Summary
Starbucks filed its Q2 FY2025 10-Q. Revenue grew modestly; margins contracted on deleverage, added labor for Back to Starbucks, and restructuring. Inventory, leases, and hedging activity increased; no share repurchases; dividend maintained.
Action Items
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Bold date-owner style not available in source.
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Evaluate store portfolio and new store pipeline for potential additional restructuring charges in near term.
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Continue actions to mitigate tariffs and volatile coffee prices; diversify/redirect shipments and secure pricing.
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Adopt upcoming FASB disclosures on segments (FY2025), income taxes (FY2026), and expense disaggregation (FY2028).
Q2 FY2025 Highlights
- Total net revenues up 2% to $8,761.6M; company-operated +3%, licensed -4%, other +1%.
- Operating income down to $601.0M; operating margin 6.9% (-590 bps).
- EPS diluted $0.34 vs. $0.68 prior year.
- Restructuring charge $116.2M; ~$69M severance accrued at quarter-end.
- Cash and investments $3.2B; cash from operations $2.36B YTD.
Segment Results
| Segment | Q2 FY2025 Revenue | YoY | Q2 FY2025 Op Inc. | Margin | Key Drivers |
|---|
| North America | $6,472.7M | +1% | $748.3M | 11.6% (-640 bps) | 5% net new stores; comp -1% (transactions -4%, ticket +3%); deleverage; labor increases |
| International | $1,867.1M | +6% | $217.0M | 11.6% (-170 bps) | 8% net new stores; +2% comps (transactions +3%, ticket -1%); 113 store conversions; promo pressure; FX headwinds |
| Channel Development | $409.0M | -2% | $193.5M | 47.3% (-440 bps) | Lower Global Coffee Alliance revenue and higher product costs; lower JV income; mix benefit |
Revenue Mix and Store Data
- Product mix Q2: Beverage 60% ($5,293.6M), Food 19% ($1,691.9M), Other 21% ($1,776.1M).
- Global stores: 40,789 (18,627 North America; 22,162 International).
- Net openings YTD: 590; Q2 net openings: 213.
- Acquisition converted 113 U.K. licensed stores to company-operated.
Key Financial Statements Summary
| Metric | Q2 FY2025 | Q2 FY2024 | YTD FY2025 | YTD FY2024 |
|---|
| Net revenues | 8,761.6 | 8,563.0 | 18,159.4 | 17,988.3 |
| Operating income | 601.0 | 1,098.9 | 1,722.8 | 2,584.3 |
| Net earnings attrib. to SBUX | 384.2 | 772.4 | 1,165.0 | 1,796.8 |
| EPS diluted | 0.34 | 0.68 | 1.02 | 1.58 |
| Operating margin | 6.9% | 12.8% | 9.5% | 14.4% |
Operating Expense Drivers (Q2)
- Product & distribution: +30 bps of revenue (inflation/coffee +60 bps; supply chain efficiencies -50 bps).
- Store operating expenses: +420 bps of revenue; +450 bps vs company-operated sales (deleverage ~200 bps; added labor ~180 bps).
- D&A: +50 bps (deleverage).
- G&A: -$22M (lapping prior proxy/advisory costs).
- Restructuring: $116.2M (support organization severance).
Liquidity, Capital, and Debt
- Cash and cash equivalents: $2,671.4M; short-term investments: $340.2M.
- Operating cash flow YTD: $2,364.0M; investing cash flow YTD: $(1,499.2)M (capex $1,282.1M; U.K. acquisition); financing cash flow YTD: $(1,421.3)M (dividends paid $1,384.9M; no buybacks).
- Dividend: $0.61/share approved for payment May 30, 2025.
- No share repurchases YTD; 29.8M shares remain authorized.
- Long-term debt: $15.7B (fair value ~$14.18B); current portion $2.25B; maturities FY2025–2029: $1.25B, $1.5B, $1.5B, $0.6B, $1.75B; thereafter $9.1B.
- Revolving credit facility: $3.0B undrawn; commercial paper capacity $3.0B undrawn; Japan credit facilities undrawn.
Derivatives and Hedging
| Hedge Type | AOCI Net Gains/(Losses) 3/30/25 | 12-Mo Reclass Expected | Notional (3/30/25) | Notes |
|---|
| Coffee CF hedges | $35.6M | $35.6M | $200M | 4 months remaining |
| FX - other CF hedges | $33.8M | $22.2M | $984M | Various maturities |
| Interest rate CF hedges | $(2.1)M | $(3.3)M | $350M | |
| Net investment hedges (CCS, FX debt) | $371.1M total | — | CCS $4,197M | Significant OCI gains YTD |
Balance Sheet Notes
- Inventories: $2,047.3M (unroasted coffee $950.4M; roasted $274.0M; packaging/supplies $500.5M).
- Coffee purchase commitments: $213M fixed-price; ~$951M price-to-be-fixed (some effectively fixed via futures).
- PPE, net: $8,820.2M; lease ROU assets: $9,467.2M; operating lease liabilities: $10,437.7M.
- Deferred revenue: $5.87B Nestlé long-term; $1.85B stored value & loyalty (≈$1.7B current).
- Shareholders’ deficit: $(7,622.5)M; AOCI $(529.0)M.
Strategy and Outlook
- Back to Starbucks strategy: invest in partner labor, simplify support org, improve coffeehouse experience, reduce new store build costs.
- Macro headwinds: tariffs, volatile coffee prices, FX; mitigating through supply diversification and pricing/supply actions.
- Potential additional restructuring charges as portfolio and pipeline are evaluated.
- Capital expenditures expected broadly consistent with FY2024.
Accounting and Governance
- Recent and upcoming FASB disclosures: segments (FY2025), income taxes (FY2026), expense disaggregation (FY2028).
- No material changes to critical accounting estimates.
- Legal matters: routine; risks from labor organizing monitored; no material adverse effect anticipated.
Decisions
- Approved quarterly dividend of $0.61 per share for May 30, 2025.
- Executed restructuring of support organization; recognized $116.2M in Q2 charges.
Open Questions
- Scope and timing of any additional restructuring charges from ongoing portfolio and pipeline evaluation.
- Magnitude of tariff impacts and effectiveness of diversification strategies on coffee supply costs.
- Trajectory and timing for North America comp recovery amid lower transactions and promotional posture.