Starbucks(SBUX) - 2025 Q3 - Quarterly Results

Q3 Fiscal Year 2025 Earnings Overview The company reported mixed Q3 FY2025 results with revenue growth overshadowed by declining comparable sales and profitability Executive Summary and Strategic Commentary Starbucks reported a 4% revenue increase to $9.5 billion, though global comparable sales declined 2% and GAAP EPS fell 47% amid strategic investments - CEO Brian Niccol stated that the 'Back to Starbucks' strategy is ahead of schedule, with innovation planned for 2026 to fuel growth and elevate customer service[4] - CFO Cathy Smith noted that Q3 EPS was negatively impacted by $0.11 due to a significant non-recurring investment in Leadership Experience 2025 and a discrete tax item[5] - The company opened 308 net new stores in Q3, ending the period with 41,097 stores globally, with 61% located in the U.S. and China[6] Q3 FY2025 Consolidated Financial Highlights | Metric | Value | Change YoY | | :--- | :--- | :--- | | Consolidated Net Revenues | $9.5 billion | +4% | | Global Comparable Store Sales | -2% | - | | Global Comparable Transactions | -2% | - | | Global Average Ticket | +1% | - | | GAAP EPS | $0.49 | -47% | | Non-GAAP EPS | $0.50 | -46% | | GAAP Operating Margin | 9.9% | -680 bps | | Non-GAAP Operating Margin | 10.1% | -660 bps | | Effective Tax Rate | 31.8% | +700 bps | Segment Performance Analysis The analysis reveals varied performance across segments, with revenue growth in all areas but contractions in operating margins for most North America Segment Results North America net revenues grew 2% to $6.9 billion, but comparable store sales declined 2% and operating margin contracted significantly - Operating margin contraction was primarily driven by deleverage, investments in support of 'Back to Starbucks' (including additional labor and the Leadership Experience 2025), and inflation[8] Q3 FY2025 North America Segment Performance | Metric | Q3 FY25 | Q3 FY24 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $6,927.0M | $6,816.7M | +2% | | Comparable Store Sales | (2)% | (2)% | 0% | | Change in Transactions | (3)% | (6)% | +3% | | Change in Ticket | 1% | 3% | -2% | | Operating Income | $918.7M | $1,432.7M | (36)% | | Operating Margin | 13.3% | 21.0% | (770) bps | International Segment Results International net revenues grew 9% to $2.0 billion with flat comparable sales, while operating margin contracted due to promotional activity - China comparable store sales increased 2%, driven by a 6% increase in comparable transactions, partially offset by a 4% decline in average ticket[6] - Operating margin contracted primarily due to increased promotional activity[10] Q3 FY2025 International Segment Performance | Metric | Q3 FY25 | Q3 FY24 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $2,010.7M | $1,842.1M | +9% | | Comparable Store Sales | 0% | (7)% | +7% | | Change in Transactions | 1% | (3)% | +4% | | Change in Ticket | (1)% | (4)% | +3% | | Operating Income | $272.7M | $287.5M | (5)% | | Operating Margin | 13.6% | 15.6% | (200) bps | Channel Development Segment Results Channel Development net revenues rose 10% to $483.8 million, though operating margin contracted sharply due to joint venture income decline - Revenue increase primarily due to an increase in revenue in the Global Coffee Alliance[11] - Operating margin contraction was primarily driven by a decline in North American Coffee Partnership joint venture income, mix shift, and higher global product costs[12] Q3 FY2025 Channel Development Segment Performance | Metric | Q3 FY25 | Q3 FY24 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $483.8M | $438.3M | +10% | | Operating Income | $218.4M | $235.2M | (7)% | | Operating Margin | 45.1% | 53.7% | (860) bps | Corporate and Other Results The Corporate and Other segment saw a 105.4% revenue increase to $34.5 million, but its operating loss widened by 8.3% Q3 FY2025 Corporate and Other Segment Performance | Metric | Q3 FY25 | Q3 FY24 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $34.5M | $16.8M | +105.4% | | Operating Loss | $(474.2)M | $(437.9)M | +8.3% | Financial Statements The financial statements detail revenue growth alongside significant declines in operating income, net earnings, and operating cash flow Consolidated Statements of Earnings Q3 FY2025 earnings show a 3.8% revenue increase but a 38.3% drop in operating income and a 47.1% decrease in net earnings Q3 FY2025 Consolidated Statements of Earnings (Key Figures) | Metric | Q3 FY25 (Millions) | Q3 FY24 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Net Revenues | $9,456.0 | $9,113.9 | +3.8% | | Total Operating Expenses | $8,577.5 | $7,670.3 | +11.8% | | Operating Income | $935.6 | $1,517.5 | (38.3)% | | Net Earnings Attributable to Starbucks | $558.3 | $1,054.8 | (47.1)% | | Diluted EPS | $0.49 | $0.93 | (47.3)% | YTD FY2025 Consolidated Statements of Earnings (Key Figures) | Metric | YTD FY25 (Millions) | YTD FY24 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Net Revenues | $27,615.4 | $27,102.3 | +1.9% | | Operating Income | $2,658.4 | $4,101.9 | (35.2)% | | Net Earnings Attributable to Starbucks | $1,723.2 | $2,851.7 | (39.6)% | | Diluted EPS | $1.51 | $2.51 | (39.8)% | Consolidated Balance Sheets The balance sheet as of June 29, 2025, shows growth in total assets and liabilities, resulting in a total shareholders' deficit of $(7.7) billion Consolidated Balance Sheet Highlights | Metric | Jun 29, 2025 (Millions) | Sep 29, 2024 (Millions) | | :--- | :--- | :--- | | Total Assets | $33,649.2 | $31,339.3 | | Total Liabilities | $41,327.8 | $38,780.9 | | Total Shareholders' Deficit | $(7,686.0) | $(7,448.9) | | Cash and Cash Equivalents | $4,172.6 | $3,286.2 | | Current Portion of Long-Term Debt | $2,748.2 | $1,248.9 | Consolidated Statements of Cash Flows Year-to-date operating cash flow decreased to $3.4 billion, while financing cash usage fell due to debt issuance and no stock repurchases - Net cash used in financing activities decreased significantly due to $1,748.5 million net proceeds from long-term debt issuance and no common stock repurchases in FY25 YTD, compared to $1,266.7 million repurchases in FY24 YTD[33] YTD FY2025 Consolidated Cash Flow Highlights | Metric | YTD FY25 (Millions) | YTD FY24 (Millions) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $3,365.7 | $4,560.0 | | Net Cash Used in Investing Activities | $(2,094.9) | $(1,849.5) | | Net Cash Used in Financing Activities | $(365.2) | $(3,073.7) | | End of Period Cash and Cash Equivalents | $4,172.6 | $3,179.1 | Corporate Information and Outlook This section covers recent corporate actions, strategic initiatives, forward-looking statements, and key performance metrics Company Updates and Strategic Initiatives Starbucks details a $1.75 billion bond issuance, key leadership appointments, strategic investments, and its quarterly dividend - Completed a $1.75 billion bond issuance in May for general corporate purposes, including repayment of upcoming debt maturities[18] - Mike Grams was appointed Chief Operating Officer in June, as part of organizational changes to accelerate the 'Back to Starbucks' strategy[18] - Hosted Leadership Experience 2025 for over 14,000 coffeehouse leaders, expanding the Assistant Store Manager Role across U.S. company-operated stores and aiming to hire 90% of retail leaders internally[18] - Declared a cash dividend of $0.61 per share, payable on August 29, 2025, marking 61 consecutive quarters of dividend payouts[18] Forward-Looking Statements and Risk Factors The report outlines forward-looking statements and associated risks including brand perception, competition, and supply chain disruptions - Forward-looking statements involve risks, uncertainties, and other factors that could cause actual results to differ materially from current expectations or projections[17] - Key risk factors include the ability to preserve and leverage brands, impact of marketing strategies, costs and execution of business initiatives (including 'Back to Starbucks'), changes in consumer preferences, dependence on North America and international markets, supply chain issues, unfavorable global economic conditions, and substantial competition[19] Key Metrics and Investor Contacts The company identifies key operating metrics for growth and provides contact information for investor and media relations - Key operating metrics believed to drive financial results and long-term growth are new store openings, comparable store sales growth, and operating margin management[21] - Investor Relations contact: Catherine Park (investorrelations@starbucks.com), Media contact: Emily Albright (press@starbucks.com)[22] Supplemental Data and Non-GAAP Reconciliation This section provides detailed data for U.S. and China markets, store counts, and reconciles GAAP to non-GAAP financial measures U.S. and China Supplemental Data U.S. comparable sales declined 2% while China comparable sales grew 2%, showing divergent performance in key markets Q3 FY2025 U.S. Supplemental Data | Metric | Q3 FY25 | Q3 FY24 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $6,454.0M | $6,366.8M | +1% | | Comparable Store Sales | (2)% | (2)% | 0% | | Change in Transactions | (4)% | (6)% | +2% | | Change in Ticket | 2% | 4% | -2% | | Store Count | 17,230 | 16,730 | +3% | Q3 FY2025 China Supplemental Data | Metric | Q3 FY25 | Q3 FY24 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $790.0M | $733.8M | +8% | | Comparable Store Sales | 2% | (14)% | +16% | | Change in Transactions | 6% | (7)% | +13% | | Change in Ticket | (4)% | (7)% | +3% | | Store Count | 7,828 | 7,306 | +7% | Store Data Overview The company expanded its global footprint by opening 308 net new stores in Q3, reaching a total of 41,097 stores worldwide Q3 FY2025 Store Count and Net Openings | Segment | Net Stores Opened Q3 FY25 | Total Stores as of Jun 29, 2025 | | :--- | :--- | :--- | | North America | 107 | 18,734 | | International | 201 | 22,363 | | Total Company | 308 | 41,097 | Non-GAAP Financial Measures Reconciliation The company presents non-GAAP measures, excluding certain items, to provide a clearer view of underlying business performance - Non-GAAP measures exclude restructuring costs and related tax impacts, as management believes this exclusion contributes to a more meaningful evaluation of the company's future and past operating performance[39] - Constant currency information is presented to provide a framework for assessing how underlying businesses performed, excluding the effect of foreign currency rate fluctuations[40] Q3 FY2025 Non-GAAP Reconciliation Highlights | Metric | GAAP (Q3 FY25) | Non-GAAP (Q3 FY25) | GAAP (Q3 FY24) | Non-GAAP (Q3 FY24) | Non-GAAP Change (%) | Non-GAAP Change (Constant Currency %) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating Income | $935.6M | $956.4M | $1,517.5M | $1,517.5M | (37.0)% | (36.7)% | | Operating Margin | 9.9% | 10.1% | 16.7% | 16.7% | (660) bps | (650) bps | | Diluted EPS | $0.49 | $0.50 | $0.93 | $0.93 | (46.2)% | (45.2)% | Q3 FY2025 Net Revenue Constant Currency Reconciliation | Metric | Value | | :--- | :--- | | Revenue for Q3 FY24 (GAAP) | $9,113.9M | | Revenue for Q3 FY25 (GAAP) | $9,456.0M | | Change (%) | 3.8% | | Constant Currency Impact (%) | (0.6)% | | Change in Constant Currency (%) | 3.2% |