Summary: Starbucks will release its third quarter results for fiscal year 2025 after the market closes on July 29. The market is full of expectations for this financial report, especially the reform effects in store expansion, digital upgrade, supply chain cost control, etc. are worthy of attention.

Second quarter review

Starbucks' adjusted earnings per share for the second quarter were $0.41, lower than the average analyst expectation of $0.49. The company's revenue increased 2% year-on-year to $8.8 billion, slightly lower than market expectations. It is worth noting that global comparable sales fell 1%, the fifth consecutive quarter of decline, and the decline exceeded analysts' expectations of 0.26%.

Third quarter forecast

According to Bloomberg data, analysts expect Starbucks' third quarter sales to be $9.292 billion, adjusted earnings per share to be $0.65, and same-store sales to decline 1.47% year-on-year.

Key highlights

Back to Starbucks plan and Green Apron

The Back to Starbucks strategy covers reforms in operations, marketing, products and experience, indicating that the company is working hard to improve performance, such as reducing order processing time from 6 minutes to less than 4 minutes, and bundling high-margin cold brew product lines with peak discounts. If this plan succeeds, it will help support confidence in long-term improvement.

The new store service model "Green Apron" launched by Starbucks management has attracted much attention (introducing AI big models in US stores to handle new deployment and division of labor to improve peak productivity. For example: dynamic scheduling system + AI passenger flow prediction, increase manpower by 20% during peak hours, and aim to shorten queue time by 40%). About 2,000 stores have implemented this model, and it is expected that these stores may achieve single-digit sales growth.

Product innovation and customer loyalty

Starbucks is innovating its menu (such as launching new products such as "Iced Oatmeal Hall Chata Latte"), which is expected to improve passenger flow trends and increase customer satisfaction, supporting sales stabilization and recovery.

Despite the decline in customer flow, the Starbucks brand still has a deep customer base. As long as the strategy is appropriate, customers are willing to return, and this unique demand resilience is one of Starbucks' confidence.

"Variables" in the Chinese market

Since the sale was reported in November last year, Starbucks' Chinese business has attracted a large number of institutional competition, and the number of participants and valuations have been rising. According to foreign media reports, more than 30 investment institutions have submitted acquisition offers, with a valuation of up to US$9 billion (about RMB 64 billion) for Starbucks' Chinese business. According to this valuation, if the transaction is successful, it will become one of the largest mergers and acquisitions in China's consumer sector in recent years.

However, Starbucks China officials have made it clear that they are not considering selling the Chinese business completely. The person said that Starbucks firmly believes in the huge growth opportunities in the Chinese market, and we are evaluating the best way to seize future growth opportunities. We will continue to focus on achieving the revitalization of China's business and maintain a positive development trend.

The outlook for the Chinese market is also an important highlight of this quarter's financial report.

Analysts’ views

Jefferies: Downgraded Starbucks from “Hold” to “Underperform”.

DBS: Maintained “Hold” rating on Starbucks.

Gordon Haskett: Maintained “Hold” rating on Starbucks.