SBUX | Q3 2025

The content provided on this website, including any communications, posts, videos, social media interactions, and other materials, is for informational and educational purposes only. It should not be considered as financial or investment advice. Read our full disclaimer here.

Links

• Link to Transcript

• Link to 10-Q

Overview

• Non-GAAP EPS of $0.50 misses by $0.15.

• Revenue of $9.46B (+4.0% Y/Y) beats by $150M.

KEY Takeaways

• Sixth straight quarter of comp sales declines: Global and U.S. comps both fell 2%, showing Starbucks is still deep in its turnaround.

• EPS dropped to $0.50 despite 4% revenue growth, highlighting margin pressure from higher labor and transformation investments.

• Green Apron Service is the centerpiece of the turnaround: A new operating model rolling out to all U.S. company-operated stores by mid-August, showing early wins in service times and transactions.

• Innovation is ramping up for 2026: New product pipeline includes protein cold foam, revamped baked goods, and afternoon-focused food/drinks—with a strict rule that nothing slows down store operations.

• Store strategy shift: 1,000 store “uplifts” coming by 2026 to bring back warmth and seating; mobile-order-only stores being phased out.

• China is rebounding, with +2% comps and +6% transaction growth; Starbucks is exploring a strategic local partner.

• International revenue crossed $2B for the first time, with strong contributions from Mexico, the U.K., and Turkey.

• Margins took a hit: Operating margin fell to 10.1%, down 650bps YoY, driven by investment-heavy strategy.

• Management is focused on differentiation through customer experience, not price wars—leaning into service, innovation, and community.

• Concern around the dividend is valid, especially if comp sales don’t stabilize, but there’s a clear strategy in place with execution beginning to show traction.

NOTES

Starbucks (SBUX) just wrapped up its sixth straight quarter of declining same-store sales, with global comps down 2% and U.S. comps falling by the same amount.

Earnings per share dropped to $0.50, and while revenue grew 4% to $9.5 billion, the results clearly show that the business is still in the early stages of a turnaround. Still, there are some signs that those efforts are starting to take hold.

The biggest move this quarter was the decision to fast-track the Green Apron Service model across every U.S. company-operated store starting in mid-August. This is a complete rework of Starbucks’ operating playbook, aimed at tightening up execution, speeding up service, and improving consistency across both in-store and drive-thru orders.

Early pilots showed gains in transactions, service times, and partner feedback, which gave management the confidence to scale it faster than originally planned. The hope is that this becomes the engine for growth—not just by fixing the basics, but by creating a platform for more innovation and better customer experiences in 2026 and beyond.

On that note, innovation is already ramping up. Later this year, Starbucks will introduce a new protein cold foam with 15 grams of protein and no added sugar. It’s the first launch from their new “Starting 5” process, where baristas help co-develop new items to ensure they’re easy to execute at scale.

Next year, the company plans to roll out a refreshed baked goods case and a bold new 1971 dark roast across U.S. company stores. There’s also a wave of afternoon-focused drinks and snacks in the pipeline, including coconut water-based beverages and gluten-free, high-protein food options.

The key with all of these new innovations is staying operationally disciplined—no new product gets approved if it slows stores down or adds friction.

With that said, Starbucks is also making big changes to its store base. Rather than pushing ahead with expensive remodels or new builds, the company is prioritizing faster, more affordable “uplift” projects that bring warmth and seating back to existing locations.

They expect to complete 1,000 of these by the end of 2026. Meanwhile, the mobile order-only store format is being phased out—management said it felt too transactional and didn’t reflect the sense of connection the brand wants to create.

Internationally, China saw a nice rebound, with same-store sales up 2% and transaction growth up 6%. Delivery and product innovation played a key role, and Starbucks is now exploring a strategic partnership with a local firm to help expand in the region.

Management made it clear this isn’t about raising capital—they want a partner who understands the Chinese market and shares their long-term vision. Outside of China, Mexico, the U.K., Turkey, and several other licensed markets saw strong results, helping push international revenue above $2 billion for the first time in a single quarter.

Regarding profitability, margins were under pressure, with the consolidated operating margin falling to 10.1%—a 650 basis point decline from last year. That drop was driven by a combination of lower sales leverage and higher investment in labor, training, and store-level initiatives.

The company is pouring more than $500 million into extra labor hours over the next year, much of it tied to Green Apron Service. They’ve also launched a broad effort to reset their cost structure, looking for savings across G&A, COGS, and operations.

While there’s no formal guidance, management pointed to 2019’s pre-COVID margin levels (around 17%) as a long-term target and said they believe it’s not only achievable, but potentially beatable.

Moving on, the analyst Q&A underscored some key themes. First, Green Apron Service is already starting to improve morning and full-day transactions in test markets, and management expects those gains to build once the rollout is complete.

Second, food is finally starting to show promise, with Canada and the U.K. leading the way on baked goods innovation that could eventually scale to the U.S.

Third, the current loyalty program has gotten too discount-heavy and one-size-fits-all, and a major refresh is coming in early 2026 that will be more personalized and engagement-driven.

Importantly, management also addressed concerns about competition and market saturation. Their take is that the best way to win is by being the best version of Starbucks. That means excellent service, better food and drink innovation, and stores that feel like a real third place—not just a transaction point.

The brand’s value perception is near a two-year high, especially among Gen Z and millennials, and management sees that as validation that their strategy is working, even if comps are still negative for now.

All in all, this was another tough quarter on paper—and I’d be lying if I said I wasn’t getting concerned for the safety of the dividend—but it didn’t feel like a company standing still.

Starbucks is definitely in investment mode, and if those investments pay off, 2026 could be the year Starbucks starts to look and feel like itself again. We’ll see what happens!

---