Starbucks Eyes China Partnership: Can It Unlock the Next Growth Cycle?

Core Insights - Starbucks Corporation is intensifying its focus on China, seeking a strategic partnership to enhance long-term growth, with over 20 potential partners showing interest [1][9] - China has shown consistent revenue growth, marking its third consecutive quarter of growth, with comparable sales increasing by 2% and transactions rising by 6% [2][5] - The company plans to maintain a significant stake in its China operations while reducing operational intensity, mirroring strategies of global peers in complex markets [3] Financial Performance - Starbucks is investing over $0.5 billion in its "Back to Starbucks" plan in the U.S., which has impacted fiscal third-quarter profitability [4] - The international segment, particularly China, is being closely monitored for its potential to balance the company's performance amid U.S. initiatives [5] - Starbucks shares have increased by 2% over the past three months, contrasting with a 3.1% decline in the industry [8] Valuation Metrics - Starbucks trades at a forward price-to-sales ratio of 2.55, which is below the industry average of 3.78 [11] - The Zacks Consensus Estimate for fiscal 2025 EPS indicates a decline of 33.2% year-over-year, while fiscal 2026 EPS is expected to rise by 22.4% [12]