Starbucks is in the midst of a significant strategic overhaul. The company’s “Back to Starbucks” plan is beginning to yield positive sales results, but substantial investments and rising expenses are severely impacting profitability. Investors are questioning whether CEO Brian Niccol can stabilize margins while simultaneously restructuring the critical China business.
Profitability Squeeze Overshadows Revenue Gains
For its first fiscal quarter, which concluded on December 28, Starbucks reported net revenue of $9.9 billion. This figure represents a 5.5% year-over-year increase and notably surpassed market expectations, which were approximately $9.62 billion. A 4% rise in global comparable store sales drove this performance, fueled by a 3% increase in customer transactions alongside slightly higher average tickets.
Despite the top-line strength, the company’s earnings disappointed. Non-GAAP earnings per share (EPS) fell 19% to $0.56, missing the analyst consensus estimate of $0.59. The operating margin contracted sharply to 10.1%, down from 16.7% in the prior-year period. Company leadership attributed this pressure to necessary investments in employee wages and store modernization, higher coffee commodity costs, and inflation-driven logistics expenses.
Key Q1 2026 Financial Metrics:
Should investors sell immediately? Or is it worth buying Starbucks?
- Revenue: $9.9 billion (+5.5% YoY)
- Non-GAAP EPS: $0.56 (-19% YoY)
- Global Comparable Store Sales: +4.0%
- Quarterly Dividend: $0.62 per share
- Global Store Count: 41,118 (+128 net new stores)
Strategic Shift in China and Domestic Progress
A major development for the international segment is the structural reorganization of Starbucks’ operations in China. The company confirmed an agreement to form a joint venture for its retail business in the region. Investment firm Boyu Capital is set to acquire a 60% stake in the Chinese unit, with Starbucks retaining a 40% interest. This transaction is scheduled for completion in the spring of 2026.
Back in the core U.S. market, initiatives under CEO Brian Niccol are showing early signs of success. For the first time in eight quarters, transaction counts in the United States returned to growth. This improvement was primarily driven by new service standards and innovations within the menu portfolio.
Forward Guidance and Capital Return
Looking ahead to the full 2026 fiscal year, Starbucks anticipates comparable store sales growth of at least 3% both in the U.S. and globally. Management provided a forecast for non-GAAP EPS in a range between $2.15 and $2.40.
The company continues its commitment to shareholder returns, declaring a dividend of $0.62 per share. This payment will be distributed on February 27 to shareholders of record as of February 13. The next comprehensive update on business performance is expected on April 28, 2026, with the release of the company’s second-quarter results.
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