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STARBUCKS CORP (SBUX)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 was operationally mixed with continued turnaround execution: revenue $8.76B (+2% y/y; +3% cc), non-GAAP EPS $0.41 (-40% y/y), and non-GAAP operating margin 8.2% (-460 bps y/y) as labor investments and restructuring weighed on margins .
  • Both revenue and EPS missed Wall Street consensus; EPS $0.41 vs $0.48*, revenue $8.76B vs $8.83B*, while Q1 FY2025 had beaten on both revenue and EPS .
  • Global comps (-1%) improved sequentially (Q1: -4%); U.S. comps (-2%) with -4% transactions and +3% ticket; International comps +2% with China flat comps (+4% transactions, -4% ticket) .
  • Management emphasized progress on “Back to Starbucks” (labor-first throughput, mobile order sequencing, menu simplification, reclaiming third place), with partner turnover <50% and early North America indicators improving; CFO reiterated prudence on forward guidance, noting seasonally normal Q3 top line but declining to provide numeric outlook .
  • Dividend maintained at $0.61/share (payable May 30, 2025) as capital returns continue despite near-term margin compression .

What Went Well and What Went Wrong

What Went Well

  • Early recovery signals: global comps improved sequentially (Q1: -4% → Q2: -1%), Canada returned to positive comps and transaction growth; 8 of top 10 international markets flat-to-positive comps .
  • China stabilization: flat comps with positive transactions and margin expansion; targeted product/value actions (sugar-free beverages, price points) show progress .
  • Turnaround execution: partner engagement up; turnover below 50%; staffing/deployment pilots and mobile sequencing reduced wait times and improved throughput (e.g., average cafe wait times dropped ~2 minutes; ~75% pilot stores meeting “4/4/12” targets) .

Quotes:

  • “My optimism has turned into confidence that our 'Back to Starbucks' plan is the right strategy to turn the business around” — Brian Niccol .
  • “We are developing new muscles to test, iterate and scale quickly” — Cathy Smith .

What Went Wrong

  • Margin compression: non-GAAP operating margin 8.2% (-460 bps y/y) driven by deleverage and added labor; GAAP operating margin 6.9% (-590 bps y/y) including $116M restructuring charges .
  • North America profitability: segment operating margin fell to 11.6% from 18.0% y/y; operating income down 35% y/y .
  • Channel Development pressure: revenue -2% y/y; operating margin -440 bps y/y due to higher product costs and lower JV income .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$8.56 $9.40 $8.76
GAAP Operating Margin (%)12.8% 11.9% 6.9%
Non-GAAP Operating Margin (%)12.8% 11.9% 8.2%
Diluted EPS (Non-GAAP) ($)$0.68 $0.69 $0.41
Net New Stores (Units)364 377 213
Total Stores (Units)38,951 40,576 40,789

Segment breakdown (Net Revenues, Operating Margin):

SegmentMetricQ2 2024Q1 2025Q2 2025
North AmericaNet Revenues ($MM)$6,380.0 $7,071.9 $6,472.7
North AmericaOperating Margin (%)18.0% 16.7% 11.6%
InternationalNet Revenues ($MM)$1,757.3 $1,871.3 $1,867.1
InternationalOperating Margin (%)13.3% 12.7% 11.6%
Channel DevelopmentNet Revenues ($MM)$418.2 $436.3 $409.0
Channel DevelopmentOperating Margin (%)51.7% 47.7% 47.3%

KPIs and Regional Comps:

KPIQ2 2024Q1 2025Q2 2025
Global Comparable Sales (%)—(4)% (1)%
North America Comparable Sales (%)(3)% (4)% (1)%
U.S. Comparable Sales (%)—(4)% (2)%
International Comparable Sales (%)(6)% (4)% 2%
China Comparable Sales (%)(11)% (6)% 0%
U.S. Transactions / Ticket(7)% / +4% (8)% / +4% (4)% / +3%
China Transactions / Ticket(4)% / (8)% (2)% / (4)% +4% / (4)%
U.S. Store Count16,600 17,049 17,122
China Store Count7,093 7,685 7,758

Non-GAAP adjustments (Q2 2025):

  • Restructuring expense: $116.2M; adds 130 bps to operating margin and $0.10 to EPS with a $(0.03) tax effect .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company EPS/Revenue GuidanceFY 2025Guidance suspended (Q4 2024, reiterated Q1 2025) No numeric guidance; CFO learning business; expects Q3 top line to follow normal seasonality Maintained suspension
Dividend per ShareQ2 2025$0.61 declared Feb 2025 $0.61 payable May 30, 2025 (record May 16, 2025) Maintained
G&A / RestructuringQ2 2025Expect Q2 spike; back-half easing (Q1 commentary) Q2 includes corporate restructuring; non-GAAP excludes restructuring; expect efficiencies over time Maintained plan

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Throughput & Mobile SequencingSet “<4 min” standard; pilot mobile sequencing; Siren targeted to top quartile Scaling Green Apron service model to >2,000 stores; sequencing algo in >400 stores; ~2 min cafe wait time reduction; ~75% meeting time targets Accelerating execution
Labor vs EquipmentPrecision staffing added in ~3,000 stores; Siren selective vs universal Emphasis on labor-first model; paused cold press rollout; equipment only for specific high-volume needs Shift to OpEx over CapEx
Pricing & ValueRemoved non-dairy upcharge; intent not to raise prices FY25; cut discounts, broaden marketing Maintain 2025 no price increases; app price transparency; build value via experience Consistent; value messaging strengthening
Third Place & Cafe ExperienceReintroduce ceramic mugs, condiment bars, seating; design standards refresh Positive customer feedback; expanded free refill policy; cafe “premium craft” uplift in NY/SoCal ahead Positive reception; rollout continuing
International & ChinaExplore partnerships; China highly competitive; Q1 China comps -6% China comps flat; +4% transactions; margin expansion; localized marketing/product Stabilizing
Tariffs & Coffee CostsAnticipated Q2 EPS pressure ~$0.01 from coffee; coffee 10–15% of product/distribution costs Active tariff mitigation; supply chain localization; coffee costs managed via hedging Managed risk
MarketingShift from discounts to brand-building; near doubling marketing % of revenue, net neutral Brand first-choice at 2-year high; non-Rewards transactions improving; linear/social momentum Improving brand metrics

Management Commentary

  • Strategic focus: “We’re building back a better business… test, iterate and scale quickly” — CFO Cathy Smith .
  • Turnaround momentum: “Our turnaround is on track, and I see more opportunity than I imagined” — CEO Brian Niccol .
  • Operating model: “Investments in labor rather than equipment are more effective at improving throughput” — CEO .
  • Capital allocation: Commitment to BBB+/Baa1 rating, dividends; pursue zero-based budgeting to find offsets — CFO .

Q&A Highlights

  • Labor-first throughput: Management prioritizes staffing/deployment and sequencing algorithms over heavy equipment rollouts; aim to scale to >3,000 stores by year-end .
  • Margin trajectory: North America margin headwinds largely labor/deleverage; recovery expected as traffic returns and efficiencies fund investments .
  • Portfolio discipline: Slower near-term unit growth to reset build/reno costs and design, then re-accelerate; long-term goal to double U.S. store count with better unit economics .
  • Pricing stance: No price increases in FY2025; 2026 pricing TBD with preference to use growth/efficiencies over price .
  • Tariffs/coffee: Active mitigation; coffee cost is 10–15% of product/distribution costs; hedging smooths volatility .

Estimates Context

MetricQ2 2024Q1 2025Q2 2025
EPS Consensus Mean ($)0.80*0.667*0.484*
EPS Actual ($)0.68 0.69 0.41
Revenue Consensus Mean ($MM)9,157.2*9,306.9*8,833.9*
Revenue Actual ($MM)8,563.0 9,397.8 8,761.6
  • Q2 FY2025: EPS miss (0.41 vs 0.484*), revenue miss ($8.76B vs $8.83B*). Q1 FY2025: EPS/revenue beat. Q2 FY2024 had misses on both EPS and revenue.
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term EPS pressure consistent with plan: Q2 non-GAAP EPS $0.41 reflects deliberate labor investments and restructuring; expect gradual improvement as throughput gains translate to transactions and leverage .
  • Early KPI recovery is credible: sequential comps improvement, Canada/International strength, and China stabilization support the turnaround narrative; watch U.S. morning daypart and mobile sequencing rollout cadence for signal of sustained traffic recovery .
  • Margin path hinges on balance of labor and efficiencies: management is using zero-based budgeting and supply chain optimization to offset labor; monitor North America margin inflection as deployment scales .
  • Capex discipline and design reset should improve ROIC: slower near-term unit growth to reduce build/reno costs, then re-accelerate with better unit economics; supportive of medium-term multiple expansion if execution holds .
  • China is shifting from headwind to neutral: flat comps with positive transactions and margin expansion are constructive; localized product/value actions reduce risk of further downside .
  • Trading implications (short-term): Q2 miss vs consensus and margin compression are likely overhangs; however, improving sequential comps and clear operational milestones could catalyze sentiment if Q3 updates validate throughput-driven transaction gains .
  • Medium-term thesis: A labor-first, experience-led model with disciplined cost offsets and targeted equipment investments can restore profitable growth; dividends maintained provide carry while operational KPIs normalize .