Starbucks Corporation
Analytical review · Report for the quarter ended June 28, 2026 (Q3 of fiscal 2026)
Bakshi Finance — Family Office | Research Depth: Comprehensive
What this review is based on. Starbucks' quarterly report on Form 10-Q for the quarter ended June 28, 2026, filed on July 29, 2026; the earnings releases for the last four quarters (October 2025 through July 2026); the annual report on Form 10-K for fiscal 2025; and Form 8-K filings on the completion of the China transaction, the restructuring plans, the note tender offers and the store closures (September 2026). Market data: closing price on October 9, 2026; Bank of Israel representative USD rate of October 9, 2026.
Company Profile
Starbucks Corporation is the world's largest coffeehouse chain. At the end of June 2026 there were 41,304 stores under the brand: one third operated by the company and two thirds operated by licensees. The company is headquartered in Seattle and had about 381,000 employees at the end of fiscal 2025.
The company reports three segments. North America (the U.S. and Canada) generates about 79% of revenue and has 18,371 stores. International has 22,933 stores, nearly all now operated by licensees. Channel Development sells packaged coffee and beverages through partnerships with Nestlé and PepsiCo.
In September 2024 Brian Niccol became chairman and CEO and launched the "Back to Starbucks" plan: a return to coffeehouse service, a simplified menu, investment in store labor hours, and closure of stores that do not meet the company's standards. In March 2026 the company sold 60% of its China retail business to funds managed by Boyu Capital, keeping 40% and ownership of the brand.
Financial Performance
The metric that leads the story is comparable store sales — the change in sales at company-operated stores open more than 13 months. It splits into two components: the number of transactions (how often customers bought) and the average ticket (how much they spent each time).
Comparable sales turned to growth
In the U.S.: 0% in the July–September 2025 quarter, +4% in the following quarter, +7.1%, and then +7.9% in the April–June 2026 quarter. In the latest quarter transactions rose 4.2% and the average ticket 3.6%. According to the company, the ticket rose mainly on delivery, food attach and beverage modifications. In the prior-year quarter U.S. comparable sales fell 2.2%, so on a two-year view the cumulative increase is about 5.7%. For the July–September 2026 quarter, according to company management, U.S. comparable sales will rise 6.5% or more, against 0% in the prior-year quarter.
Revenue fell because of China, profit rose — partly on special items
Revenue fell 1.4% to $9,323 million: removing the China stores from the consolidated results subtracted $776 million, and comparable sales added $524 million. GAAP operating income rose to $980 million (10.5% of revenue). The company also presents "adjusted" (non-GAAP) operating income of $1,345 million (14.4%), which excludes $303 million of restructuring and impairments and $62 million of transaction and transformation costs. Net income — $1,045 million, $0.91 per share — includes a $536 million pre-tax gain on the sale of control in China. Excluding these items the company reported $0.85 per share.
Two items in the quarter do not necessarily recur. The first: tariff refunds. In February 2026 the U.S. Supreme Court ruled that the reciprocal tariffs imposed under IEEPA were unlawful. According to the 10-Q, refunds received in the quarter "largely offset" tariffs paid in the first three quarters of the fiscal year and were recorded as a reduction of product and distribution costs. The company did not disclose the amount, and adjusted profit includes it. The second, in the opposite direction: performance-based compensation rose $79 million in the quarter versus $112 million for the full nine months.
| USD millions | Q3-25 | Q4-25 | Q1-26 | Q2-26 | Q3-26 |
|---|---|---|---|---|---|
| Revenue | 9,456 | 9,569 | 9,915 | 9,532 | 9,323 |
| GAAP operating income | 936 | 278 | 891 | 828 | 980 |
| GAAP operating margin | 9.9% | 2.9% | 9.0% | 8.7% | 10.5% |
| Adjusted operating margin | 10.1% | 9.4% | 10.1% | 9.4% | 14.4% |
| GAAP EPS ($) | 0.49 | 0.12 | 0.26 | 0.45 | 0.91 |
| Adjusted EPS ($) | 0.50 | 0.52 | 0.56 | 0.50 | 0.85 |
Q = fiscal quarter; the fiscal year ends in late September. Q3-26 = April–June 2026.
Fiscal 2026 guidance was updated three times
In January 2026 the company guided to adjusted EPS of $2.15–2.40; in April to $2.25–2.45; and in July to $2.55–2.65, with an adjusted operating margin above 11%. In the first nine months the company earned $1.91 of adjusted EPS, so the guidance implies $0.64–0.74 for the July–September quarter, versus $0.52 in the prior-year quarter. In September the company announced the closure of about 250 stores in North America and updated net new stores for the year to about 440, instead of 600–650.
Balance Sheet & Capital
On June 28, 2026 the company held $3.9 billion in cash and investments against financial debt of $13.3 billion. Net debt: $9.4 billion. In the first nine months of the fiscal year debt fell by $2.8 billion: $1.5 billion of scheduled maturities and about $1.3 billion of notes repurchased in May, funded by the China transaction proceeds. A $3 billion credit facility was undrawn. Maturity schedule: $1.5 billion in fiscal 2027, $1.1 billion in 2028, $1.75 billion in 2029.
Beyond financial debt there are $9.2 billion of lease liabilities — the store rents. Liabilities also include $5.6 billion of deferred revenue, mostly the balance of an up-front payment of about $7 billion received from Nestlé, recognized as revenue over 40 years. About $176 million a year is recorded as revenue from this payment, with no additional cash flow.
Shareholders' equity is negative: a deficit of $7.7 billion. The deficit arose from share repurchases and dividends paid over the years in excess of accumulated earnings, not from losses. Interest coverage: adjusted operating income for the last 12 months ($4.1 billion) is 7.4 times interest expense ($556 million).
Capital return: a quarterly dividend of $0.62 per share ($2.48 a year), 65 consecutive quarters. No share repurchases were made in fiscal 2025 or in the first nine months of 2026. In fiscal 2025 free cash flow ($2.44 billion) was lower than dividends paid ($2.77 billion). In the last 12 months free cash flow was $3.64 billion and dividends $2.81 billion — in part because capital expenditures for the nine months fell from $1.85 to $0.89 billion. According to the company, fiscal 2026 capital expenditures will be lower than in 2025.
Segments
| April–June quarter, USD millions | Revenue 2025 | Revenue 2026 | Change | Operating income 2026 | Margin 2025 | Margin 2026 |
|---|---|---|---|---|---|---|
| North America | 6,927 | 7,395 | +6.8% | 1,009 | 13.3% | 13.6% |
| International | 2,011 | 1,323 | −34.2% | 253 | 13.6% | 19.1% |
| Channel Development | 484 | 588 | +21.5% | 306 | 45.1% | 52.1% |
North America. Revenue rose 6.8%, and the operating margin rose from 13.3% to 13.6%. According to the breakdown in the filing: sales leverage added about 340 basis points, lapping a leadership event held in the prior-year quarter about 120, and lower inflation together with the tariff refunds about 110. On the other side, restructuring took about 240, labor-hour investments about 190, and product mix about 100. In fiscal 2024 the segment margin was 19.8%, and in fiscal 2025 11.5%.
International. Revenue fell 34% because about 8,000 China stores moved from company operation to licensing. The margin rose to 19.1%, but operating income fell 7%, despite comparable sales of +5.7%. From the China joint venture the company recorded $52.5 million of product sales and royalties in the quarter, plus its share of the venture's earnings.
Channel Development. Revenue rose 21.5%, mainly from the alliance with Nestlé. According to the filing, the margin rose mainly on tariff impacts, including the refunds (about 1,370 basis points).
Competitive Position
The advantage the company presents is scale and brand: 41,000 stores, a supply chain that includes its own roasting, a digital loyalty program (Starbucks Rewards) holding $1.7 billion in loaded cards and points, and supermarket-shelf presence through Nestlé and PepsiCo. Moving most stores outside North America to licensees turns a growing share of revenue into royalties and product sales.
What the filings show on the other side: in 2024–2025 U.S. transactions fell for eight consecutive quarters, and the North America margin fell from 19.8% to 11.5%. Bringing customers back required investment in labor hours, which the company presents as part of the model rather than a temporary expense. About 6% of more than 10,000 U.S. company-operated stores are unionized. The company does not publish market-share data against competitors, and this review does not include such data from a primary source.
How to Think About This Company
At Starbucks, the question is no longer whether customers are coming back — it is what it costs to bring them back. U.S. comparable sales rose 7.9% and transactions 4.2%. That is the change the "Back to Starbucks" plan set out to deliver. The next question is how much of this growth remains on the profit line, after the labor costs needed to achieve it.
The North America margin bridge is the key. According to the 10-Q, on segment comparable sales of 8.1%, sales leverage added about 340 basis points, while labor hours and product mix took about 290. A leadership event that did not recur and the tariff refunds added another ~230, and restructuring took 240. Removing the non-recurring items leaves a very modest operating improvement. The next reports will show whether leverage widens as the labor investment stabilizes.
One quarter is not "clean". The April–June quarter recorded tariff refunds covering three quarters, a catch-up in performance-based compensation, a gain on selling control in China, and tax on that gain. In the quarters before it, results benefited from stopping depreciation on China assets classified as "held for sale". The company's guidance for the July–September quarter — $0.64–0.74 per share, which by our calculation implies an adjusted operating margin of about 11%–13% — is a reference point that does not depend on refunds.
"One-time" costs that recur. Fiscal 2025 recorded $892 million of restructuring and impairments, and nine months of 2026 another $416 million. Over six quarters the company announced five plans, the latest in September 2026 (about $300 million to close about 250 stores). The company excludes them from adjusted profit and states they will be completed "within a finite period of time". The gap between GAAP and adjusted operating income over the last 12 months: $1.15 billion. The reader has to decide which of the two to use.
China: from an operating asset to a financial asset. Boyu's funds bought 60% at an enterprise value of about $4 billion. Starbucks received $3.1 billion, kept 40% (about $1.2 billion on the books), and recorded a $536 million pre-tax gain. From now on China means royalties, product sales and a share of earnings — not $3 billion a year of revenue. According to the company, the partners aspire to reach up to 20,000 stores in China over time, from about 8,000 today.
The comparison base is changing. 2026 comparable sales are measured against a weak year: the April–June 2025 quarter fell 2.2%, and July–September 2025 was 0%. In fiscal 2027 the base will be the 2026 quarters, which rose 4%–7.9%. For growth to continue at the same pace, transactions need to keep rising on a high base.
Cash flow against the dividend. The dividend, about $2.8 billion a year, is the largest use of cash. In 2025 free cash flow did not cover it. Over the last 12 months it did, but that happened while capital expenditures fell by half. The question is what level of investment is needed to maintain and renovate 18,000 stores in North America — a figure that is not in the current filings.
A strengthening balance sheet. The $2.8 billion debt reduction lowered interest expense, and the maturity schedule is spread out. The equity deficit is not a sign of distress but the result of past capital returns. On the other side, lease liabilities ($9.2 billion) are a fixed part of the business structure.
What will decide. Three figures will tell the story in the coming reports: the North America margin without tariff refunds, the pace of transactions against a high comparison base, and whether the restructuring plans indeed end in the first half of fiscal 2027, as the company states.
This framework is intended to structure analysis, not to produce an investment conclusion. It does not take part in the decision — the decision belongs to the reader.
Risks & Monitoring
Risks that emerge from the filings
- Labor costs: investment in labor hours took about 190 basis points from the North America margin in the quarter, and about 240 over nine months. Self-insurance reserves on the balance sheet rose from $282 million to $455 million.
- Commodity prices: green coffee is the company's primary market risk. Purchase commitments: $383 million at fixed prices and about $440 million at prices not yet fixed.
- Tariffs and trade policy: the 2026 refund stemmed from a court ruling. New tariffs on a different legal basis would affect product costs.
- Restructuring: five plans in six quarters; according to the company, about $230 million more for existing plans through the first half of fiscal 2027, and about $300 million for the September 2026 plan.
- Unionization: about 6% of U.S. company-operated stores are unionized; the company describes past work stoppages and disruptions.
- Dependence on one segment: North America generates about 79% of revenue.
- Leverage: net debt of $9.4 billion plus $9.2 billion of lease liabilities, against an equity deficit.
Items to monitor in the Q4 and fiscal 2026 report (October 29, 2026)
| # | Item | Latest reading |
|---|---|---|
| 1 | U.S. comparable sales and transaction/ticket split | +7.9% (4.2% / 3.6%); guidance: +6.5% or more |
| 2 | North America margin, without tariff refunds | 13.6% GAAP in Q3; 19.8% in fiscal 2024 |
| 3 | Adjusted EPS in the quarter | Implied guidance: $0.64–0.74 |
| 4 | Fiscal 2027 guidance | Not yet published |
| 5 | Restructuring costs and new plans | $416 million over nine months + about $530 million announced |
| 6 | Annual free cash flow vs. dividend | 12 months: $3.64 vs. $2.81 billion |
| 7 | Share of China JV earnings — first full quarter | Q3: International equity income $22.8 million |
| 8 | Level of capital expenditures | $887.8 million over nine months ($1,849.5 million prior year) |
Scenario Framework
Scenarios are descriptive, not predictive. They include no prices, no probabilities, and do not rank the outcomes. Their sole purpose is to organize the conditions that would need to be met for each state to materialize, so they can be checked against the coming filings.
- If U.S. transactions keep rising even against the high 2026 base
- If the North America margin rises in quarters with no tariff refunds and no lapping of one-time events
- If the restructuring plans end in the first half of fiscal 2027, with no new plan
- If free cash flow covers the dividend even when capital expenditures return to a maintenance-and-renovation level
- If comparable sales moderate to lower positive growth against a high comparison base
- If sales leverage keeps being offset by labor costs and mix
- If restructuring costs appear in 2027 as well, at a smaller scale
- If the China venture contributes royalties and a share of earnings, with no material change to the consolidated picture
- If U.S. transactions return to decline once the weak 2025 base runs out
- If the North America margin returns to 10%–12% in quarters without special items
- If coffee prices, new tariffs or labor costs rise faster than the average ticket
- If free cash flow falls back below the dividend
Analytical Lens
The following six questions are identical in every company review we publish. They are deliberately open and do not lead to a single conclusion. Their role is to let the reader examine the company along the same six dimensions as every other company.
Key Observations
1. In the April–June 2026 quarter U.S. comparable sales rose 7.9%, with transactions up 4.2% and average ticket up 3.6%. In the prior-year quarter they fell 2.2%. For the July–September 2026 quarter, according to company management, they will rise 6.5% or more.
2. Revenue fell 1.4% to $9.32 billion following the removal of the China stores from the consolidated results. GAAP operating income was $980 million (10.5%), and adjusted operating income $1,345 million (14.4%). The adjusted figure includes tariff refunds covering three quarters, the amount of which was not disclosed.
3. Fiscal 2025 and nine months of 2026 recorded $1.31 billion of restructuring and impairments, and the company announced about $530 million more. In September 2026 it announced the closure of about 250 stores in North America.
4. Financial debt fell $2.8 billion in nine months, to $13.3 billion, partly from the China transaction proceeds ($3.1 billion). Over the last 12 months free cash flow was $3.64 billion and dividends paid $2.81 billion.
Bakshi Finance operates as a Family Office for qualified clients only. Mr. Yaron Bakshi held a licensed investment adviser qualification in Israel during 2008–2023. As of the publication date of this document, the firm does not hold an investment advice, investment marketing or portfolio management licence.
This document is intended for research and professional study purposes only. Nothing herein constitutes a recommendation to buy, sell, hold or carry out any transaction in securities. Nothing herein substitutes for advice that takes into account the data and needs of each person. Every decision is the sole responsibility of the investor.
Past performance is not indicative of future results. Data were drawn from official sources: the quarterly report on Form 10-Q for the quarter ended June 28, 2026 (July 29, 2026), the earnings releases for Q4 of fiscal 2025 and Q1–Q3 of fiscal 2026, the annual report on Form 10-K for fiscal 2025 (November 14, 2025), and the company's 2026 Form 8-K filings with the U.S. Securities and Exchange Commission, the latest dated September 24, 2026. Filings published after this date are not included.
Review for qualified investors — Family Office
The full analytical review of Starbucks (SBUX) for the quarter ended June 2026 is available to Bakshi Finance premium clients.
The review includes a 10-section analysis, "How to Think About This Company" paragraphs, a structured scenario framework, and a 6-dimension Analytical Lens.
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