Global coffee chain giant $Starbucks(SBUX)Starbucks$ will release its Q4 FY2025 earnings report after the market closes on October 29. According to projections from the Tiger International APP, Starbucks's Q4 revenue is expected to be $9.363 billion, up over 3% year-over-year; adjusted earnings per share (EPS) are estimated at $0.56, down more than 29% year-on-year.

Q3 Review

In Q3 FY2025, Starbucks reported consolidated net revenue of approximately $9.456 billion, up about 3.7% year-over-year; net income attributable to Starbucks was about $558 million, down approximately 47%; global same-store sales decreased by 2%; adjusted EPS was about $0.61, a significant decline year-over-year. In Q3, the company emphasized the "Back to Starbucks" strategy, focusing on improving service efficiency and in-store experiences, while noting that transformation investments and inflationary pressures were impacting profit margins. Geographically and by business segment, company-operated store revenues were about $7.8125 billion, licensed store revenues were about $1.1056 billion, and consumer packaged goods/foodservice and other revenue approximately $537.9 million; North American segment revenues were approximately $6.927 billion, international segment revenues were about $2.0107 billion, and channel development revenues were approximately $483.8 million. Notably, China's business revenue was about $790 million, up 8% year-over-year, with same-store sales up 2%, 70 new stores opened, and expansion into 17 county-level markets.

Q4 Outlook

Improving North American Service Efficiency and Same-Store Recovery Validation

The core focus in Q4 is whether U.S. same-store sales can emerge from negative growth and the marginal benefits of service efficiency improvements. In the Q3 earnings call, management outlined a 30% reduction in store construction costs, increased staffing, and optimized order sorting algorithms, with pilot stores showing improved transaction volumes and service speeds, consistent with media coverage of the "Green Apron Service" initiative aimed at enhancing customer connections and speeding up service. Most analysts anticipate low single-digit revenue growth in Q4, while noting that increased labor investment, store refurbishments, and promotions will raise short-term expenses, diluting profit margins, meaning EPS is likely to see a significant year-over-year decline. If service renovations can be replicated across more stores, reduced queues and alleviated peak period bottlenecks will improve order completion rates and turnover efficiency, driving transaction volume recovery; increased membership engagement and mobile ordering penetration will be key drivers, providing sustained support for same-store recovery. In a competitive environment with cautious spending on durable goods, stable U.S. same-store growth will provide crucial signals for market confidence and directional improvement in Q4 operating profits.

Continuation and Structural Balance of Product and Pricing Strategies in China

In Q3, China's same-store sales turned positive with 2% growth, and same-store transaction volume grew by 6%, indicating that product innovation and the "Mind Blowing Price" strategy effectively boosted foot traffic. The "True Flavor Sugar-Free" innovation system drove multi-flavor combinations to foster repeat purchases, while pricing strategies for Frappuccino, iced shaken tea, and tea lattés expanded the customer base and increased demand during afternoon and evening periods, with delivery platform subsidies also contributing to order growth. For Q4, these strategies are expected to continue, supported by the launch of seasonal and festive menus, likely maintaining the upward trend in transaction volumes and offsetting international segment weaknesses. However, the dilution effect of pricing strategies and marketing investments on ticket size and profit margins must be noted, as short-term margin elasticity will be limited, necessitating cautious expectations for Q4 gross and net margins. As store network expansion continues (with 7,828 stores in Q3), sustained popularity of new products and value perception will improve order structure and normalize revenues, potentially leading to a recovery trajectory and preserving room for future margin improvements.

Stable Contributions from Channel Development and Member Coordination

Channel development produced approximately $483.8 million in revenue in Q3, benefiting from partnerships with Nestlé for packaged coffee and ready-to-drink products, reflecting stability. Q4 focus will be on member activity and increased mobile ordering penetration, with store transaction recovery combined with retail channel coordination, contributing relatively predictable revenue growth during the transformation period. Research reports and media previews highlight that current operating profit margin pressures remain a main theme, so the market is more concerned with the sustainability of revenue and transaction volume recovery. If U.S. service renovations drive customer traffic recovery and the international segment continues to improve, channel development's stable cash flow and brand outreach will act as a "stabilizer" for the group. Amid the release of overhead expenses and ongoing value-driven marketing, the gross margin structure and inventory management of channel products will also influence Q4 profit performance. If new product pacing and stock strategies match seasonal demand, consistent profit stability from the channel segment is likely.

Phased Pressure from Operating Investments and Profit Path Rebalancing

The pace and structure of transformation investments from Q3 to Q4 are vital for determining profit trajectories. Analysts broadly agree that labor investments and store refurbishment will pressure short-term profits but yield mid-term benefits for service efficiency and customer experience. Combining consensus EPS expectations for Q4 (about $0.55-0.58), the "pressure-recovery" profit dynamics are ongoing, driven mainly by the pace of same-store recovery, optimization of transaction structures through product and pricing strategies, and backend operational efficiency implementation. If U.S. store order completion rates improve significantly during peak periods, with sustained transaction growth and delivery channel activity in China, in combination with the revenue stability of channel development, albeit short-term margin pressures, the group can achieve marginal improvement signals, laying the foundation for future profit elasticity. On the cost side, continued realization of store construction cost reductions and scheduling optimizations will progressively reflect in improved unit hour productivity and single-store profitability through Q4.

Analyst Opinions

Regarding the Q4 outlook, recent institutional perspectives tend to lean "cautiously optimistic." Numerous media-referenced consensus expectations point to low single-digit revenue growth and year-over-year declines in EPS; Citi maintained a "neutral" rating in its August report, lowering the price target to $99, citing short-term profit drag from transformation investments but expected long-term improvements in customer experience and transaction volume. Morgan Stanley, Barclays, and Wells Fargo all commonly lowered price targets but maintained "overweight/outperform" ratings from late summer to early fall, identifying clear transformation directions, gradual realization of North American service and menu optimizations, and a recovery in Chinese momentum as the core logic. RBC maintained an "outperform" rating with a price target of $95, emphasizing international segment improvements and channel development stability, while Jefferies upgraded to "hold" post-Q2 with a $76 price target, noting the valuation provides downside protection. Recently, some institutions have minor adjustments to price targets within the $100-105 range while sustaining an optimistic outlook, highlighting Q4 as a validation period for the U.S. same-store inflection point and sustainable Chinese volume. Overall, the bullish camp predominates, but with high sensitivity to profit margin and same-store recovery pace, recommending priority observation of same-store trends and store efficiency metrics.

Conclusion

The main themes for Q4 are U.S. same-store recovery and sustained Chinese momentum, with transaction volume improvement signals expected to intensify under service efficiency renovations and value strategies. The market consensus anchors revenue growth expectations in the low single-digit range, with EPS still affected by transformation investments, requiring time and execution validation for profit path recovery. Channel development provides stable contributions, and member and mobile order coordination help offset customer traffic fluctuations. Institutional views generally lean "cautiously optimistic," stressing the replicability of service renovations and sustained improvements in international segments as key observation points. My assessment is that the critical validation for Q4 revolves around stable U.S. same-store recovery and sustained Chinese order momentum. As long as these two variables maintain improvement, despite near-term margin pressures, the restoration of revenue and transaction structures will continue to build momentum for future profit elasticity.

This content is generated by Tiger AI and is for reference only.