01—Abstract
Summary
Summary of the 10-Q filed January 28, 2025. Cited figures are marked; the original filing is the authoritative source.
Starbucks Corporation reported its first quarter fiscal year 2025 results, showing a slight decrease in total net revenues to $9.40 billiona from $9.43 billion in the prior year, primarily driven by a decline in licensed store revenues.
While company-operated store revenues saw a modest increase due to new store openings and an acquisition, this was offset by a 4%b decline in comparable store sales globally, with both U.S. and international markets experiencing similar decreases. The company's operating margin contracted significantly, falling by 390 basis points to 11.9%. This was attributed to deleverage, increased investments in store partner wages and benefits as part of the "Back to Starbucks" plan, and the removal of extra charges for non-dairy milk customizations.
Despite these challenges, management highlighted early progress on its "Back to Starbucks" plan, focusing on strategic actions and operational efficiencies to drive future improvements. Net earnings attributable to Starbucks decreased to $780.8 millionc ($0.69 per diluted share) from $1.02 billion ($0.90 per diluted share) in the prior year's quarter.
The company's balance sheet remains solid, with total assets of $31.9 billiond and significant cash and investment balances. Starbucks continued to return capital to shareholders through its quarterly dividend, though share repurchases were suspended for the current quarter.
02—Key points
Key Highlights
- Total net revenues declined slightly by 0.3% to $9.398 billion, impacted by a 4.7% decrease in licensed store revenues.
- Comparable store sales decreased by 4% globally, with both North America and International segments experiencing a 4% decline.
- Operating income decreased by 24.4% to $1.12 billion, and the operating margin contracted by 390 basis points to 11.9%.
- Net earnings attributable to Starbucks fell 23.8% to $780.8 million, with diluted EPS decreasing to $0.69 from $0.90 year-over-year.
- Company-operated store revenue increased by 0.4% to $7.785 billion, driven by 1,347 net new company-operated stores.
- The company acquired 23.5 Degrees Topco Limited, converting 113 licensed stores to company-operated in the UK.
- Starbucks maintained a strong liquidity position with $4.2 billion in cash and investments and an undrawn $3.0 billion revolving credit facility.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed January 28, 2025Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $9.40B$9.43B | −0.3% |
| Operating Expenses | $8.32B$8.00B | +4.1% |
| Operating Income | $1.12B$1.49B | −24.5% |
| Interest Expense | $127.20M$140.10M | −9.2% |
| Net Income | $780.80M$1.02B | −23.8% |
| EPS (Basic) | $0.69$0.90 | −23.3% |
| EPS (Diluted) | $0.69$0.90 | −23.3% |
| Shares Outstanding (Basic) | 1.13B1.14B | −0.2% |
| Shares Outstanding (Diluted) | 1.14B1.14B | −0.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of the revenue decline?
The primary driver of the slight revenue decline was a decrease in revenue from licensed stores, which fell by 4.7% ($56.4 million), partially offset by a modest increase in company-operated store revenue.
What is causing the contraction in Starbucks' operating margin?
The operating margin contracted significantly by 390 basis points due to deleverage on lower comparable store sales, increased investments in store partner wages, benefits, and hours as part of the "Back to Starbucks" plan, and the removal of extra charges for non-dairy milk customizations. These factors were partially offset by pricing actions and supply chain efficiencies.
Did Starbucks repurchase any shares during this quarter?
No, Starbucks made no common stock share repurchases during the quarter ended December 29, 2024. However, 29.8 million shares remained available for repurchase under current authorizations.
How did the acquisition of 23.5 Degrees Topco Limited impact the results?
The acquisition of 23.5 Degrees Topco Limited, a U.K. licensed business partner, converted 113 licensed stores to company-operated stores. This contributed to the increase in company-operated store revenue but also had a $9 million impact on licensed store revenue due to the transition.
06—Continue