Starbucks (SBUX) Up 4.1% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Starbucks reported better-than-expected first-quarter fiscal 2025 results, with earnings and net revenues exceeding estimates, but faced a decline in year-over-year earnings and flat revenues [2][5]. Financial Performance - Earnings per share (EPS) for the quarter was 69 cents, surpassing the Zacks Consensus Estimate by 4.6%, but down 23% from 90 cents in the prior-year quarter [5]. - Net revenues reached $9.398 billion, exceeding the consensus mark of$ 9.3 billion, and were nearly flat compared to $9.425 billion in the prior-year quarter [5]. - Global comparable store sales declined 4% year over year, driven by a 6% decrease in comparable transactions, partially offset by a 3% increase in average tickets [6]. Operational Insights - The company opened 377 net new stores globally, bringing the total store count to 40,576 [6]. - Operating margin contracted 390 basis points to 11.9% due to increased operating expenses and investments in the "Back to Starbucks" plan [7][8]. Segment Performance - North America segment net revenues were$ 7.072 billion, down 1% year over year, with comparable store sales declining 4% [9]. - International segment net revenues increased 1% to $1.871 billion, with comparable store sales also down 4% [10]. - Channel Development segment net revenues fell 3% to$ 436.3 million, attributed to declines in the Global Coffee Alliance and ready-to-drink revenues [12]. Strategic Initiatives - Starbucks aims to enhance sales growth through the "Back to Starbucks" plan, supply-chain efficiencies, menu simplification, and effective marketing campaigns [4]. - The company has suspended its guidance for fiscal 2025 but expects EPS to improve in the latter half of the fiscal year [17][18]. Financial Position - As of the end of the fiscal first quarter, cash and cash equivalents stood at $3.671 billion, up from$ 3.286 billion at the end of fiscal 2024 [14]. - Long-term debt was $14.312 billion, slightly down from$ 14.319 billion as of September 2024 [14]. Market Outlook - Estimates for Starbucks have trended downward, with a consensus estimate shift of -8.67% [20][21]. - The stock currently holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [23].