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Investing.com -- Starbucks Corporation (NASDAQ:SBUX) shares fell nearly 2% in premarket trading Thursday, a day after the coffee giant reported worse-than-expected earnings for the fiscal fourth quarter and lower margins.
The Seattle-based company reported adjusted earnings per share of $0.52 on revenue of $9.57 billion, compared to Wall Street estimates of $0.56 and $9.35 billion, respectively. Consolidated net revenues increased 5% year-over-year to $9.6 billion, while GAAP earnings per share fell sharply to $0.12, down 85% from the same period last year.
Global comparable store sales (SSS) rose 1%, marking the first increase in seven quarters, led by a 3% jump in international comps. North America and U.S. comparable store sales were flat, weighed down by a 1% decline in transaction volume, which was offset by a 1% increase in average ticket size.
"Revenue was better than we expected by 3% including better Int’l SSS, channel development upside, and U.S. comp flow-through," Guggenheim analysts commented. They expect SSS in the U.S. to be 2% in the fiscal Q1 2026 "and build during the year to +3-4%."
TD Cowen analysts echoed this view. "While F2026 guidance will not be provided until the January 29 investor meeting, same store sales are expected to build as the year progresses based on advancements with the turnaround."
Operating margins contracted substantially, highlighting ongoing cost pressures and the impact of restructuring. GAAP operating margin declined to 2.9%, down 1,150 basis points from the prior year, while the non-GAAP margin narrowed by 500 basis points to 9.4%, reflecting investments in labor, inflationary factors and deleverage.
“We’re a year into our ‘Back to Starbucks’ strategy, and it’s clear that our turnaround is taking hold,” said CEO Laxman Narasimhan. “Our return to global comp growth and the momentum we’re building give me confidence we’re on the right path to deliver the very best of Starbucks for our customers, partners and shareholders.”
Starbucks ended the quarter with 40,990 stores globally after closing 627 locations as part of its restructuring, over 90% of which were in North America. Despite the closures, net revenues in the North America segment rose 3% to $6.9 billion, though operating margin dropped steeply to 4.5% due to restructuring costs, inflation, and increased labor investments.
Sales in China, Starbucks’ key international growth market, grew modestly with comparable store sales up 2%, as a 9% increase in customer transactions offset a 7% fall in average ticket. Meanwhile, Channel Development revenue surged 17% to $542.6 million, underpinned by growth through the Global Coffee Alliance and other consumer packaged goods initiatives.
Despite considerable margin compression and bottom-line pressure, Starbucks’ positive sales trajectory and loyalty to its dividend, now paid for 62 consecutive quarters, helped buoy investor sentiment. The company reiterated its long-term commitment to driving sustainable growth and reshaping store operations in alignment with its multi-year turnaround vision.
(Luke Juricic contributed to this report.)