The global coffee chain Starbucks Corporation (NASDAQ: SBUX) released its financial results for the third fiscal quarter of 2025, reporting a 2% decline in comparable global sales. However, investors responded positively to signs of progress in the recovery plan led by its CEO, Brian Niccol, which briefly boosted its shares before they later fell 0.75% in after-hours trading, closing at $93.44 USD.
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The market reacted cautiously to the results: while revenue exceeded expectations, the earnings per share (EPS) fell well short of forecasts, creating a negative surprise that tempered investor optimism.
“We’ve done the hard work on the hard things to build a strong operating foundation. In 2026, we’ll unleash a wave of innovation that fuels growth and elevates customer service,” said Brian Niccol, chairman and chief executive officer of Starbucks.
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How much did Starbucks earn, and what disappointed analysts?
Consolidated revenue for the quarter reached $9.5 billion USD, surpassing market expectations of around $9.29 billion, according to data released by the company. This represented a 4% annual increase, driven particularly by international growth and new store openings.
However, the adjusted earnings per share came in at $0.50 USD, below analysts’ projections of $0.65 USD, representing a negative surprise of 23.08%. The drop was attributed to two key factors:
- A non-recurring investment in the “Leadership Experience 2025” event, which gathered over 14,000 store leaders across North America as part of the “Back to Starbucks” plan.
- A discretionary tax charge related to international operations, which raised the effective tax rate to 31.8%, up from 24.8% the previous year.
What is Brian Niccol’s Starbucks doing to address the sales decline?
The “Back to Starbucks” strategy has been the cornerstone of Brian Niccol’s leadership since his appointment in September 2024. The initiative aims to revitalize the brand after several quarters of transaction declines, focusing on:
- Improving in-store customer service
- Simplifying daily operations
- Fostering a culture of internal leadership development
- Driving technological innovation and new service formats
Niccol, recognized for successfully transforming Chipotle, emphasized that Starbucks is building a better experience for both customers and its partners (employees).
Which regions contributed most to Starbucks’ performance this quarter?
North America:
- Revenue: $6.93 billion (+2%)
- Comparable sales: -2%
- Transactions: -3%
- Average ticket: +1%
- Operating margin: dropped from 21% to 13.3%
International:
- Revenue: $2.01 billion (+9%)
- Comparable sales: unchanged
- China: +2% comparable sales, with a 6% increase in transactions
Retail Channel (products in supermarkets and retail stores):
- Revenue: $483 million (+10%)
- Operating margin: sharp drop from 53.7% to 45.1%
The China region stood out with strong recovery in store traffic, although average tickets dropped by 4%. This suggests that volume is recovering faster than per-visit spending — a key pattern in reopening markets.
How many stores does Starbucks have and how fast is it growing?
During the quarter, Starbucks opened 308 net new stores, bringing its global total to 41,097 locations. Of those:
- 53% are company-operated
- 47% operate under licensing agreements
The United States and China together account for 61% of the total store count, with 17,230 and 7,828 stores respectively.
What was the impact of operational and tax-related decisions?
The report noted a GAAP operating margin contraction of 680 basis points, settling at 9.9%. On a non-GAAP basis, the margin was 10.1%. This decline was mainly due to:
- Operational deleverage from lower volume
- Inflation and increased labor costs
- Extraordinary transformation plan expenses
The company also reported a rise in store operating expenses, now representing 55.6% of revenue from company-operated stores, up from 50.9% a year earlier.
What financial and organizational plans did Starbucks announce?
Key announcements this quarter included:
- $1.75 billion bond issuance to refinance existing debt
- Election of two new board members, including Marissa Mayer, former Yahoo CEO
- Expansion of the Assistant Store Manager role in the U.S., part of the commitment to internal promotion
- Dividend of $0.61 per share, the 61st consecutive quarterly payout, with an 18% compound growth rate
