STARBUCKS CORP (SBUX)·Q1 2025 Earnings Summary

Executive Summary

• Q1 FY25 revenue was $9.398B, flat year over year; EPS was $0.69, down 23%, with operating margin contracting 390 bps to 11.9% as the company invested in “Back to Starbucks” (labor, hours, benefits) and removed nondairy upcharges .
• Global comps fell 4% (transactions −6%, ticket +3%); U.S. comps −4% (transactions −8%, ticket +4%); China comps −6% (ticket −4%, transactions −2%) as early actions prioritized quality of experience over discounting .
• Management pivoted from discounting (40% fewer discounted transactions) to brand marketing, simplified holiday offerings, and announced ~30% menu SKU reduction by FY25 year-end; algorithms and digital menu boards aim to reach a 4‑minute handoff target and reduce mobile-order bottlenecks .
• Guidance remains suspended; CFO signaled Q2 EPS is the trough (seasonality, restructuring charges), with sequential and YoY EPS improvement in 2H FY25; $0.61 quarterly dividend declared continues capital return .

What Went Well and What Went Wrong

• What Went Well

  • Non-Rewards traffic grew q/q; Starbucks Rewards membership rose to 34.6M (+1% YoY, +2% q/q). U.S. category share among QSRs recovered; early signs that brand/experience-led marketing is resonating .
  • Operational efficiencies delivered ~150 bps savings in Q1 (in-store stability and supply chain sourcing/recalibration) to help fund investments .
  • Channel Development margin expanded 90 bps to 47.7% on mix and lower product costs in the Global Coffee Alliance, despite revenue declining 3% .

• What Went Wrong

  • Global comps −4% with U.S. −4% and China −6%; holiday promotions underperformed as the company reduced discount frequency to reframe the brand proposition .
  • Consolidated operating margin fell 390 bps to 11.9% (NA margin −470 bps to 16.7%) on deleverage, wage/benefit/hour investments, and nondairy price parity; only partly offset by pricing and efficiencies .
  • EPS declined 23% to $0.69; management expects the most pressure in Q2 (lowest EPS) due to seasonality, restructuring (G&A spike), and elevated investments before improving in 2H FY25 .

Financial Results

Headline P&L (oldest → newest)

Q1 FY25 YoY deltas (vs Q1 FY24)

Segment performance (oldest → newest)

KPIs and operating metrics (oldest → newest)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We started by reducing the frequency of discount-driven offers, resulting in 40% fewer discounted transactions year-over-year… We also removed the extra charge for nondairy milk customizations” — Brian Niccol .
• “We’re positioning the business to achieve our 4-minute throughput goal… order sequencing creates more of a bottleneck than capacity” — Brian Niccol .
• “These additional [labor] hours, coupled with wage and benefit rate increases, resulted in a 180 bps margin pressure in the North America segment… nondairy [parity] an impact of 60 bps… efficiencies yield ~150 bps savings in Q1” — Rachel Ruggeri .
• “EPS is expected to be the lowest in Q2… with sequential and year-over-year improvement in the latter half of fiscal year 2025” — Rachel Ruggeri .

Q&A Highlights

• Marketing mix shift: Dollars moved from discounts to “working” brand dollars; marketing as % of revenue increasing (near doubling), but offset by lower discounting; net promotional spend broadly neutral YoY .
• Operations/throughput: Mobile-order sequencing is the primary bottleneck; pilots show promise; Siren system to be targeted to top-quartile volume stores rather than broad rollout .
• Support org restructuring: G&A to spike in Q2 due to restructuring/severance, with some savings in Q4; overall FY25 G&A higher YoY due to lapping lower performance-based comp .
• Store growth: U.S. TAM could support a doubling of stores over time using flexible formats (drive-thru/café/smaller footprints) with strong new unit economics in TX/Southeast .
• Coffee/Channel implications: Coffee price volatility a ~$0.01 EPS headwind in Q2 and a volume/profitability risk to Channel Development, even with pass-through pricing .

Estimates Context

• Wall Street consensus (S&P Global) for Q1 FY25 revenue/EPS and near-term periods was unavailable due to SPGI daily request limits; as a result, we cannot present “vs consensus” comparisons for this quarter. Given management’s outlook (Q2 trough EPS, restructuring costs and continued investments), street models may need to reflect lower Q2 and a back-half recovery trajectory .
• Note: S&P Global consensus values were unavailable at time of analysis.

Key Takeaways for Investors

• Near-term margin/EPS pressure is deliberate: labor/hour investments, nondairy price parity, and reduced discounting are weighing on Q1 and will weigh more in Q2, but are intended to rebuild brand equity and traffic; efficiencies (150 bps in Q1) help fund this .
• Execution is the catalyst: Success of the mobile-order sequencing algorithm and 4‑minute handoff target (plus digital menu boards and simplified menus) is the operational swing factor for traffic and margin throughput .
• Marketing reset: Shifting from discounting to brand/experience ads (and writing on cups, condiment bars, “for-here” service) supports premium positioning and could sustain ticket while rebuilding frequency, especially in morning daypart .
• China stabilization is key: China comps improved from −14% to −6%; leadership transitions and potential partnerships present upside if stabilization continues .
• Channel Development quality over volume: Margin is resilient, but coffee price volatility and pressured consumer may weigh on volumes; watch GCA dynamics and RTD momentum .
• 2H inflection watch: With Q2 as the trough and some G&A savings emerging in Q4, sequential EPS recovery in 2H FY25 is the next proof point; dividend continuity underscores balance sheet strength .
• Long-term optionality: U.S. unit expansion runway (formats, regions) and a refocused premium coffeehouse strategy set the stage for renewed growth if execution progresses as planned .

Management and Press Release Cross-References:

• Q1 FY25 headline metrics and comps .
• Segment details .
• Q3/Q4 trend baselines .
• Dividend and company updates .