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01/10 16:38
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong performance in key areas like the Global Coffee Alliance and at-home coffee categories. The 'Back to Starbucks' strategy is positively impacting customer experience, despite some store closures. The Q&A section highlights optimism in new service models and market expansion. While management avoided specific guidance, the focus on strategic growth, improved customer perception, and transaction growth in younger demographics supports a positive outlook. The lack of detailed guidance is a concern, but overall sentiment leans positive due to operational improvements and strategic initiatives.
Global Revenue Growth 5% year-over-year growth in Q4 FY2025. This growth was driven by international outperformance, positive comps in Canada, and progress in the U.S. business.
Global Comparable Store Sales Growth 1% year-over-year growth in Q4 FY2025. This was the first positive quarter in 7 quarters, driven by international markets and improvements in the U.S. and Canada.
North America Company-Operated Comparable Store Sales Flat year-over-year in Q4 FY2025. U.S. comps were flat, while Canada showed positive growth. Improvements were attributed to better transaction comps and the implementation of the Green Apron Service.
International Segment Revenue $2.1 billion in Q4 FY2025, a record high, with 9% year-over-year growth. Growth was led by strong performance in China, Japan, the U.K., and Mexico.
China Comparable Store Sales 2% year-over-year growth in Q4 FY2025, driven by a 9% increase in transactions. Growth was supported by product innovation and a fast-growing delivery business.
Earnings Per Share (EPS) $0.52 in Q4 FY2025, down 34% year-over-year. The decline reflects investments in labor and inflationary pressures, including coffee prices and tariffs.
Consolidated Operating Margin 9.4% in Q4 FY2025, a contraction of 500 basis points year-over-year. This was primarily due to inflation, higher coffee prices, and investments in labor hours.
Delivery Business in the U.S. Grew nearly 30% year-over-year in Q4 FY2025, surpassing $1 billion in sales for the full fiscal year. Growth was driven by increased demand for delivery services.
Channel Development Segment Revenue 16% year-over-year growth in Q4 FY2025, driven by higher revenue from the Global Coffee Alliance and strong performance in the at-home and ready-to-drink coffee categories.
Net Store Closures 107 net store closures globally in Q4 FY2025 as part of a restructuring plan. These closures were aimed at improving profitability and customer experience.
Green Apron Service: Implemented as the new standard for customer experience across U.S. company-operated stores. Investments in staffing and hours led to record low hourly partner turnover and improved customer experience scores.
Smart Queue sequencing algorithm: Launched to improve service times, with over 80% of U.S. stores achieving cafe service times of 4 minutes or less.
Clover Vertica brewer: Rollout nearly complete, enhancing freshly brewed coffee offerings.
Protein Cold Foam and Protein Lattes: Introduced as part of menu innovation, aimed at attracting less frequent customers.
International expansion: Opened 316 net new coffee houses in Q4, totaling over 900 in fiscal 2025. Record international revenue of $2.1 billion in Q4.
China market: Achieved 2% comp growth in Q4, with a portfolio exceeding 8,000 stores. Actively seeking a partner to unlock growth potential.
Flagship stores: Opened new flagship stores, including one in Santiago Bernabeu Stadium, Madrid, with plans for more in 2026.
Store closures: Closed 107 underperforming stores globally in Q4 as part of restructuring, leading to a 1% net decline in North America store count.
Uplift renovation program: Completed nearly 70 store renovations in Q4, with plans to complete over 1,000 by the end of fiscal 2026.
Streamlined support structure: Simplified organizational structure to align with growth priorities, reducing G&A expenses.
Back to Starbucks strategy: Focused on improving customer service, store ambiance, and marketing. Achieved first positive global comp sales growth in 7 quarters.
Menu innovation: Overhauled marketing and menu strategy, including the removal of extra charges for non-dairy milk and introduction of new products.
China partnership: Exploring partnerships to retain a meaningful stake in the China business while unlocking growth potential.
Restructuring and Impairment Charges: Starbucks faced restructuring and impairment charges due to the closure of underperforming coffee houses that were unable to meet profitability or customer experience standards. This resulted in a reduction in baseline North America company-operated revenues.
Inflation and Tariffs: The company experienced margin contraction due to inflation, particularly in coffee prices, and tariffs, which increased operational costs.
Supply Chain Challenges: Starbucks is working to improve its supply chain to support innovation and inventory availability, indicating ongoing challenges in this area.
Competitive Marketplace in China: The company faces a competitive marketplace in China, requiring optimization of product and pricing strategies to maintain growth.
Turnaround Execution Risks: The multiyear turnaround plan involves significant investments and operational changes, which carry risks of execution and achieving desired outcomes.
Store Closures: 107 net store closures globally in Q4 were part of restructuring efforts, impacting revenue and requiring disciplined capital deployment for future growth.
Dynamic Coffee Price Environment: The company operates in a challenging coffee price environment, which affects profitability and requires careful cost management.
Non-linear Recovery in U.S. Market: The U.S. market recovery is not linear, with transaction comps still rebuilding, posing challenges to achieving consistent growth.
Revenue Expectations: Starbucks anticipates U.S. company-operated comparable store sales to build through fiscal 2026, supported by a strong holiday lineup, future menu innovation, and coffee house uplifts. International revenue growth is expected to continue, with China and other top markets contributing significantly.
Margin Projections: The company expects operating margins to improve gradually over a multiyear period as benefits from strategic changes, such as reduced build costs and streamlined support structures, flow through the P&L. Fiscal 2026 G&A expenses are expected to run lower than fiscal 2023 levels.
Capital Expenditures: Starbucks is focused on disciplined capital deployment, including reducing build costs and improving the profitability of new coffee houses. The company plans to complete over 1,000 coffee house uplifts by the end of fiscal 2026.
Market Trends and Business Segment Performance: Starbucks expects continued growth in its delivery business, which grew nearly 30% year-over-year in Q4 2025. The company also plans to expand its Clover Vertica brewer rollout and introduce new menu innovations, such as an up-leveled bake case and enhanced matcha offerings, in fiscal 2026. Internationally, Starbucks plans to open more flagship coffee houses and expand its presence in China, where it sees significant long-term growth potential.
Strategic Plans: The company will double down on its Green Apron Service, scale the assistant store manager role, and simplify store-level reporting to focus on five key KPIs. Starbucks also plans to enhance its rewards program, mobile app, and brand activations in fiscal 2026.
Quarterly Dividend Increase: Starbucks announced an increase to its quarterly dividend earlier this month, marking the 15th consecutive year of dividend increases.
The earnings call reveals strong performance in key areas like the Global Coffee Alliance and at-home coffee categories. The 'Back to Starbucks' strategy is positively impacting customer experience, despite some store closures. The Q&A section highlights optimism in new service models and market expansion. While management avoided specific guidance, the focus on strategic growth, improved customer perception, and transaction growth in younger demographics supports a positive outlook. The lack of detailed guidance is a concern, but overall sentiment leans positive due to operational improvements and strategic initiatives.
The earnings call summary presents a mixed outlook. The Q2 revenue growth and store expansion are positives, but the significant EPS decline and lack of detailed guidance are concerns. The Q&A highlights management's strategic focus and innovation, but also reveals uncertainties about cost offsets and margin recovery timelines. The absence of specific guidance and the cautious outlook from management suggest limited immediate upside, leading to a neutral sentiment.
The earnings call presents mixed signals: revenue growth and strategic investments are positive, but declining margins and EPS are concerning. The Q&A highlights management's focus on technology and staffing improvements, but lacks clarity on financial outlook. The shareholder return plan is vague, and competitive pressures persist. Given these factors, a neutral sentiment is appropriate, with potential for slight positive movement if strategic initiatives yield results.
The earnings call highlights mixed results: a slight revenue increase, but declining margins and EPS. Positive aspects include new store growth and shareholder returns. However, concerns about labor costs, economic factors, and management's unclear responses in the Q&A create uncertainty. The strategic initiatives and optimistic guidance suggest potential long-term growth, but short-term challenges and the lack of clear guidance on key issues balance the sentiment to neutral.
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