Sign in

    Starbucks Corp (SBUX)

    Q1 2025 Earnings Summary

    Reported on Feb 7, 2025 (After Market Close)
    Pre-Earnings Price$100.41Last close (Jan 28, 2025)
    Post-Earnings Price$102.70Open (Jan 29, 2025)
    Price Change
    $2.29(+2.28%)
    • Starbucks plans to double its U.S. store count, indicating significant growth potential in the domestic market. The CEO highlighted the opportunity to execute smaller formats that deliver great seating and partner experience, opening up new trade areas. The company has seen tremendous success in states like Texas and the Southeast, with new stores opening with great economics.
    • Strategic shift from discounting to broader marketing efforts is driving sales improvements, particularly among non-Starbucks Rewards customers. By reducing discounts and increasing broad-based marketing, Starbucks has seen growth in the morning daypart and a return of non-Rewards customer traffic to levels from a year ago. This approach has strengthened ticket and overall revenue.
    • Investments in labor and operational efficiencies are expected to drive traffic and margin expansion. Starbucks is adding additional staffing hours to improve the partner and customer experience, which has shown positive responses in stores. The company is also focusing on driving efficiencies both in-store and out-of-store, yielding savings of approximately 150 basis points in Q1. These initiatives are expected to balance investments and lead to margin expansion over time.
    • Increased expenses and margin pressure: Starbucks expects EPS to be lowest in Q2 due to seasonality, organizational restructuring charges, and elevated investments, with year-over-year pressure intensifying. General and administrative expenses are projected to be higher as a percentage of revenue for fiscal year 2025, which will pressure margins in the near term. ,
    • Operational challenges with mobile ordering: The lack of sequencing in mobile orders is causing bottlenecks and congestion in stores, leading to customer dissatisfaction and potentially impacting sales. The company acknowledges it currently lacks effective measurement systems to track wait times and operational improvements, which may delay efficiency gains. ,
    • Risks associated with aggressive store expansion: The plan to double the U.S. store count could lead to market saturation and cannibalization, potentially diluting the brand's premium positioning and impacting pricing power and profitability. Concerns were raised about balancing extensive distribution with maintaining current price points. ,
    MetricYoY ChangeReason

    Total Revenue

    **-0.3% **

    Primarily driven by a 2% global comparable store sales decline (stemming from lower transactions), which outweighed the benefit of net new store growth (7% YoY) and prior-year pricing actions. Unfavorable foreign currency and a cautious consumer environment also contributed to the decline.

    Beverage

    **-0.3% **

    Influenced by soft traffic (despite slightly higher average ticket), as well as intensified competition in key markets. Ongoing promotional adjustments from the previous fiscal period, including fewer discount-driven offers, further impacted overall beverage volume.

    Food

    **+1.9% **

    Benefited from expanded dayparts (e.g., lunch), menu simplification efforts, and steady breakfast demand, offset partially by reduced store traffic compared to the prior year. Continued operational improvements also supported modest growth year over year.

    Other

    **-2.2% **

    Primarily reflects lower miscellaneous revenues and continued impacts from product SKU optimization. The sale of Seattle’s Best Coffee in the previous fiscal period also contributed to a reduced “Other” revenue base, creating a less favorable YoY comparison.

    North America

    **-0.7% **

    A 2% decline in comparable store sales—driven by softer traffic—offset the contribution from net new store openings. Higher labor and promotional costs persisted from the prior year, while pricing actions in previous quarters provided only partial relief to revenue growth.

    International

    **+1.4% **

    Reflects net new store growth and market expansion in regions outside the U.S., offset by unfavorable foreign currency and a 4% decline in comparable store sales in certain markets. China’s performance remained under pressure due to heightened competition and cautious consumer spending.

    Corporate & Other

    **+78% **

    Growth partly due to higher technology-related revenues and other corporate initiatives coming off lower prior-year results. Incremental investments in corporate infrastructure and partner programs continue to pressure profitability, despite the revenue uptick in this segment.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    EPS

    Q2 2025

    no prior guidance

    Expected to be lowest in Q2 2025 due to seasonality, restructuring, and investments; pressured by ~$0.01

    no prior guidance

    Coffee Price Impact

    Q2 2025

    no prior guidance

    ~$0.01 negative impact on EPS net of hedge gains

    no prior guidance

    G&A Expenses

    Q2 2025

    no prior guidance

    Spike in G&A as a percentage of revenue due to restructuring charges

    no prior guidance

    G&A Expenses

    FY 2025

    no prior guidance

    Expected to be higher than prior year due to lower performance-based compensation

    no prior guidance

    1. Productivity and Margin Expansion
      Q: Do you still see $4B productivity opportunity by 2028?
      A: Rachel Ruggeri stated they continue to focus on efficiencies both in-store and in supply chain, achieving about 150 basis points of margin expansion this quarter due to efficiency. However, they are not sticking to the $4 billion figure and are working through the right level of efficiencies for future margin expansion.

    2. Store Expansion and Format Strategy
      Q: How will you double U.S. store count?
      A: Brian Niccol expressed confidence in doubling the U.S. store count by utilizing flexible store formats—including small, medium, and large sizes—that deliver the Starbucks experience. Success in markets like Texas and the Southeast with these formats supports this growth potential.

    3. Organizational Restructuring and G&A Impact
      Q: What changes are you making to support organization?
      A: Starbucks is creating roles like Chief Store Officer and Chief Development Officer to drive accountability in key business lines. They expect a spike in G&A in Q2 due to restructuring, with some savings starting in Q4, but G&A as a percentage of revenue will be higher this year.

    4. Operational Improvements and Mobile Order Sequencing
      Q: Can you quantify operational improvements and 4-minute handover?
      A: Brian Niccol explained that bottlenecks are due to mobile orders lacking sequencing. They're piloting an algorithm in 3 stores to smooth mobile order rushes, resulting in improved financial performance and higher partner and customer satisfaction.

    5. Partner Investments and Staffing Levels
      Q: How are you assessing staffing and investments needed?
      A: Starbucks added additional labor hours to 3,000 stores based on precision staffing models and is piloting in 700 stores to understand the optimal labor model. While there's a near-term unfavorable impact, they expect these investments to drive traffic and be accretive long-term.

    6. Marketing Strategy and Spend
      Q: What's the plan for marketing spend in 2025?
      A: Starbucks is reallocating dollars from discounting to brand-building marketing efforts. Marketing spend as a percentage of revenue is increasing, close to doubling, but overall net revenue has increased due to reduced discounts.

    7. Menu Simplification and Daypart Strategy
      Q: Will you have different AM and PM menu offerings?
      A: They're simplifying the menu by reducing items by about 30% to focus on speed and core offerings. Digital menu boards allow flexibility to adjust merchandising between dayparts, providing appropriate offerings for morning and afternoon.

    8. Attracting Younger Customers and Menu Strategy
      Q: How are you drawing younger customers back?
      A: Starbucks is broadening its reach across all age groups by offering appealing drinks like matcha lattes and cold beverages. They're seeing progress with younger customers through smart flavors in tea and cold drinks.

    9. Promotion Strategy and Impact on Ticket
      Q: What's the impact of fewer promotions on ticket?
      A: Ticket in North America grew over 4%, benefiting from annualized pricing and fewer discounts. The shift from discounts to broad-based marketing is helping reach a broader customer base, strengthening ticket and overall proposition.

    10. Siren System Implementation and Store Processes
      Q: Why only implement Siren System in top stores?
      A: Most stores don't require additional capacity; achieving the 4-minute handover is about process and sequencing. The Siren System is needed only in the highest volume stores; others can improve throughput with the right processes and algorithms.