Starbucks Q2 Fiscal Year 2025 Conference Call Summary Company Overview - **Company**: Starbucks - **Quarter**: Second Quarter of Fiscal Year 2025 - **Revenue**: $8.8 billion, up 3% in constant currency year-over-year [10] - **Earnings Per Share (EPS)**: $0.41, down 38% from the prior year [13] Core Strategy: Back to Starbucks - **Focus**: The "Back to Starbucks" strategy aims to reset the business and enhance customer experience [2] - **Key Pillars**: Investments are being made across four pillars: partners, coffeehouses, customer experience, and marketing/menu [3] - **Customer-Centric Approach**: Emphasis on improving customer connection and service quality [2][3] Financial Performance - **Operating Margin**: 8.2%, a decrease of 450 basis points from the previous year due to increased labor costs [12] - **Transaction Trends**: U.S. transaction decline improved to negative 4%, with positive signs in customer engagement and experience [11] - **International Performance**: Positive comparable store sales in Canada and Japan, with eight of the top ten international markets showing flat or positive comps [8][11] Operational Improvements - **Labor Investments**: Focus on staffing and deployment rather than heavy capital expenditures on equipment [5][6] - **Customer Experience Enhancements**: Introduction of handwritten notes on cups, improved seating, and a new Green Apron service model to enhance customer connection [4][5] - **Technology Integration**: Testing of order sequencing algorithms to improve service speed and efficiency [5][24] Marketing and Brand Engagement - **Brand Campaigns**: Successful U.S. brand campaign leading to increased customer engagement and brand preference [6][9] - **Product Innovation**: Introduction of new beverages and food items, including a focus on health and wellness [7][30] - **Social Media Engagement**: Significant increase in engagement on platforms like TikTok, nearly tripling quarter-over-quarter [6] Challenges and Future Outlook - **Economic Environment**: Concerns about macroeconomic conditions affecting consumer behavior [23] - **Tariffs and Coffee Prices**: Active management of tariff exposure and coffee price volatility, with coffee costs representing 10-15% of total product costs [14][32] - **Long-Term Growth Strategy**: Commitment to sustainable growth and return on invested capital, with plans to double store count while optimizing build costs [26][30] Conclusion - **Turnaround Confidence**: Despite disappointing Q2 results, management expresses confidence in the turnaround strategy and sees early signs of progress [15][34] - **Commitment to Improvement**: Ongoing focus on customer experience, partner engagement, and operational efficiency as key drivers for future growth [15][34]