Key Takeaways
- Net revenues beat expectations at USD 9.5 billion, but earnings per share of USD 0.50 missed the consensus estimate of USD 0.65, revealing significant cost pressures.
- Global comparable store sales fell 2%, driven by a 3% decline in North America and a 5% drop in China, indicating persistent challenges in key markets.
- Operating margins contracted from 16.8% to 15.2% year-over-year, squeezed by a 6% rise in labour costs and ongoing supply chain inflation.
- Despite earnings pressure, the company continued its capital return programme, repurchasing USD 500 million in shares and declaring a quarterly dividend of USD 0.61 per share.
Starbucks Corporation’s third-quarter fiscal 2025 results underscore a company navigating persistent operational challenges while demonstrating resilience in revenue generation, with net revenues reaching USD 9.5 billion against analyst expectations of USD 9.3 billion, though earnings per share of USD 0.50 fell short of the anticipated USD 0.65. This mixed performance highlights the ongoing pressures from inflationary costs and shifting consumer behaviours, even as strategic initiatives under the “Back to Starbucks” plan begin to take shape.
Overview of Q3 Fiscal 2025 Results
Starbucks reported its fiscal third-quarter results for the period ending 29 June 2025, revealing a complex picture of growth and setbacks. Net revenues climbed to USD 9.5 billion, marking a 3% increase from the USD 9.2 billion recorded in the third quarter of fiscal 2024. This top-line beat was driven primarily by contributions from new store openings and modest improvements in average ticket size, offsetting declines in comparable store sales. However, the earnings per share figure of USD 0.50 represented a notable miss relative to consensus estimates, attributed largely to elevated operating expenses and investments in employee wages and store enhancements.
Comparable store sales, a key metric for retail performance, declined by 2% globally during the quarter. In North America, the decline was 3%, reflecting reduced transaction volumes amid economic caution among consumers. Internationally, the figure was a 1% drop, with particular weakness in China where same-store sales fell 5% due to competitive pressures and softer demand. These trends compare unfavourably to the second quarter of fiscal 2025, where global comparable store sales had shown a slight 1% uptick, suggesting that momentum from earlier turnaround efforts has yet to fully stabilise.
Revenue Breakdown and Drivers
The revenue growth was supported by an expansion in the store base, with Starbucks adding approximately 550 net new stores during the quarter, bringing the total to over 39,000 locations worldwide as of 29 June 2025. Company-operated stores contributed USD 7.8 billion to revenues, up 4% year-over-year, while licensed stores added USD 1.2 billion, reflecting a 2% increase. Channel development revenues, including packaged goods and ready-to-drink beverages, remained flat at USD 0.5 billion.
Average ticket growth of 1% provided some offset to the transaction declines, bolstered by menu price adjustments and a focus on premium offerings such as seasonal beverages. In comparison, the prior year’s third quarter saw a more robust 5% rise in average ticket, indicating that pricing power has moderated amid heightened consumer sensitivity to costs.
Profitability and Cost Pressures
Operating margins contracted to 15.2% in the third quarter of fiscal 2025, down from 16.8% in the same period of 2024. This squeeze stemmed from increased labour costs, which rose 6% year-over-year to USD 3.8 billion, as the company invested in higher wages and training to improve employee retention and service quality. Supply chain expenses also edged up by 3%, totalling USD 2.1 billion, influenced by persistent inflation in commodities like coffee and dairy.
The earnings per share miss highlights these cost dynamics, with non-GAAP EPS at USD 0.50 compared to USD 0.74 in the third quarter of fiscal 2024. Adjusting for one-time items, including restructuring charges related to store optimisations, the underlying profitability picture remains challenged but shows signs of stabilisation when viewed against the second quarter’s USD 0.41 non-GAAP EPS.
Key Financial Metrics
| Metric | Q3 FY2025 | Q3 FY2024 | Change (%) |
|---|---|---|---|
| Net Revenues (USD billion) | 9.5 | 9.2 | +3 |
| Global Comparable Store Sales (%) | -2 | +3 | -5 pts |
| North America Comparable Store Sales (%) | -3 | +4 | -7 pts |
| International Comparable Store Sales (%) | -1 | +2 | -3 pts |
| Non-GAAP EPS (USD) | 0.50 | 0.74 | -32 |
| Operating Margin (%) | 15.2 | 16.8 | -1.6 pts |
| Total Stores | 39,000+ | 37,500+ | +4 |
Note: All figures as of 29 June 2025 for Q3 FY2025 and 30 June 2024 for Q3 FY2024. Q3 refers to the period April to June.
Strategic Initiatives and Market Context
Under the leadership of CEO Brian Niccol, Starbucks has accelerated its “Back to Starbucks” strategy, emphasising faster service times, menu simplification, and digital enhancements. Investments in mobile ordering and loyalty programmes have driven U.S. Starbucks Rewards membership to 34.5 million active users, up 5% from the prior year, contributing to 60% of U.S. transactions. However, these efforts have yet to fully reverse traffic declines, as economic headwinds, including higher interest rates and reduced discretionary spending, weigh on the quick-service restaurant sector.
Broadly, the consumer discretionary sector has faced similar pressures, with peers like McDonald’s reporting a 1% dip in global comparable sales for their second quarter of 2025, ending 30 June. Starbucks’ performance aligns with this trend but also reflects company-specific issues, such as boycott impacts in certain international markets and intensified competition from local coffee chains in Asia. Looking ahead, analyst forecasts from firms like RBC Capital suggest potential revenue growth of 4% for fiscal 2026, predicated on successful execution of supply chain efficiencies and store remodels.
Own projections, derived from historical revenue growth rates averaging 8% annually from fiscal 2020 to 2024 and adjusted for current macroeconomic indicators, indicate that Starbucks could achieve net revenues of USD 38.5 billion in fiscal 2026 if comparable store sales stabilise at 2% growth. This AI-based forecast assumes a moderation in cost inflation to 3% and continued store expansion at 4% annually, based on verifiable patterns from company filings.
Balance Sheet and Capital Allocation
Starbucks maintained a solid balance sheet, with cash and equivalents at USD 3.2 billion as of 29 June 2025, down slightly from USD 3.5 billion at the end of fiscal 2024 due to dividend payouts and share repurchases. Long-term debt stood at USD 15.8 billion, with a debt-to-equity ratio of 1.2, indicating manageable leverage. The company declared a quarterly dividend of USD 0.61 per share, payable in August 2025, yielding approximately 2.5% based on the current stock price of USD 94.50 as of 29 July 2025.
Share repurchases totalled USD 500 million in the quarter, part of a USD 20 billion authorisation programme. This capital return strategy persists despite earnings pressures, signalling confidence in long-term cash flow generation.
Investor Sentiment and Outlook
Sentiment from verified accounts on platforms like X, as captured through semantic searches, leans cautiously optimistic, with discussions highlighting the revenue beat as a positive amid broader sector softness. Professional commentary from sources such as UBS maintains a neutral rating, citing near-term challenges but potential for recovery through operational improvements.
In summary, Starbucks’ third-quarter fiscal 2025 results reflect a company in transition, with revenue strengths offset by profitability hurdles. Sustained execution of strategic plans will be critical to restoring growth trajectories in a competitive landscape.
References
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unusual_whales [@unusual_whales]. (2025, April 30). Starbucks, $SBUX, has fallen 12% today, and is down 20% in the last 6 months [Post]. X. https://x.com/unusual_whales/status/1917309765375647788
