Brewing a comeback: Starbucks navigates challenging Q2 FY2025

Overview

Starbucks posted modest revenue growth in Q2 FY2025 amid a challenging macroeconomic environment, as its “Back to Starbucks” turnaround plan begins to show operational traction.

While comparable sales declined slightly, CEO Laxman Narasimhan expressed optimism, stating: “My optimism has turned into confidence that our ‘Back to Starbucks’ plan is the right strategy to turn the business around and to unlock opportunities ahead. Improving transaction comp in a tough consumer environment at our scale is a testament to the power of our brand and partners getting ‘Back to Starbucks.’ We are on track and if anything, I see more opportunity than I imagined.”

Q2 FY2025 vs. Q2 FY2024:

Consolidated net revenues increased slightly to $8.76bn (+2% reported and +3% constant currency), supported by new store openings and strong international performance, partially offset by weaker U.S. trends.
- In North America, revenues were $6.47bn (+1% YoY), while operating margin was 11.6% (-640bps YoY), with growth driven by net new store openings (+5% YoY), but profitability impacted by traffic decline and higher labor costs.
- International revenues grew to $1.87bn (+6% YoY), while operating margin recorded a value of 11.6% (-170bps YoY), influenced by new store growth and transaction gains, partially offset by FX and promotional activity.
- Channel development revenues declined slightly to $409m (-2% YoY), with operating margin of 47.3$ (-440bps YoY), due to Global Coffee Alliance softness and increased product costs.
Global comparable store sales declined -1% YoY, driven by a -2% decline in comparable transactions, partially offset by a +1% increase in average ticket.
- North America comparable store sales declined -1% YoY, driven by a -4% decline in comparable transactions, partially offset by a +3% increase in average ticket. U.S. comparable store sales declined -2%, driven by a -4% decline in comparable transactions, partially offset by a +3% increase in average ticket.
- International comparable store sales increased +2% YoY, driven by a +3% increase in comparable transactions, partially offset by a -1% decline in average ticket. China comparable store sales were flat, driven by a +4% increase in comparable transactions, offset by a -4% decline in average ticket.
GAAP operating margin declined to 6.9% (-590bps YoY), pressured by labor investment and restructuring costs tied to the company’s turnaround plan.
Non-GAAP operating margin also decreased to 8.2% (-460bps YoY), reflecting margin contraction from lower leverage and transformation-related costs.
GAAP EPS was $0.34 (-50% YoY), while non-GAAP EPS was $0.41 (-40% YoY), driven by reduced profitability and higher restructuring-related expenses.
Total operating expenses were on an upward slope, reaching the value of $8.2bn (+9% YoY).
The company opened 213 net new stores in Q2, ending the period with 40,789 stores: 53% company-operated and 47% licensed. At the end of Q2, stores in the U.S. and China comprised 61% of the company’s global portfolio, with 17,122 and 7,758 stores in the U.S. and China, respectively.
Starbucks declared quarterly cash dividend of $0.61/share, maintaining a 60-quarter payout streak.
The company ended Q2 FY2025 with $2.67bn (-19% YoY) in cash, despite ongoing investment and transformation costs.
Net cash from operating activities in H1 FY2025 was $2.36bn (down from $2.89bn YoY) due to lower earnings and working capital needs.

While no formal guidance was reiterated, management reaffirmed confidence in the “Back to Starbucks” transformation strategy and emphasized that restructuring efforts are laying the foundation for sustainable, long-term growth. The company is focused on improving traffic trends, accelerating innovation, optimizing labor efficiency, and enhancing store profitability. Starbucks expects gradual improvement in comparable sales as initiatives scale across core markets through the remainder of FY2025.

Despite management’s optimism, SBUX’s stock price has plummeted since the quarterly results were released, down approximately -6.5% as of press time. This downward trend is not necessarily a surprise to investors, as it has been on the rise since the beginning of this year, with SBUX’s stock price down approximately -14% in the first four months of 2025.