Starbucks Investor Day: “Back to Starbucks” plan, Rewards revamp, and FY2028 margin targets unveiled

Starbucks (NASDAQ:SBUX) used its “Starbucks 2024” company news event to outline its “Back to Starbucks” turnaround plan, highlight new product and technology initiatives, and provide a financial framework through fiscal 2028. Chairman and CEO Brian Niccol, joined by senior leaders across brand, operations, international, and finance, emphasized returning to what the company views as its core differentiators: coffee craft, partner-led service, and a welcoming “Third Place” coffeehouse experience.

Re-centering the brand on coffee, service, and the “Third Place”

Niccol opened by grounding the event in coffee, introducing a new dark roast blend called 1971 Roast, which he said is expected to be in all stores starting around February or March. Starbucks also highlighted new brewed coffee equipment called Clover Coffee, which Niccol said will enable freshly ground coffee brewed into a customer’s cup each visit.

Niccol framed the “Back to Starbucks” plan as a reset of operational fundamentals, citing customer feedback that menus needed to feel more relevant, service needed to be more timely, and store operations had become too complex. He said Starbucks has focused investments “inside the coffeehouse,” including the rollout of Green Apron Service across North America, which he called the company’s largest-ever investment in customer experience.

He also described efforts to “reclaim the Third Place” with changes such as returning condiment bars, adding new ceramic mugs and new seating elements, expanding the “Uplift” remodel program, and introducing a new code of conduct designed to prioritize customer and partner experience. Niccol said Starbucks has also closed certain locations that could not meet financial expectations or deliver the desired environment.

Menu innovation and a revamped Starbucks Rewards program

Global Chief Brand Officer Tressie Lieberman presented a “flywheel for growth” centered on innovation, rituals, and connection. She noted that cold beverages represent about two-thirds of beverages sold and said Starbucks’ U.S. food business has doubled since 2020. Lieberman also pointed to customization as a major driver, describing cold foam as one of the largest modifiers and saying it represents one-third of Starbucks’ billion-dollar customization business.

Lieberman said Starbucks generated more than $12 billion in U.S. revenue before 11:00 a.m. in fiscal 2025, calling the morning a core strength. She also positioned midday and afternoon as a major opportunity, noting those dayparts already generate $11 billion after 11:00 a.m., but said Starbucks believes it can create a “true second peak” anchored by an “afternoon reset” ritual.

Among the menu-related items discussed:

• New espresso, matcha, and chai beverages with flavors such as ube and coconut planned for spring.
• Updates to core flavors and “always-on” options including pistachio, lavender, and sugar-free caramel.
• A February expansion of the bakery case with globally inspired flavors, including a Strawberry Matcha Loaf.
• Expansion plans for Refreshers, described as a $2 billion platform, including Energy Refreshers using a proprietary blend with B vitamins and caffeine derived from green coffee extract.
• More premium and snack-focused food offerings such as flatbreads, wraps, and additional “all-day snacking” items.

Lieberman also detailed a next-generation loyalty overhaul called Reimagine, launching March 10. The program introduces three membership tiers—Green, Gold, and Reserve—with benefits including faster star earning at higher tiers, changes to star expiration, and additional perks such as a free beverage modification each month for Green members. She said the redesign is intended to better personalize benefits and incentives, and she cited the scale of Starbucks Rewards, noting that the program reached more than 35 million 90-day active members in the most recent quarter and represented nearly 60% of U.S. company-operated revenue in fiscal 2025.

Digital initiatives discussed included scaling scheduled ordering nationally, adding in-app discovery features (including a trending beverage category and a “secret menu”), and developing an AI-powered ordering companion to help customers find beverages and complete orders.

Operational changes: throughput, tools, and store formats

Chief Operating Officer Mike Grams said Starbucks is rebuilding an operating model that can deliver consistent customer experiences as innovation accelerates. He highlighted partner benefits and retention, stating turnover is about half the retail average and listing benefits including competitive pay, healthcare, equity, and 18 weeks of family leave, available for partners working 20 hours per week.

Grams described operational pressure points, including mobile order complexity and throughput not keeping pace with demand, and emphasized pilot-and-scale testing via a “Starting Five” program. He said Green Apron Service pilots in 650 stores have outperformed the broader portfolio in transaction growth by two points. He also discussed several technologies and equipment changes intended to improve service speed and reduce friction:

• Smart Queue, an order sequencing algorithm across café, mobile, drive-thru, and delivery channels. Starbucks said it has prioritized more than 100 million café orders and reduced production time by two minutes.
• Mastrena III, a new proprietary espresso machine that Starbucks plans to begin rolling out in 2027. Grams said it will cut the time to pull four shots in half and double capacity.
• A smaller “shot puller” solution for cold beverages planned for high-demand stores later in the year.
• Green Assist, a generative AI knowledge app for partners trained on Starbucks standards.
• NextGen POS, a proprietary point-of-sale system designed by partners for partners, which Starbucks said can sell 80% of products with two taps and reduce time to POS proficiency from about three months to less than a week.

On store environment, Grams said Starbucks is shifting away from disruptive million-dollar remodels in favor of targeted “uplifts” costing roughly $150,000 per store, typically completed overnight. Niccol separately said Starbucks expects by the end of fiscal 2026 that uplifts will add more than 25,000 seats across the U.S. company-operated portfolio and replace thousands more with more comfortable options.

International strategy and China shift to an asset-light model

Starbucks International CEO Brady Brewer said global away-from-home coffee is growing, citing nearly 8% year-over-year growth, and argued Starbucks is positioned to benefit. He stated Starbucks’ international business includes more than 22,000 coffeehouses in 88 markets outside the U.S. and Canada, representing roughly one-third of global system sales and 20% of total company revenue in fiscal 2025. He added that about 40% of international segment revenue came from China.

Brewer described a strategic shift in China following a joint venture with Boyu, saying Starbucks will move approximately 8,000 China coffeehouses from company-operated to a licensed model, increasing the international mix from roughly 55% licensed to 90% licensed. He said the shift is expected to raise international segment operating margins to the “high teens” immediately once the ownership structure changes in the spring, with potential to exceed 20% by FY28. Brewer also reiterated Starbucks’ long-term view that China could reach 15,000–20,000 coffeehouses, up from about 8,000.

He also highlighted Starbucks’ Channel Development business (packaged coffee, ready-to-drink, and foodservice), saying it serves 300 million occasions per week globally and generated nearly $900 million in operating income in fiscal 2025 with operating margins above 40%.

Financial framework: FY2026 guidance and FY2028 targets

Chief Financial Officer Cathy Smith said Starbucks has invested in more than $500 million of additional coffeehouse labor, coffeehouse uplifts at $150,000 per store, brand marketing, and partner benefits, while also streamlining non-retail G&A and pursuing procurement and supply chain initiatives.

For fiscal 2026, Smith reiterated guidance shared on the prior day’s earnings call, including global comparable sales growth of 3% or better, slightly improving consolidated operating margins year over year with improvement beginning in the back half as the company laps Green Apron Service investments, and EPS guidance of $2.15–$2.40.

For fiscal 2028, Niccol and Smith outlined targets that include:

• Global and U.S. comps of at least 3% over the next three years.
• Net revenue growth of 5% or more in fiscal 2028, including 2%–3% revenue contribution from new stores.
• More than 2,000 net new coffeehouses globally in fiscal 2028, including ramping to about 400 net new U.S. company-operated coffeehouses annually by that time.
• Fiscal 2028 operating margins of 13.5%–15% and EPS of $3.35–$4.00.

Management said the 2028 framework assumes China retail operations are “status quo,” though Smith added that if China moves to the contemplated JV structure, fiscal 2028 EPS would be approximately $0.15 lower. During Q&A, Niccol said Starbucks believes it can eventually “earn back” to 2019 margin levels in the 17%–18% range beyond 2028, contingent on sustained comp performance and continued cost discipline.

Closing the event, Niccol said the company’s turnaround is “ahead of schedule,” pointing to U.S. and global transaction-driven comp growth in the first quarter of 2026 and improved customer connection scores. He described Starbucks’ long-term objective as moving from “Back to Starbucks” to “the best of Starbucks,” with an emphasis on consistent, timely service, relevant innovation, and a stronger in-store experience across café, drive-thru, mobile order, and delivery.

About Starbucks (NASDAQ:SBUX)

Starbucks Corporation is a global coffeehouse chain and roaster that operates, licenses and franchises coffee shops and related retail businesses. Founded in Seattle, Washington in 1971 by Jerry Baldwin, Zev Siegl and Gordon Bowker, the company grew from a single store focused on whole-bean coffee and equipment into a broad consumer-facing brand. Howard Schultz, who joined the company later and served in senior leadership roles, is widely credited with transforming Starbucks into a mass-market specialty coffee retailer and expanding its footprint internationally.

Starbucks’ core activities center on the retail sale of hot and cold specialty beverages, whole-bean and packaged coffees, teas and ready-to-drink products, along with complementary food items and merchandise such as mugs and brewing equipment.