Starbucks CEO Says Turnaround Is Ahead of Schedule

Bloomberg the close anchor Romaine Bostick joins us now with Brian Nicholls, the CEO of Starbucks. Romaine.

Brian, thanks for joining us here on Bloomberg Television this morning. Fresh, of course, uh, off your most recent earnings report. And I do kind of want to start off with closing out 2026, fiscal 2026 for you. Uh, real evidence here that the turnaround is taking foot. But let's push forward into the new fiscal year, Brian. Where is that growth coming from? Because we've seen a little bit of a step down in terms of actual transaction growth, though ticket growth does seem to be accelerating.

Yeah, I think look, uh first of all, what I would say is we've kind of moved through the turnaround and now we're really focused on our growth plan and that's what you're going to see us do in fiscal year 27 and beyond. And you know, what I love that's happening in our business is our growth is being driven by the fundamentals of our green apron service and also the fundamentals being executed around great coffee, great craft, through customization, and then obviously getting customers those experiences

with our priestas in store. So, you know, as you look at fiscal year 27, one of the things I love about this is we're ahead of schedule, right? If you look at what we guided for fiscal year 28, we are already touching the low end of that guidance a year earlier. And so, the fact that, you know, we've told people uh instead of just three or better, we're going to be doing at least 4% this year. Our margins have expanded where we're going to be in that 13 and a half to 14% range, and then obviously earnings growth uh that comes with it in that 315 uh to 325 range. So, you know, I I think it's growth uh and we're a growth company and it's driven by transactions and the fundamentals of our green apron service model combined with, you know, great merchandising, great marketing, great menu innovation. It's it's it's the way you want a business to grow.

Yeah, certainly. but I'm curious about that push ahead though into fiscal 2028 and getting to those targets earlier than planned. I mean, you're obviously focused a little bit more on getting to the low end of that target. Uh you still have the high end that you have that gap between the two. Is there some sense here that that low end of the target is what you think investors should focus on or more on the high-end side that they had already modeled in?

Yeah, look, all my point is is we're already achieving what we said we were going to do in 28 in 27. So, you know, that I think should give people really great confidence in our ability, uh, to not just hit the guidance, uh, that we put out there in 28. But also, I said this even at our investor day when we put that out there. It's just a point in time. It's going to be part of our journey and it's really a growth journey. So, um, you know, our intention is when you get into the years beyond, you know, obviously we'll continue to grow this business beyond what we've even guided in fiscal year 28. So, you know, we've talked about this in the past, which is this business has plenty of opportunity, plenty of growth in front of it, whether it's new units in the US or around the world, or, you know, growing transactions and customers within our existing four walls, uh to get ourselves back to 17% or better margins in the in the long run. So, you know, I I just think we're a great growth story and uh the business is back on its front foot.

With regards to expanding the footprint. I mean, you still had uh something like 250 uh store closures uh in North America, yet you're now you're guiding towards an opening of 300. So, uh what's changed now? Was that just sort of getting rid of the weaker stores or have the economics of store openings changed that gives you confidence on opening 300?

Yeah, look, we we changed the strategy on what we wanted to build and where we wanted to build it in the US. And so we had to reset the pipeline and then we also had to do some, you know, I think cleaning up of our estate. And that's exactly what we've done. Uh now I think we're in a great situation to continue the growth going forward. And you know, you're going to see us in fiscal year 28, um, you know, open roughly 300 new stores. Uh that'll take us on our journey to hopefully 5,000 and more. Uh and then when you talk about outside the United States, Roman, it's pretty impressive, right? We've got 22,000 stores outside the United States. There is no reason why we can't double that to 40,000 plus just outside the United States. So, you know, there is just so much opportunity for this Starbucks brand around the world because the Starbucks promise is exactly the experience that customers want. Great coffee, great customization through great craft, and then obviously in a great place, um and where they can build community.

Are the economics of the international business going to be enough to satisfy investors? I mean, your net new store growth is heavily weighted on the international side. Yet we're still seeing softness in sales there and some of the partnerships that you have struck particularly in China, obviously, are a little bit less impactful on both revenue and profitability.

Yeah, look, I think the good news is it's going to be a capital light uh partnership, uh as you look around the world. So what obviously happens in that is we get a really great return on the Starbucks business and that's exactly what you saw even in this quarter. If you exclude China, the fact that we, you know, sold 60% of the business. Our international business, the revenue grew 5%, our operating income grew, um and you know, all the metrics you would want to see going up, we're going up. And the good news is our partnership in China with Boyu is off to a terrific start. Like I'm really optimistic about where we're going to get to in fiscal year 27 and well beyond. Uh so I think it's a tremendous opportunity that you know, when you think about growth and you think about a consumer company at our scale, I think we're category defining.

You are. Well, let's talk about some of the subcategories there because I mean, you've obviously made a lot of changes to the menu. Uh I saw Kathy Smith was talking about how matcha has now become a billion dollar business. We've talked a lot about refreshers and merchandising and everything else. Um not always so much about coffee, Brian. And I am curious, do you still view Starbucks as a coffee led company?

Yeah, look, our our biggest category that grew this last year was espresso, uh both in hot and cold, uh primarily driven by cold. But yeah, what Kathy was talking about is we've had tremendous growth in these other aspects, right? And remember, Starbucks is the coffee company that originally had a tea business as well. So it's makes total sense for us to be winning with matcha. Um you know, and cold matcha, like iced matcha lattes, um that is what's driving that billion- dollar business and then we've got a great platform called cold foam that just makes it really delicious. I I don't, you know, I personally love an iced matcha latte with a strawberry cold foam. It's a great afternoon drink and I think that's what you're hearing our customer say.

Well, I am curious though too, but as we kind of as you kind of move into this next phase of of growth, Brian, I mean, there's also been a focus, I know, on improving the food menu. Has there been discussions uh about the idea that maybe Starbucks could pursue a multi-brand model for Starbucks court?

Yeah, look, I I I think it's one of those possibilities. The good news is Starbucks is such a strong business and our scale uh presents, you know, an opportunity to go beyond just being a one uh brand company. Um that's not our focus right now, but is it an opportunity down the road? You know, I would never say never. Um but look, I think when you've got a strong business like Starbucks, uh I think you put other businesses into a portfolio that could leverage the strength of Starbucks. That could be an interesting proposition down the road.

How far have any talks gone with any other potential parties this year?

You know, that has not been our focus. Our focus is first getting the turnaround and getting Starbucks into a growth situation. And I think that's what we demonstrated, uh, you know, this quarter and what what I think you'll continue to see us demonstrate in this fiscal year.

Would you be open to pursuing M&A as a way to meet some of your growth targets beyond organically?

You know, look, the good news is I don't need inorganic, uh, to hit our growth targets. I am in a position of strength. Um we're in no rush to do anything outside of our back-to Starbucks growth plan. Um so, you know, look, I I think I wouldn't be doing my job if I wasn't taking a look at what's out there. But with that said, you know, the good news is we're in a place where we can get all the growth that we know we can achieve through the Starbucks business. And you know, when you're in that position of strength, it gives you a lot of opportunities to evaluate and figure out what you want to do next. But the good news is, uh the Starbucks plan has tremendous upside and tremendous growth in what we're executing right now. The team's focused and I think we're demonstrating that, you know, Starbucks is a winner.

Well, Brian, really appreciate uh you joining us today and I also want to thank you and your team. You've actually finally helped me out with my uh Halloween costume uh this year after seeing your latest ad there. I'm going to be Martha Stewart. Nice cozy outfit, pumpkin spice latte, and a basic attitude for everybody that I greet.

Well, man, I wish you would swing by my place. I'd love to see that.

You don't want to see it. Have a good one, Brian.

All right, take care.

Thanks.