01—Abstract
Summary
Summary of the 10-Q filed January 28, 2026. Cited figures are marked; the original filing is the authoritative source.
Starbucks Corporation reported its first quarter fiscal year 2026 results, with total net revenues increasing 5.5% year-over-year to $9.9 billiona.
This growth was primarily driven by a 5.2% increase in company-operated store revenues, fueled by a 4% rise in comparable store sales in the U.S. and a 5% increase internationally. However, the company experienced a significant decline in net earnings attributable to Starbucks, which fell to $293.3 millionb from $780.8 million in the prior year's quarter, resulting in diluted earnings per share of $0.26, down from $0.69. The decrease in profitability was largely influenced by a substantial increase in income tax expense, significantly impacted by changes in indefinite reinvestment assertions related to the planned joint venture in China.
Additionally, operating income saw a contraction due to increased product and distribution costs, elevated coffee pricing and tariffs, and labor investments supporting the 'Back to Starbucks' strategy. Despite the earnings drop, the company continues to execute its 'Back to Starbucks' initiatives, including store closures and organizational restructuring, and is advancing its strategic partnership in China.
02—Key points
Key Highlights
- Consolidated net revenues increased by 5.5% to $9.9 billion, driven by company-operated stores and international growth.
- Global comparable store sales increased by 4%, with a 4% rise in the U.S. and a 5% rise internationally.
- Net earnings attributable to Starbucks significantly decreased by 62.4% to $293.3 million, leading to diluted EPS of $0.26.
- Operating margin contracted by 290 basis points to 9.0% due to higher costs and strategic investments.
- Significant increase in income tax expense, primarily due to changes in indefinite reinvestment assertions related to the China joint venture, impacting reported earnings.
- Starbucks continues to execute its 'Back to Starbucks' strategy, including store closures and restructuring efforts, with $88.1 million recorded in restructuring and impairment charges.
- The company announced an agreement to form a joint venture for Starbucks retail operations in China, classifying the related assets and liabilities as held for sale.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed January 28, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $9.92B$9.40B | +5.5% |
| Operating Expenses | $9.08B$8.32B | +9.2% |
| Operating Income | $890.80M$1.12B | −20.6% |
| Interest Expense | $139.00M$127.20M | +9.3% |
| Net Income | $293.30M$780.80M | −62.4% |
| EPS (Basic) | $0.26$0.69 | −62.3% |
| EPS (Diluted) | $0.26$0.69 | −62.3% |
| Shares Outstanding (Basic) | 1.14B1.13B | +0.3% |
| Shares Outstanding (Diluted) | 1.14B1.14B | +0.3% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the significant decrease in net earnings?
The primary driver for the significant decrease in net earnings was a substantial increase in income tax expense, largely due to a $266 million discrete impact from changes in indefinite reinvestment assertions following the classification of Starbucks retail operations in China as held for sale. This, combined with increased operating expenses and inflationary pressures, contributed to the lower profitability.
How is the company's 'Back to Starbucks' strategy progressing?
The company is continuing to execute its 'Back to Starbucks' strategy, focusing on revitalizing coffeehouses, enhancing customer experience, and improving efficiency. This includes store closures (165 closed in Q1 FY26 as part of restructuring) and simplification of the support organization. The company reported $88.1 million in restructuring and impairment charges related to these initiatives.
What is the impact of the China joint venture on the financial statements?
Starbucks has agreed to form a joint venture with Boyu Capital for its retail operations in China, with Boyu Capital acquiring up to a 60% interest. The assets and liabilities associated with this China business have been classified as 'held for sale' on the balance sheet. This classification led to the cessation of depreciation and amortization for these assets, reducing operating expenses. However, it also resulted in a significant increase in income tax expense due to changes in indefinite reinvestment assertions. Upon closing, Starbucks will account for its 40% stake using the equity method.
What is the outlook for operating margins?
Operating margin contracted by 290 basis points to 9.0% in the first quarter of fiscal 2026. This was primarily attributed to labor investments supporting the 'Back to Starbucks' strategy and inflationary pressures, particularly elevated coffee pricing and tariffs. Management expects certain macroeconomic pressures to alleviate in the second half of the fiscal year.
06—Continue