4-hour peak in the morning. And the reason why that's important is, obviously, we're earning our way into having additional labor to support more transactions at a peak type performance."
— Brian Niccol, Chairman and CEO

Assessment: Labor hours will not be cut for margin. The leverage has to come from more transactions per staffed hour. That is consistent with the Q3 call's answer and with the guide, but it ties future North America margin to traffic, the very input FY27 de-emphasizes.

What They're NOT Saying

1. The Chipotle episode. Three weeks before the print, a press report said the company had worked with advisers on a possible bid for Chipotle, and the stock closed at $90.75 the next day. The company said on October 12 that it is not buying Chipotle. Neither the release nor the call mentioned the matter, and no analyst asked. The denial is clear, but a CEO who ran that company and a balance sheet just repaired make the capital-allocation question fair. A single sentence on M&A discipline would have cost nothing.
2. Delivery's share of the comp. In Q3, closures, transfer and delivery were lumped together at "about half" of the comp. In Q4, closures and transfer were split out at ~200 bps, but delivery was bundled with pricing as "about half" of the ticket. The quarter-to-quarter comparison of underlying comp on Q3's own definition is therefore not possible.
3. The size of the transfer contribution inside the FY27 guide. The ~4% North America comp includes a "small contribution from uplifts and sales transfer." With ~250 closures just completed and ~200 bps of transfer in each of the last two quarters, "small" is the most important unquantified word in the guide.
4. FY27 restructuring. The release's FY27 GAAP-to-non-GAAP bridge carries $0.13 a share of restructuring and impairments, roughly $150M before tax. The figure appears in the reconciliation table and nowhere on the call, which did not mention restructuring once. Investors are left without a closure count, a program scope or an end date.
5. North America segment margin for FY27. Asked directly what the guide assumes for North America and International margins, management restated the consolidated guide. International's ~20% starting point came from the prepared remarks. No North America figure was given.
6. China, in any measurable form. "China exceeded its goals in fiscal 2026" arrived without the goals. There is still no JV comp, revenue, unit economics or profit figure, and the only proxy, segment equity income, fell to $20.6M from $22.8M.
7. Uplift returns. More than 1,700 uplifts are done and more than 2,000 are planned, funding most of a capex step-up to ~5% of revenue. Management again gave no measured transaction lift, payback period or return on the program.
8. International comp guidance going forward. The company will now guide only North America company-operated comp, a reasonable change for a largely licensed International portfolio. Global comp, which included International, is no longer guided either, so the segment that just missed by 230 bps now has no comp target at all.

Market Reaction

• Pre-print setup: SBUX closed at $105.51 on October 29 ahead of the after-close release, up 25.3% year-to-date against an S&P 500 up 12.8%, up 25.4% over the trailing twelve months, and up 10.6% over the trailing thirty days. The 52-week closing range was $79.60 to $108.55. The stock had closed at $90.75 on October 9 and rallied 16.3% into the print.
• After-hours move: Shares slipped roughly 1.7% to 2% after the release and call, to about $103.69.
• Next-day session: The stock opened at $105.71 (+0.2%), traded between $102.24 and $106.25, and closed at $103.67, down 1.7%. Volume of 14.2M shares was 1.6x the 30-day average of 8.9M.
• Relative performance: The S&P 500 fell 1.8% the same session, so SBUX finished roughly in line with the market. Since the $105.85 close on which our Q3 downgrade was priced, the stock is down 2.1% against an S&P 500 up 1.9%.

A Second Straight Print With No Relative Move

For the second quarter in a row, a beat and raise produced a move that matched the index. In July the stock gained 1.6% on a day the S&P gained 1.7%. This time it fell 1.7% on a day the S&P fell 1.8%. That pattern says the market is pricing SBUX on its forward multiple, not on its quarterly surprises. Neither the cleanest quarter of the turnaround nor an FY27 guide above consensus moved that multiple.

The reaction makes sense once the two halves of the release are separated. The backward-looking half was unambiguously strong: an 11% EPS beat, a clean 14.0% margin, a 120 bps comp beat. The forward-looking half was good on EPS and weak on the top line: revenue guided down about 1% against a Street at +1.4%, Channel Development down 10%, an International comp miss and a North America comp decelerating to ~4%. The buyback was supportive but modest. One market strategist's summary was that the guidance "was weak, but perhaps they're trying to set low expectations," and that is roughly how the stock traded.

The Real Move Happened Before the Print

The more informative price action was between prints. The stock peaked at $108.55 on August 13 and had slid to $96.58 by September 15, before the September 22 closure announcement cut the unit guide. It closed between $90.75 and $96.11 for nineteen straight sessions from September 18 to October 14. The low came on October 9, the day after the Chipotle report. From that low the stock climbed 16.3% in fourteen sessions into the release, including 14.3% from the October 12 close, the day the company denied any Chipotle acquisition.

That sequence matters for our rating. The mid-$90s pullback that we named in our Q3 note as a reason to revisit Outperform came, lasted nearly four weeks, and was gone by the print. A 16% run into a report sets a high bar for the report itself, and a flat relative reaction to a strong quarter is what that bar produces.

Street Perspective

Debate: Is the FY27 Guide a Floor or a Fair Estimate?

Bull view: This CFO has beaten every guide she has set, finishing FY26 $0.07 above the top of a twice-raised range and beating the Q4 U.S. comp guide by 120 bps. A ~4% comp guide set against the easiest Q1 comparison, a margin guide at the low end of the FY28 framework, and a cost program only half-realized all point to upward revisions through FY27. The bull camp argues that earnings upgrades, not multiple expansion, will carry the stock.

Bear view: The headline 18% growth includes a 53rd week, an easy first half against FY26's two lowest-margin quarters, which still carried company-operated China, and coffee deflation in store margins, none of which repeat in FY28. Revenue is guided down. The more cautious desks already sit below the guide on both North America comp and margin, arguing that optimism is in the price and that the recovery's durability is unproven once the closures and the labor comparison wash out.

Our take: The bull side has the better argument for FY27, and our estimate of $3.20 to $3.30 sits at or above the top of the guide accordingly. The bear side has the better argument for FY28, which is where the calendar and comparison benefits reverse. Upward FY27 revisions are likely, but at 32x FY27 the stock needs them simply to hold its level.

Debate: How Much of the Comp Is Demand?

Bull view: Four straight quarters of positive U.S. transactions, a two-year transaction stack that improved again, more than 80% of company-operated stores comping positive, record loyalty membership and a $1B matcha platform. The closure effect is now cleanly sized at about 200 bps and guided to be small in FY27. A 7.7% comp with ~200 bps of transfer is still a ~5.7% comp, well above the 3% algorithm.

Bear view: Transactions nearly halved sequentially to +2.4%, and most of the closure transfer should land in transactions. About half the 5.2% ticket is pricing and delivery. FY27 is guided ticket-weighted. Strip out transfer, pricing and delivery and the underlying demand growth is closer to the long-term algorithm than the headline suggests, and there is no traffic story left to re-rate.

Our take: Both are right about different things. The recovery is real and broad, and it is no longer traffic-led. A ticket-led 4% comp with sub-CPI pricing is a good business. It is not the growth profile that justifies a premium to a 29x five-year average multiple, and it is why we hold rather than add.

Debate: Does Capital Return Change the Equity Story?

Bull view: With leverage repaired and long-term debt down $2.8B in a year, the buyback is back, the dividend has grown for 16 straight years, and capex is now funding uplifts that management put at about $150,000 a store on the Q3 call. The company has moved from deleveraging to compounding, and the investment-grade balance sheet gives it room to do more.

Bear view: $1B is about 0.8% of the market capitalization and is partly offset by share-based dilution. Dividend plus buyback roughly equals FY26 free cash flow, before a capex step-up of about $0.6B. Even the brief reappearance of large-scale M&A talk in October shows how quickly the capital-allocation story can be reopened.

Our take: The bull side wins on direction and the bear side wins on scale. The buyback is a credible signal of confidence and it removes a bear point, but it is a modest per-share tailwind, not a catalyst. The October denial closes the M&A question for now. We would still welcome an explicit statement of acquisition discipline.

Model Update

FY27 arithmetic: Guided revenue of about $37.5B at a 13.75% to 14.1% margin gives $5.16B to $5.29B of operating income. Less ~$360M of net interest, taxed at ~24.5%, over ~1,141M shares, that is $3.18 to $3.26 a share, and we round the range to $3.20 to $3.30 to allow for a modest top-line beat. The same arithmetic at the guided 13.75% midpoint gives about $3.18, close to the company's $3.20.

FY28 arithmetic, and why we cut it: Removing the 53rd week leaves a 52-week FY27 base of about $36.8B. Growth of about 5%, in line with the framework, takes FY28 revenue to about $38.7B. At a 14.0% to 15.0% margin, with ~$360M of net interest, a 24.5% tax rate and ~1,135M shares, FY28 EPS is about $3.35 to $3.65. We use $3.40 to $3.65. Our prior $3.95 to $4.20 required roughly 23% growth on our own FY27 estimate and, on this arithmetic, an operating margin of about 16% to 17%, above the top of the company's 13.5% to 15% framework. We made the same kind of error in FY27 a quarter ago and corrected it. This is the FY28 version of that correction.

Valuation: At the October 30 close of $103.67, SBUX trades at 31.9x our FY27 of $3.25 and 32.4x the guide midpoint. On the same FY27 basis it traded at 32.1x at our Q3 downgrade ($105.85 on $3.30), so the multiple has not moved. On a 52-week FY27 basis the stock is at about 33x. On the Q3 method, 30x to 33x our FY27, fair value today is $97.5 to $107.3. A 12-month target should look through to FY28, which will be the forward year a year from now. At 29x to 32x our FY28 midpoint of $3.52, a turn below the FY27 range because growth slows once the extra week and the easy comparisons pass, the target is about $102 to $113. We set it at $102 to $112, from $105 to $115. The target is a price target and excludes the dividend. From $103.67 it implies a price return of about -1.6% to +8.0%. Adding the ~2.4% dividend yield gives a total return of roughly +1% to +10%, about +6% at the midpoint. That is a market-like return, and it is a Hold.

Valuation impact: Price target down $3 at both ends. The FY28 cut is the main driver. We also changed the method: in Q3 we capitalized FY27 and added a credit for FY28, and now that FY28 is the year a 12-month target looks through to, we capitalize it directly at a lower multiple. The buyback and the cleaner run-rate earnings keep the cut small.

Thesis Scorecard Post-Earnings

The Q3 Triggers, Graded

Overall: The thesis strengthened operationally for the second quarter in a row, and the valuation thesis is unchanged. Bull 3, 5 and 6 are confirmed. Three bear points are refuted or contained (spending, capital return and the refund pull-forward). The two pillars we moved to At Risk, transaction-led growth and Channel Development, are about the composition of growth, not its existence. Every operating promise on the Q3 checklist was met or beaten: Q4 U.S. comp, FY26 EPS, FY26 margin, the Q4 tax rate, the coffee effect, the uplift count, the unit target, the cost program and an FY27 framework with numbers. What did not change is the price. The stock is 2% below our downgrade level at the same FY27 multiple, after spending most of the interval at a level where we said we would look again.

Action: Hold. We set the Q3 conditions as reasons to revisit, and we have. The buyback and the closure-adjusted comp came through, and they improve the quality of our estimates. They do not move our 12-month return above market-like at $103.67, and the condition that would have, price, was available for four weeks and closed before the print. Existing holders should stay with a business that is executing better than we modeled. New money should wait. For the Q1 FY27 print (January 27, 2027) we keep the Q3 triggers and add new ones openly. We would revisit Outperform on a pullback toward $95, about 29x our FY27, or on an FY27 guide raised to a midpoint above $3.30, the top of our range. We would move to Underperform if closure-adjusted comp falls below 3% while reported comp stays elevated, if FY27 margin tracks below the 13.5% guide floor, or if Q1 North America comp prints below 3% against a guide built for steady quarters. If a price pullback and a comp shortfall arrive together, they offset, and the rating stays at Hold.