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STARBUCKS CORP (SBUX)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 revenue of $9.46B grew 3.8% YoY (3.2% cc) and modestly beat consensus, but EPS of $0.50 (non-GAAP) fell 46% YoY, reflecting deleverage, added labor for “Back to Starbucks,” and a discrete tax item; management quantified a ~$0.11 EPS headwind from Leadership Experience 2025 and the tax item .
  • Global comps declined 2% (transactions -2%, ticket +1%); U.S. comps -2% (transactions -4%, ticket +2%); International flat; China +2% comps on +6% transactions; net new stores +308 to 41,097 .
  • Segment mix showed North America operating margin down to 13.3% (from 21.0% YoY), International at 13.6% (from 15.6%), and Channel Development at 45.1% (from 53.7%), highlighting broad margin compression .
  • Call tone: turnaround progressing ahead of schedule; accelerated rollout of Green Apron Service mid‑August, Smart Queue deployment, and portfolio “uplifts” set up 2026 innovation wave (protein cold foam, reimagined Rewards, new prototypes); no formal numeric guidance, conservative near‑term view given macro/ticket dynamics .

What Went Well and What Went Wrong

What Went Well

  • China returned to positive comps (+2%) on +6% transactions driven by product innovation and pricing changes; International revenue topped $2B for the first time, with seven of top ten markets comping positively .
  • Operational pilots showed improved speed and transaction capture: Smart Queue cut in‑café times to under four minutes for 80% of orders and drive‑thru under four minutes; peak transaction comps improved; non‑Rewards traffic grew YoY for the first time since post‑pandemic .
  • Brand and customer value perception improved, with stronger marketing resonating and reduced reliance on discounts; ticket grew in U.S. (+2%) amid fewer discounted transactions .

What Went Wrong

  • EPS and margins missed investor expectations: GAAP operating margin fell 680 bps YoY to 9.9% and non‑GAAP to 10.1% given deleverage, added labor, Leadership Experience 2025, and inflation; GAAP EPS down 47% YoY .
  • North America margin contracted sharply (13.3% vs 21.0% YoY) amid traffic declines (U.S. transactions -4%) and licensee softness (grocery/retail) .
  • Effective tax rate jumped to 31.8% (vs 24.8% prior year) primarily due to discrete changes in indefinite reinvestment assertions for certain foreign entities (~850 bps), further pressuring EPS .

Financial Results

Consolidated Performance vs Prior Quarters

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$9.40 $8.76 $9.46
GAAP EPS ($)$0.69 $0.34 $0.49
Non-GAAP EPS ($)—$0.41 $0.50
GAAP Operating Margin (%)11.9% 6.9% 9.9%
Non-GAAP Operating Margin (%)—8.2% 10.1%

Actuals vs S&P Global Consensus

MetricQ1 2025Q2 2025Q3 2025
EPS Consensus Mean ($)0.667*0.484*0.645*
EPS Actual ($)0.69 0.41 0.50
Revenue Consensus Mean ($USD Billions)9.31*8.83*9.30*
Revenue Actual ($USD Billions)9.40 8.76 9.46
Values retrieved from S&P Global.*

Q3: Revenue beat, EPS missed. Q2: Revenue and EPS both missed. Q1: EPS modestly beat, revenue near‑inline .

Segment Breakdown (Q3 FY25 vs Q3 FY24)

SegmentNet Revenues ($MM) Q3 FY24Net Revenues ($MM) Q3 FY25YoY %Operating Income ($MM) Q3 FY24Operating Income ($MM) Q3 FY25Operating Margin Q3 FY24Operating Margin Q3 FY25
North America$6,816.7 $6,927.0 +2% $1,432.7 $918.7 21.0% 13.3%
International$1,842.1 $2,010.7 +9% $287.5 $272.7 15.6% 13.6%
Channel Development$438.3 $483.8 +10% $235.2 $218.4 53.7% 45.1%

KPIs and Operating Data

KPIQ1 2025Q2 2025Q3 2025
Global Comparable Store Sales-4% -1% -2%
North America Comparable Sales-4% -1% -2%
U.S. Comparable Transactions-8% -4% -4%
International Comparable Sales-4% +2% 0%
China Comparable Sales-6% 0% +2%
Net New Stores (Quarter)+377 +213 +308
Total Stores (End of Quarter)40,576 40,789 41,097

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Financial GuidanceFY25/Q4None providedNo formal numeric guidance; management conservative on U.S. near‑term trajectory; expect normal Q4 seasonality; focus on rolling out Green Apron Service and managing cost structure .Maintained “no formal” guidance; qualitative caution
Tariffs/Coffee CostsFY25–FY26Not quantifiedCoffee prices moderating; increased coverage; moving average coffee costs and tariff impacts to lag market; YoY coffee cost increases expected to peak in 1H FY26 .Informational update
DividendQ3 FY25Prior dividend cadenceDeclared $0.61 per share payable Aug 29, 2025; 61 consecutive quarters of dividends .Maintained payout

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY25)Previous Mentions (Q2 FY25)Current Period (Q3 FY25)Trend
Operational turnaround/Green ApronBack to Starbucks defined; labor, service standards; non‑dairy upcharge removed .Piloted staffing and Smart Queue; decision to emphasize OpEx over CapEx; paused certain equipment rollouts; Green Apron to 2,000+ stores by YE .Accelerated Green Apron rollout mid‑Aug across U.S.; pilots show faster service and better transactions .Momentum improving
Supply chain/out‑of‑stocksHigh‑level mention of efficiencies .Efficiency focus and menu simplification .Targeting reduced out‑of‑stocks; item availability improving in pilots .Improving
Tariffs/macroGeneral caution in forward‑looking statements .Active mitigation; holiday sourcing shifts; coffee hedging; avoiding price increases in FY25 .Tariff exposure mitigated; coffee prices moderating; costs to peak 1H FY26; conservative near‑term U.S. outlook .Managed risk; cautious near term
Product/menu innovationMatcha reformulation; Cortado; fresh baked tests abroad .Building platforms; digital menu boards; afternoon apertivo exploration .Protein cold foam in late Q4; reimagined baked case; 1971 dark roast; coconut water beverages tests; 2026 Rewards/app overhaul .Pipeline building; 2026 wave
Digital/Rewards34.6M 90‑day active members .App pickup scheduling; pricing transparency; reducing discounting .Non‑discounted transactions up; Rewards to be reimagined to tailor engagement vs discounting .Improving quality of sales
Regional performanceU.S. comps -4% Q1 .Canada positive comps; U.K. gains; Japan strong; China flat comps .China +2% comps; International revenue >$2B; Canada strong .International strengthening

Management Commentary

  • “It’s clear Back to Starbucks is the right plan… We are building a better Starbucks… stronger, more resilient, and consistently growing” — Brian Niccol (CEO) .
  • “In 2026, we'll unleash a wave of innovation… We're building back a better Starbucks experience and a better business” — Brian Niccol (CEO) .
  • “We made a significant non‑recurring investment in our Leadership Experience 2025 and also incurred a discrete tax item, which in the aggregate, negatively impacted Q3 EPS by $0.11” — Cathy Smith (CFO) .
  • “We will invest over $500,000,000 of additional labor hours into our U.S. company‑operated portfolio over the next year… beginning with our Green Apron Service rollout in mid‑August” — Cathy Smith (CFO) .

Q&A Highlights

  • Labor investment and offsets: ~$500M incremental labor hours planned; broad cost structure reset (COGS, OpEx, G&A) to offset and support margins in 2026–2028 .
  • Margin trajectory: 2019 profitability seen as a guidepost with aspiration to reach/exceed over time, contingent on top‑line growth and cost discipline; investor day slated for early 2026 .
  • Green Apron rollout: Full U.S. deployment starting mid‑August; assistant store manager expansion part of roster strategy .
  • China strategy: Evaluating strategic partner to capture growth while retaining meaningful stake; strong brand momentum and comp recovery .
  • Pricing stance: Price is the last lever; intent not to raise prices in FY25; app to improve price transparency .

Estimates Context

  • Q3 FY25 EPS missed consensus ($0.50 vs $0.645*) on deleverage, labor investments, and discrete tax; revenue beat ($9.46B vs $9.30B*) as store growth and International strength offset U.S. traffic declines .
  • Given conservative near‑term U.S. posture and margin investments, near‑term EPS estimates may drift lower, while revenue can remain resilient with International momentum and fall seasonal strength (PSL) .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue resilience, EPS pressure: Mix of International growth and store expansion is offsetting U.S. traffic, but margins/ETR are constraining EPS; expect EPS normalization only as operational improvements scale .
  • Turnaround execution is the catalyst: Accelerated Green Apron Service, Smart Queue, and portfolio “uplifts” are tangible levers to drive transaction recovery; watch U.S. morning daypart and non‑Rewards traffic trends .
  • China stabilization improving optionality: Positive comps with transaction growth and potential strategic partnership could de‑risk growth and improve local execution .
  • Margin recovery is multi‑year: Management frames 2019 margin as a guidepost; near‑term margins pressured by deliberate labor investments; look for 2026–2028 cost actions and scaling benefits .
  • Dividend sustained: $0.61/share declared and 61 consecutive quarters underscore commitment to shareholder returns amid turnaround .
  • Risk watch: Tariff exposure outside green coffee mitigated; coffee costs moderating with hedges; macro uncertainty tempers near‑term U.S. trajectory .
  • Trade setup: Near‑term reactions likely driven by EPS miss vs revenue beat; medium‑term rerating hinges on visible U.S. traffic inflection and margin stabilization as operational changes scale into 2026 .