Starbucks profit jumps 409% as US stores surge, China exit drags revenue lower

Starbucks posted a 409% surge in quarterly net income on Thursday even as total revenue fell, a split result that reflects a company deliberately shrinking one part of its business while the other accelerates. The coffee chain's US stores delivered their strongest comparable sales in years, while its international segment — gutted by the mid-year handover of its China retail operations to a licensed joint venture — dragged the headline numbers down.

For the 13-week quarter ended September 27, net income attributable to Starbucks rose to $677.2 million from $133.1 million a year earlier, according to the company's financial results reported by Xinhua and published by The Star. Revenue fell 4.5% year-on-year to $9.14 billion, with the company attributing the decline primarily to the conversion of its China retail operations to a licensed joint-venture model — a structural accounting change that removed a large revenue stream from the books.

Strip out that China effect and the underlying business looks considerably healthier. Global comparable coffeehouse sales rose 7.2% — the fifth consecutive quarter of positive comp growth — driven by a 5.2% increase in average ticket and a 1.8% rise in comparable transactions. North America was the standout: comparable sales grew 7.9%, including a 7.7% rise in the United States, and North American segment revenue grew 6% to $7.33 billion. More than 80% of North America company-operated coffeehouses delivered positive comps, up from less than 50% a year ago.

The international segment told a different story. Revenue there fell 37% to $1.31 billion, almost entirely reflecting the China restructuring. International comparable sales — now largely comprising Japan and the UK — rose just 0.9%, a fraction of the North American pace.

Profitability improved sharply across the board. Operating income jumped 256.5% to $991.8 million, and the consolidated operating margin expanded 450 basis points year-on-year to approximately 14% — the third consecutive quarter of margin expansion. Non-GAAP adjusted earnings per share rose 53.8% to $0.80. The company said general and administrative costs declined approximately 20%, and noted that more than half of a targeted $2 billion in gross savings has already been achieved.

The guidance is built on the strength of the fundamentals — Green Apron service, a strong Rewards and digital program, and marketing and menu innovation.— Brian Niccol, CEO

Niccol added that the company is 'probably a year ahead of schedule' relative to its fiscal 2028 framework, which gave management the confidence to commit to approximately 4% North America comparable sales growth in fiscal 2027.

For the full fiscal year 2026, Starbucks reported revenue of $37.91 billion, up 2% from the prior year. Full-year net income rose 36.1% to $2.53 billion, and adjusted EPS of $2.72 exceeded the high end of the company's own guidance. The company's Starbucks Rewards program reached a record 36 million 90-day active members.

Looking to fiscal 2027, Starbucks guided for consolidated net revenues to decrease approximately 1% year-on-year — again primarily reflecting the China transition — while projecting North America comparable sales growth of approximately 4% and a consolidated operating margin of 13.5% to 14%. Adjusted EPS is guided at $3.15 to $3.25. The company plans to open a net 1,200 new coffeehouses globally, with approximately 1,100 of those internationally (China accounting for roughly half) and 90 to 100 in North America. The quarterly dividend was raised to $0.63 per share, the 16th consecutive annual increase.

The China transition is the single biggest variable distorting Starbucks' reported figures. By converting owned retail stores to a licensed joint-venture model, Starbucks collects fees and royalties rather than booking full store revenues — a move that reduces top-line revenue while typically improving margins and reducing capital requirements. The company ended the quarter with 41,607 coffeehouses globally.

Why it matters — Starbucks' results show a company using a deliberate structural retreat from China to clean up its books while its core US business stages a genuine recovery — and the guidance it issued suggests management believes the hard work is largely done.

Reported by com.my, businesstoday.com.my, finance.yahoo.com, thestar.com.my