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Starbucks Corporation SBUX reported second-quarter fiscal 2025 results, with earnings and net revenues missing the Zacks Consensus Estimate. The top line increased year over year, while the bottom line declined from the prior-year quarter’s figure.
Following the results, SBUX stock declined 6.4% in Tuesday’s after-hours trading session. Negative investor sentiments were witnessed as the company delivered underwhelming earnings performance, reflecting expense deleverage and heightened store investments.
Management acknowledged that the current results had fallen short of the company’s potential. Nevertheless, it highlighted foundational progress across all four pillars of the turnaround strategy — partners, coffeehouse experience, customer engagement and marketing/menu innovation. It emphasized that Starbucks is enhancing its agility to test, iterate and scale initiatives efficiently, laying the groundwork for long-term, sustainable growth and strong returns on invested capital.
Discussion on Earnings, Revenues & Comps of SBUX
In the fiscal second quarter, the company reported earnings per share (EPS) of 41 cents, missing the Zacks Consensus Estimate of 49 cents by 16.3%. The bottom line decreased 39.7% year over year from EPS of 68 cents reported in the prior-year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Starbucks Corporation Price, Consensus and EPS Surprise
Starbucks Corporation price-consensus-eps-surprise-chart | Starbucks Corporation Quote
Net revenues of $8.76 billion lagged the consensus mark of $8.79 billion by 0.3%. However, the reported value was up 2.3% from $8.56 billion reported in the prior-year quarter.
Global comparable store sales declined 1% year over year. The downside was due to a decrease of 2% in comparable transactions, partially overshadowed by a 1% increase in average tickets.
During the quarter, Starbucks opened 213 net new stores worldwide, bringing the total store count to 40,789 at the quarter’s end.
Starbucks’ Overall Margin Contracts in Q2
The company’s Non-GAAP operating margin contracted 460 basis points (bps) to 8.2% from the prior year. The decline was primarily due to deleverage and increased labor costs associated with the "Back to Starbucks" initiative. Additionally, restructuring expenses linked to the streamlining of its global support organization further pressured margins.
On a constant currency (cc) basis, the Non-GAAP operating margin contracted 450 bps year over year.
SBUX’s Segmental Details
Starbucks has three reportable operating segments: North America, International and Channel Development.
North America: The segmental net revenues were $6.47 billion, up 1% year over year. The segment’s comparable store sales declined 1% compared with a 3% fall reported in the prior-year quarter. Average transactions declined 4%, whereas the change in tickets rose 3% year over year.
Operating margin contracted 640 bps to 11.6% from 18% in the prior-year quarter. Our model expected this segment’s operating margin to be 13.4% in the quarter.
International: This segment’s net revenues of $1.87 billion increased 6% year over year. Comparable store sales increased 2% against a 6% fall reported in the prior-year quarter. Average transactions increased 3%, whereas the change in tickets fell 1% year over year.
Operating margin contracted 170 bps year over year to 11.6%. The downside was due to heightened promotional activity and restructuring expenses tied to the streamlining of the global support organization. These pressures were partially offset by the benefits of leverage. We expected this metric to be 10% in the quarter.
In the fiscal second quarter, comps in China were flat compared with an 11% decline reported in the prior-year quarter. Transactions rose 4%, whereas the change in tickets fell 4% year over year.
Channel Development: Net revenues in the segment fell 2% year over year to $409 million. The dismal performance was due to a decline in contributions in the Global Coffee Alliance.
The segment’s operating margin contracted 440 bps year over year to 47.3%. Higher product costs related to the Global Coffee Alliance and a decline in North American Coffee Partnership joint venture income caused the downside. We expected the operating margin to be 40% in the quarter.