SBUX Starbucks 10-K 2026-09-27 section summaries

Starbucks FY2026 business overview

Fiscal year ended September 27, 2026; Starbucks operated in 91 markets.

Business and revenue mix

The company-operated channel share reflects the Q3 conversion of Starbucks’ China retail operations to a licensed joint-venture model. Channel Development sells packaged coffee, single-serve products, ready-to-drink beverages, and foodservice products. The Nestlé Global Coffee Alliance handles a large portion of packaged-coffee activity; ready-to-drink products are sold through collaborations that include PepsiCo and Nestlé.

Coffeehouse footprint and operating model

The company-operated count fell substantially following the transfer of 7,991 China coffeehouses to the licensed joint venture in Q3. During FY2026, Starbucks opened 491 and closed 617 company-operated stores; separately, 266 closures were under restructuring plans announced in FY2025 and 250 under plans announced in FY2026. The licensed model generally generates lower gross margin but higher operating margin than company operation: licensees bear store operating costs and capital investment, while Starbucks earns royalties, product margins, and fees. Starbucks is pursuing disciplined expansion and optimizing the mix; North America is its most mature and scaled business, while some International markets require more support relative to revenue and operating income.

Strategy, customers, and workforce

The “Back to Starbucks” turnaround, announced in Q4 FY2024, focuses on revitalizing coffeehouses, improving customer experience, and increasing efficiency. FY2026 actions included further store closures, moving some support functions to a new Nashville office, transforming the global support organization and non-retail facilities, and reducing operating complexity at Reserve and Roastery locations. The Green Apron Service model is rolling out across U.S. company-operated coffeehouses, with repeatable routines, tools, and technology intended to improve order flow and speed while allowing more time for craft and customer connection. Starbucks also introduced Green, Gold, and Reserve Rewards tiers in Q2 FY2026.

At September 27, 2026, Starbucks employed approximately 306,000 people: 221,000 in the U.S. (about 214,000 in company-operated coffeehouses) and 85,000 internationally (about 84,000 in company-operated coffeehouses). Partners at approximately 6% of U.S. company-operated coffeehouses were union-represented. Starbucks emphasizes wages, benefits, training, and internal advancement, targets filling 90% of U.S. retail leadership roles internally, and awarded Bean Stock grants to more than 240,000 partners in FY2026. It introduced a U.S. coffeehouse coach role and offers eligible U.S. partners tuition coverage for a first bachelor’s degree through SCAP. Retention, safety, harassment, and bullying are monitored as workforce risks.

Supply, competition, and operating environment

Coffee prices generally declined during FY2026 but remained volatile and elevated compared with five years earlier. Starbucks’ high-altitude arabica is typically purchased at a premium to the “C” commodity price. Exposure includes weather and climate risks, water availability, crop disease and pests, farm input costs, political and economic conditions, tariffs and other trade controls, futures-market activity, and potential supply restrictions or export quotas. Starbucks uses fixed-price and price-to-be-fixed commitments and forward and futures contracts to hedge; purchase commitments, inventory, and expected future contracts are expected to cover green-coffee needs through FY2027. Its 10 farmer support centers work to improve coffee quality, yields, and climate resilience.

Starbucks controls substantially all coffee purchasing, roasting, and packaging for its operations. Nestlé distributes Starbucks packaged coffee outside Starbucks coffeehouses under the Global Coffee Alliance and sometimes roasts and packages products. The company also depends on dairy and plant-based beverage suppliers, specialty tea and ready-to-drink suppliers, and multiple food and packaging sources; management considers non-delivery risk generally remote based on supplier relationships and historical performance.

Competition spans specialty coffee retailers, quick-service restaurants, ready-to-drink brands, and international entrants. Competition for prime retail sites and qualified employees also affects development and operations; packaged coffee and tea compete across grocery, warehouse club, convenience, specialty retail, and foodservice channels. Q2 is typically a lower-revenue and lower-operating-income quarter. Holiday Starbucks Card loading tends to boost Q1 operating cash flow, although revenue is recognized upon redemption, so quarterly results may not predict full-year performance. Regulatory regimes differ across markets; changes could increase compliance costs, though Starbucks did not expect a material effect on capital expenditures, results, or competitive position versus prior periods.

Principal risks

Starbucks’ performance depends on the strength of its brand, customer trust, product quality, and ability to remain relevant. Negative publicity can spread quickly through social media, video, AI-enabled content, and other channels, potentially before the company can respond. Actual or perceived misconduct by Starbucks or its partners, or objections to company actions and positions, could prompt boycotts and reduce demand. Marketing, loyalty, digital engagement, and pricing may not keep pace with changing preferences, competition, inflation, or operating costs; passing higher costs to customers could also weaken demand.

Strategy, demand, and growth execution

The Back to Starbucks strategy includes improving service and the customer experience, investing in partners, transforming support functions, changing coffeehouse operations and designs, strengthening coffee leadership, and expanding digital, delivery, international, cold-beverage, and Channel Development businesses. Execution could be delayed or cost more than expected because of labor and materials shortages, permitting and real-estate constraints, supply-chain capacity, regulation, remodel disruptions, or geopolitical instability. Restructuring and portfolio changes may produce significant charges, and expected savings and returns are uncertain. Poor prioritization or resource allocation could harm other operations.

Strategic actions, restructuring, impairments, acquisitions, dispositions, and shifts among company-operated, licensed, and joint-venture models can create one-time charges and recurring changes to revenue, expenses, and margins, making results less comparable. Following the divestiture of its China retail operations through a joint venture with Boyu Capital, Starbucks shifted from recording the business’s revenues and expenses to recording its share of joint-venture income under the equity method; the company expects lower reported revenue and higher operating margin than under the former company-operated model. Fiscal 2025 and fiscal 2026 restructuring plans have resulted in, and may continue to result in, charges, savings, and changes to the coffeehouse base.

Demand is exposed to discretionary-spending trends, competition, and changing preferences—including greater interest in wellness, nutrition, functional ingredients, and weight management. Weak product acceptance, concerns about ingredients or food safety, and forecasting errors that cause excess inventory, shortages, markdowns, or write-offs could reduce sales, increase costs, and damage the brand. Contamination, mislabeling, or other food-safety incidents may lead to recalls, closures, litigation, or regulatory action.

Geographic, partner, and store exposure

North America generated approximately 76% of total net revenues in fiscal 2026, leaving consolidated results particularly dependent on that segment and the U.S.; weakness elsewhere may not offset a North American slowdown. Starbucks operates in 91 markets, where differing consumer preferences, regulation, labor requirements, trade restrictions, currency and repatriation limits, political instability, and intellectual-property enforcement create additional risks. International growth—especially in developing markets—depends on licensees’ ability to invest, operate coffeehouses, and meet contractual obligations.

Licensees, joint-venture partners, suppliers, distributors, retailers, and service providers are important to Starbucks’ operations but are not fully under its control. Their financial distress, labor or sanitation problems, legal noncompliance, poor service, or failures to protect Starbucks’ intellectual property could harm results and reputation. Channel Development is particularly reliant on Nestlé, which holds global rights to distribute certain Starbucks-branded packaged goods; poor performance by Nestlé or major regional licensees may be difficult to offset.

New coffeehouses require substantial investment and can take time to become profitable. Construction costs, site selection, leases, permits, staffing, weather, competition for locations, and cannibalization may delay openings or reduce returns; remodels may exceed budgets or disrupt business.

Costs, supply chain, and economic conditions

Coffee costs and availability are exposed to weather and climate events, water constraints, crop disease, input costs, inventories, political and economic conditions, speculative trading, and tariffs. Arabica generally trades at a premium to the “C” commodity price, and many supply agreements link prices to future “C” rates. Starbucks says its ability to hedge fully against coffee-price increases is limited, as is its ability to pass higher costs to licensees. Dairy and plant-based milks, other commodities, energy, and packaging also pose cost and availability risks. Supplier concentration, capacity constraints, logistics problems, stockouts, expedited shipping, and disruptions such as natural disasters, labor shortages, pandemics, or geopolitical conflict could constrain growth, increase costs, or damage the brand.

As a discretionary retailer, Starbucks is also sensitive to downturns, inflation, interest rates, employment and credit conditions, taxes, public-health events, and consumer shifts toward lower-priced products. Lower traffic or transaction value without corresponding cost reductions may pressure margins. Credit-market disruption or a ratings downgrade could raise borrowing costs or restrict capital access; supplier or licensee distress could cause defaults, bad-debt expense, insolvency, or market exits.

People, regulation, technology, and reputation

Wage and benefit inflation, labor shortages, turnover, and competition for skilled workers may raise costs and make it harder to staff stores and maintain service. Unions have secured representation rights at around 6% of U.S. company-operated coffeehouses, and initial collective bargaining is underway. Unfavorable agreements, bargaining constraints, or work stoppages could increase costs, reduce flexibility, disrupt operations, and create legal, regulatory, and reputational exposure.

Changing requirements across jurisdictions—including labor, food, trade, tax, environmental, packaging, privacy, cybersecurity, and AI rules—may increase compliance costs and obligations. Carbon, plastics, water-use, and packaging rules, tariffs, beverage taxes, and global minimum tax regimes could affect costs, demand, cash flows, or tax rates. Claims and litigation involving employees, customers, regulators, suppliers, shareholders, and others may generate substantial expenses, distraction, settlements, or judgments.

Cyberattacks and technology failures affecting Starbucks or third parties could expose sensitive customer, employee, payment, or proprietary data, disrupt operations, reduce customer activity, and require costly remediation. Starbucks has experienced cyberattacks and expects threats to evolve, including AI-enabled social engineering. Privacy laws may constrain data use and cross-border transfers; expanding AI use adds uncertainty around consent, bias, inaccuracies, intellectual property, and regulation. Starbucks’ trademarks, trade secrets, and other intellectual property are valuable but can be costly to protect and enforce, and infringement claims may disrupt revenue generation or market entry.

Finally, criticism of responsible-business commitments or disclosures—whether stakeholders view progress as insufficient or initiatives as excessive—could damage reputation and loyalty, prompt litigation or boycotts, and impair performance. Shareholder activism may add legal costs, distract management, create strategic uncertainty, and contribute to stock-price volatility. Missing guidance or market expectations, or changing dividends and repurchases, may also affect share-price volatility.

Cybersecurity

As of the filing date, Starbucks had identified no cybersecurity threats or incidents that materially affected, or were reasonably likely to materially affect, its business strategy, results of operations, or financial condition. The company cautions that future incidents affecting Starbucks or its third-party partners and service providers could have a material adverse impact. Insurance may cover certain incident-related costs, subject to the applicable terms and conditions.

Risk management and response

Cybersecurity risk management is integrated into Starbucks’ enterprise risk management framework and uses industry-standard approaches, including the NIST Cybersecurity Framework. The program includes ongoing risk assessments and investment as threats, laws, and compliance requirements evolve; system and network monitoring; simulated attacks and penetration testing; and annual employee awareness training, phishing simulations, and incident-reporting procedures.

Starbucks maintains an incident response plan that is tested periodically and includes escalation protocols for senior management and the Board. Third-party risk controls include risk-based assessments, contractual cybersecurity obligations, and external monitoring. A global privacy program addresses risks associated with processing personal data. Internal audit periodically evaluates the cybersecurity program, and outside experts support assessments, testing, monitoring, and incident response.

Oversight and governance

The senior vice president and chief information security officer (CISO), who has more than 20 years of information security and technology experience, leads the cybersecurity program and regularly reviews risks and opportunities with technology leaders.

The Board has ultimate oversight. Its Audit and Compliance Committee oversees cybersecurity, technology, and data privacy risks through the enterprise risk management program. The committee receives regular updates from the CISO or the CISO’s team covering the threat landscape, technology and regulatory developments, policies and practices, incidents and responses, and program-effectiveness metrics, and reports to the full Board.

Starbucks FY2026 results and business developments

Starbucks’ FY2026 net revenue grew 2.0%, while operating income and margin improved. The results reflect stronger comparable sales and cost leverage, partly offset by higher product and distribution costs and continued investment in labor. The China transaction materially changed International revenue and segment comparability, while contributing to higher International margins.

Consolidated results

Revenue rose 2.0%; diluted EPS growth reflected operating improvement and a $536.3M gain on the China transaction. Product and distribution costs increased to 32.3% of revenue from 31.4%, primarily due to mix. Operating-margin expansion of 180 basis points reflected approximately 210 basis points of sales leverage, partly offset by approximately 130 basis points of labor investment supporting the “Back to Starbucks” strategy. Coffeehouse operating expenses were $17.1898B versus $17.0589B; general and administrative expense declined to $2.3729B from $2.6172B, mainly due to restructuring savings and efficiencies. Restructuring and impairment expense was $688.6M versus $892.0M.

Revenue categories

Company-operated comparable sales increased 6.2%, comprising a 3.2% increase in transactions and 3.0% in average ticket. Licensed revenue benefited from licensee sales and royalties, including the China joint venture (JV). Other revenue growth largely reflected the Global Coffee Alliance and elevated coffee prices.

Segment results

North America: Operating margin increased to 12.0% from 11.5%. Comparable sales rose 6.6% (transactions +3.6%; average ticket +3.0%), with ticket growth supported by delivery, pricing, product mix, and food attach. Sales leverage was partly offset by labor investment.

International: Operating margin rose to 17.7% from 12.1%. The China retail-to-licensed-JV transition contributed approximately 330 basis points of margin expansion, and lower China operating and depreciation costs after held-for-sale classification contributed approximately 200 basis points. Excluding the China-model transition’s revenue effect, comparable sales increased 3.7% (average ticket +2.0%; transactions +1.6%). Product sales and royalties rose by $217M from existing licensees and $105M from the new China JV; comparable sales contributed $152M.

Channel Development: Revenue growth primarily reflected a $266M increase in Global Coffee Alliance revenue, largely associated with elevated coffee prices. Operating margin declined to 46.8% from 47.3%; lower growth in North American Coffee Partnership JV income relative to segment revenue reduced margin by approximately 170 basis points. Product and distribution costs were $1.3434B versus $1.1683B.

Corporate and Other: The operating loss improved 4.1%. Approximately $227M of restructuring-related savings and operating efficiencies and $51M of lower restructuring costs were partly offset by $114M of higher performance-based compensation and $66M of China transaction and transition expenses.

China transaction, strategy, and restructuring

In Q3 FY2026, Boyu Capital acquired a 60% stake in Starbucks’ China retail operations; Starbucks retained 40% and continues to own and license the brand and intellectual property. Starbucks deconsolidated the retail business, records its JV share of income under the equity method, and receives product-sale and royalty revenue. The transition reduced company-operated International revenue by approximately $1.5B in FY2026. Management expects the licensed model to produce lower revenue but higher operating margins than company operation, affecting comparisons. A portion of the proceeds funded debt reduction; the partners’ long-term aspiration is up to 20,000 China locations.

FY2026 included $372.5M of impairment and disposition charges for company-operated coffeehouse and non-retail facility assets (including $113.0M of right-of-use asset impairments), plus $196.0M primarily for accelerated right-of-use asset amortization and other lease-exit costs. These two categories totaled $568.5M, compared with $592.1M in FY2025. The company evaluated coffeehouses against brand-experience and financial-performance criteria, and also reassessed non-retail facilities and Reserve and Roastery assets. Estimates depend on forecasts and valuation assumptions; weaker performance or economic conditions could affect recoverability and fair values.

“Back to Starbucks” emphasizes service, staffing and scheduling, digital and drive-thru experience, supply chain, technology, marketing, menu relevance, and partner training. Starbucks expects FY2027 net-revenue growth to moderate, primarily due to lapping the China divestiture and recent North America closures. It also expects fewer North America company-operated openings as it rebuilds development capabilities and applies stricter return criteria.

Cash flow, liquidity, and capital allocation

Operating cash flow increased with higher net earnings and favorable working-capital changes, partly offset by noncash adjustments including the China divestiture gain. Investing cash flow reflected $2.5B of net China divestiture proceeds and lower capital expenditures. Financing cash use included $2.8B of debt repayments versus $1.3B in FY2025; FY2026 had no new debt issuance, compared with $1.7B issued in FY2025. FY2027 capital expenditures are expected to exceed FY2026, primarily for coffeehouses, supply chain, and corporate facilities.

Cash and investments totaled $4.2B at year-end, versus $3.7B a year earlier; $1.3B of cash and short-term investments was held in foreign subsidiaries. Starbucks had no borrowings under its $3.0B revolving facility, commercial paper program, or Japanese yen facilities, leaving $3.0B of available contractual borrowing capacity, and was in compliance with its debt covenants. In May 2026 it used China proceeds to repurchase approximately $1.3B principal amount of senior notes; the debt-extinguishment gain was immaterial.

Material cash requirements totaled $30.6096B: operating leases $10.8197B; debt principal $13.3841B; debt interest $5.1309B; purchase obligations $922.5M (approximately 88% for green coffee); and other obligations $352.4M. Of the total, $4.6682B was due within one year, including $1.6902B of lease obligations and $1.500B of debt principal. Dividends were $2.8B in each year; the FY2026 fourth-quarter dividend was $0.63 per share, with an expected $718.2M payout. No shares were repurchased in either year; 29.8M shares remained authorized for repurchase.

Taxes and market risks

The effective tax rate increased to 34.2% from 25.9%. Starbucks recorded $266M of discrete tax expense in Q1 and a further $8M in Q2 after releasing its remaining indefinite-reinvestment assertions. The China divestiture and retained JV interest generated $199.5M of incremental income tax expense, including approximately $147.8M in Q3 and the remainder in Q4. Interest expense declined to $531.3M from $542.6M, primarily due to lower debt balances.

After the February 2026 Supreme Court ruling against IEEPA reciprocal tariffs, Starbucks sought refunds and received substantially all requested amounts in Q3; the refunds, recorded in product and distribution costs, largely offset tariffs incurred in the first three quarters. Green coffee is the primary commodity-price exposure, alongside dairy, diesel, cocoa, sugar, and other inputs. A 10% commodity-price movement was estimated to change OCI by $15M (gain for an increase; loss for a decrease), with no change in net earnings, excluding effects on underlying hedged items. The company uses derivatives and contracts to hedge exposures and prohibits speculative trading.

A 10% change in underlying exchange rates was estimated to change derivative fair values by +$37M/−$37M in net earnings and +$235M/−$235M in OCI; these sensitivities exclude the hedged items. Long-term debt fair value was $11.629B; a 100-basis-point rate increase would reduce it by $639M, net of a $9M fair-value change in designated interest-rate swaps. Management did not expect a 100-basis-point rate change to significantly affect available-for-sale securities’ fair value.

The latest quantitative goodwill assessment estimated reporting-unit fair values approximately $120B above carrying values. Management did not anticipate significant goodwill or indefinite-lived intangible impairment in the next 12 months absent a sustained, multi-year global business decline in key markets. Valuations rely on forecasts and assumptions, so adverse changes could affect estimates.

Item 7A — Market Risk

Item 7A provides no standalone market-risk figures or additional disclosures. It incorporates by reference Item 7’s sections on “Commodity Prices, Availability, and General Risk Conditions” and “Financial Risk Management”; the related commodity and financial risk details are addressed there.

Starbucks (SBUX) — FY2026

Starbucks’ fiscal year ended September 27, 2026. Revenue grew modestly and operating income and earnings recovered from FY2025, but both remained below FY2024. The March 2026 China transaction materially changed the company’s operating model and balance sheet, while restructuring and store-closure costs continued to weigh on results.

Consolidated results

Revenue increased 2.0% year over year. Company-operated coffeehouses generated $30.940B, compared with $30.745B; licensed coffeehouses generated $4.616B, compared with $4.350B; and other revenue was $2.355B, compared with $2.089B. The effective tax rate rose to 34.2% from 25.9%, including China-related and other tax items. A $536.3M net divestiture gain was reported below operating income.

Segment results

North America and Channel Development growth partly offset lower International revenue after the China retail business shifted to a licensed joint-venture model. Segment operating results include equity-method income where applicable.

Cash flow and balance sheet

FY2026 other intangible assets comprised $79.5M of indefinite-lived trade names, trademarks and patents and $90.1M of net finite-lived intangibles. The substantial goodwill decline primarily reflected the China divestiture. Tangible shareholders’ equity, calculated as shareholders’ deficit less goodwill and other intangible assets, was approximately $(9.088)B. Starbucks’ debt was $13.384B at face value and $11.629B at estimated fair value. It repurchased approximately $1.3B principal amount of senior notes in May 2026. Its $3.0B revolving facility was undrawn at year-end, and Starbucks reported covenant compliance.

China transaction and restructuring

On March 30, 2026, Starbucks sold a 60% interest in its China retail operations to Boyu Capital, based on an approximately $4.0B cash-free, debt-free enterprise value. Starbucks received $3.1B of consideration and retained a 40% equity-method interest valued at approximately $1.2B. It deconsolidated net assets with a $3.4B carrying value; 7,991 formerly company-operated China coffeehouses shifted to licensed locations in International. China revenue declined to $1.781B from $3.161B, and China long-lived assets fell to $166.7M from $4.277B. The transaction also involved reclassifying cumulative translation and net-investment hedge losses into earnings. Related incremental tax expense was approximately $199.5M, and transaction and transition costs were $79.3M.

The “Back to Starbucks” program continued through support-organization changes, facility actions and coffeehouse closures. Restructuring and impairment expense was $688.6M, down from $892.0M in FY2025; it included $105.1M for FY2025 plans and $583.5M for FY2026 plans. Starbucks closed 266 coffeehouses in FY2026 under FY2025 plans and another 250 under a separate FY2026 plan. Total estimated pretax charges for the two plans are approximately $1.7B; both plans and remaining closures are expected to be completed by the first half of FY2027.

Other investor considerations

• Returns and dilution: Operating cash flow included $2.544B of net divestiture proceeds in investing cash flow. Financing cash flow was $(5.645)B, including $2.825B of dividends and $2.816B of long-term debt repayments. Shares outstanding increased from 1,136.9M at the start of FY2026 to 1,140.1M at year-end. Weighted-average diluted shares were 1,143.4M, including 4.1M dilutive shares from options and RSUs. Stock-based compensation was $368.6M, versus $318.3M.
• Leases and restructuring exposure: Year-end operating lease liabilities were $9.137B against $10.820B of undiscounted payments. Another $525.8M of operating leases, primarily real estate, had not commenced. Restructuring-related lease costs were $309.0M, versus $239.3M.
• Taxes and risks: Starbucks released its remaining indefinite-reinvestment assertions; FY2026 tax expense included $323.3M of China nonresident capital gains tax, partly offset by an $81.5M Netherlands participation-exemption benefit. In Q4, the IRS issued proposed adjustments for FY2018–FY2019 that Starbucks disputes; the outcome remains uncertain and could affect future tax expense and earnings.
• Controls and impairment: Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. The critical audit matter concerned management’s judgment in identifying potential long-lived-asset impairment indicators for coffeehouses.

For the fiscal quarter ended September 27, 2026, no Starbucks director or officer informed the company that they had adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement. This section contains no financial or operating results.