Starbucks leans on a $2 billion savings push as margins rebound and FY26 EPS outlook rises

Starbucks is betting that tighter spending will help convert improved sales into steadier profit growth. In its fiscal 2026 second-quarter update, the company reported expanding operating margins and raised its non-GAAP earnings-per-share (EPS) outlook for the full year to a range of $2.25 to $2.45. Non-GAAP EPS is the company’s earnings-per-share figure after excluding certain items management says obscure underlying performance. Starbucks has been restructuring and investing in its “Back to Starbucks” turnaround plan, and the latest results suggest cost discipline is starting to show up as the turnaround gains momentum.

The quarter’s topline progress was led by comparable store sales, a key metric that tracks sales at existing locations. Global comparable store sales rose 6.2% in the quarter ended March 29, 2026, driven by a 3.8% increase in comparable transactions and a 2.3% rise in average ticket. North America comparable sales increased 7.1%, with U.S. comparable sales also up 7.1%. International comparable sales grew 2.6%, including China comparable sales up 0.5%. Consolidated net revenues rose 9% to $9.5 billion, according to Starbucks’ filing and results materials.

On the bottom line, Starbucks said GAAP operating margin expanded 180 basis points year over year to 8.7%, while non-GAAP operating margin climbed 120 basis points to 9.4%. The company attributed the margin improvement mainly to sales leverage, and lower store operating and depreciation and amortization costs after classifying assets related to Starbucks retail operations in China as held for sale. It also pointed to investments tied to “Back to Starbucks” as a partially offsetting factor in the cost base. In the same release, CFO Cathy Smith said the combination of comparable sales growth and cost discipline is beginning to show up in margins.

The savings plan at the center of the debate is a gross, multi-year cost initiative that Starbucks says is designed to support earnings as growth stabilizes. In an earnings call transcript, management reiterated that it remains on track with its $2 billion cost savings plan. Company executives described the $2 billion as gross savings expected to be realized through fiscal 2028, balanced across product and distribution costs, operating expenses (OpEx), and general and administrative costs (G&A). They also said the near-term visibility of the savings is most likely to appear in G&A, because realized savings across the profit and loss statement are being offset by strategic investments in “Back to Starbucks.”

Starbucks’ fiscal 2026 guidance also embeds assumptions about the shape of the China business and where the margin will come from. The company said its full-year guidance assumes a joint venture licensing structure in China in the second half of fiscal 2026, with China-related revenues expected to be less than 20% of what they would have been reported previously under a company-operated model. Management also forecast slightly improving consolidated operating margins, supported by sales leverage over the next two quarters and by the margin effects expected from the China licensing structure. It also reaffirmed a target to open approximately 600 to 650 net new coffeehouses globally across company-operated and licensed businesses.

The question for investors is whether cost savings can accelerate EPS growth without undermining the turnaround’s customer and labor investments. Starbucks guided to global and U.S. comparable store sales growth of 5.0% or greater, consolidated net revenues roughly flat year over year, and non-GAAP operating margin to slightly improve. The company’s latest quarter showed margin improvement alongside comparable store sales growth, and management framed the sequence of the turnaround as first improving topline, then driving earnings growth. Whether the $2 billion plan meaningfully raises the slope of EPS versus revenue will likely depend on how quickly sales leverage continues and how inflationary pressure interacts with wage and input costs.

Still, not everything is spelled out in public materials. Starbucks did not fully break down the $2 billion savings plan by line item, timeline, or percentage contribution across product and distribution costs, OpEx, and G&A in the transcript excerpt. It also did not disclose the expected magnitude of savings timing within fiscal 2026 versus later years beyond stating that realization is expected through fiscal 2028. In addition, some margin movements in the quarter were affected by accounting classification tied to China assets held for sale, which may not repeat the same way each quarter. As a result, near-term EPS results may reflect a mix of operational progress and discrete factors.