Key Takeaways
- Starbucks’ fiscal fourth-quarter revenue fell 4% to $9.1 billion and its international comparable sales rose just 0.9%, yet CEO Brian Niccol repeated that Starbucks can double its stores outside the US to 40,000-plus.
- Licensees pay for most new stores abroad, and cash from operations covered capex nearly 4x in fiscal 2026, so money isn’t the constraint.
- Starbucks earns royalties on what licensed stores sell, which makes traffic the real test, and transactions at its company-operated international stores fell 2.8% in the quarter.
- At the targeted pace of 1,500 new international stores a year, reaching 40,000 takes about 11 years.
Starbucks (SBUX) missed on revenue last week, and its overseas sales came in light. Its CEO’s answer: Starbucks can still double its store count abroad.
Starbucks reported its fiscal fourth quarter on October 29. Revenue fell 4% to $9.1 billion, short of the roughly $9.2 billion Wall Street expected, mostly because China moved to a licensed joint venture. International comparable sales rose 0.9%, against the roughly 3% analysts were looking for.
The next morning on Bloomberg Talks, Romaine Bostick asked Brian Niccol about store growth. Niccol repeated a target Starbucks first laid out at its January investor day, pointing to the 22,000 stores it has outside the US:
“There’s no reason why we can’t double that to 40,000 plus just outside the United States.”
Doubling down the morning after international sales missed takes some nerve.
Wall Street Expects a Flat Year at Starbucks
Analysts expect Starbucks’ revenue to stay about flat in fiscal 2027 and then grow about 4% in fiscal 2028.
Management’s own guidance lines up. It expects fiscal 2027 revenue to fall about 1%, even with roughly $700 million from an extra 53rd week, while North America comparable sales rise about 4%.
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Licensees Pay for Starbucks’ New Stores
The flat year comes from the way Starbucks now grows abroad. Asked whether the international economics would satisfy investors, Niccol said “it’s going to be a capital light partnership as you look around the world.”
Management said on its third-quarter call that International is about 90% licensed now that China is a joint venture with Boyu Capital. Starbucks swapped revenue for margin: International revenue fell 37% to $1.31 billion in the fourth quarter, while the segment’s operating margin jumped to 19.7% from 10.8%.
The doubling depends on those partners, too. The International segment ended the year with 23,431 stores, so reaching 40,000 means about 16,600 more. At its January investor day, Starbucks targeted at least 1,500 net new international stores in fiscal 2028, and at that pace the goal takes about 11 years. Fiscal 2027 is slower, with about 1,200 net new stores guided globally. The China venture’s goal of up to 20,000 stores, from about 8,000, would supply roughly 70% of the increase.
Starbucks’ own spending is small next to its cash. Cash from operations has covered capex in each of the last five years, and fiscal 2026 capex fell to $1.26 billion, less than half its fiscal 2024 level.
That left about $3.7 billion of free cash flow, the cash Starbucks’ dividend rests on. It also backs Niccol’s answer when Bostick asked about M&A: “Look, the good news is I don’t need inorganic to hit our growth targets.”
Starbucks’ Stores Abroad Still Need Customers
International is where the quarter missed, and the details look worse than the headline. Transactions at company-operated international stores fell 2.8%, and a 3.7% rise in the average ticket covered the gap. Licensed stores aren’t in that figure, but they pay Starbucks a royalty on what they sell, so each new one is worth only as much traffic as it brings in. Niccol’s defense on Bloomberg was that, excluding China, international revenue grew 5% and operating income rose.
The overall margin still has ground to make up. Starbucks’ operating (EBIT) margin fell from 15.4% in fiscal 2023 to 9.9% in fiscal 2025, and climbed back only to 10.9% in fiscal 2026.
North America, which earned 63% of Starbucks’ segment profit in fiscal 2025, has to do most of that work. The fourth quarter helped: Starbucks’ company-wide adjusted operating margin reached 14.0%, up 4.6 points, and Niccol told Yahoo Finance “I think the turn has occurred.” Management targets a 13.5% to 15.0% adjusted margin in fiscal 2028 and expects International to pass 20%, which the segment’s fourth quarter already came close to.
Money Won’t Stop Starbucks’ Doubling
Niccol can afford 40,000 stores abroad, because partners pay for the buildings and Starbucks collects the royalties. The catch is that those royalties track sales, and international traffic fell last quarter after rising in the two before it. The first-quarter report in late January will show whether that drop was a blip. If transactions abroad fall again, 11 years starts to look optimistic.
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