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1. Company Snapshot

1.a. Company Description

Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of specialty coffee worldwide.The company operates through three segments: North America, International, and Channel Development.Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single serve products, and ready-to-drink beverages; and various food products, such as pastries, breakfast sandwiches, and lunch items.


The company also licenses its trademarks through licensed stores, and grocery and foodservice accounts.The company offers its products under the Starbucks, Teavana, Seattle's Best Coffee, Evolution Fresh, Ethos, Starbucks Reserve, and Princi brands.As of October 3, 2021, it operated 16,826 company-operated and licensed stores in North America; and 17,007 company-operated and licensed stores internationally.


The company was founded in 1971 and is based in Seattle, Washington.

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1.b. Last Insights on SBUX

Starbucks' recent performance has been negatively impacted by faltering US sales, shrinking margins, and execution risks associated with its turnaround efforts. The company's third-quarter fiscal 2025 results reflected margin pressure and soft global comparable sales. Jefferies downgraded the stock to "underperform" from "hold", citing concerns about its growth trajectory and priorities. Despite a revenue beat, the company's earnings missed estimates due to softer customer traffic and higher costs. Starbucks is betting on new beverage innovation, including protein cold foam and coconut water drinks, to revive slipping US comparable sales.

1.c. Company Highlights

2. Starbucks' Q4 FY2025 Earnings: A Mixed Bag

Starbucks reported Q4 FY2025 consolidated revenue of $9.6 billion, up 5% year-over-year, driven by 2% net new company-operated store growth and a 1% increase in global comparable store sales. However, the company's operating margin contracted 500 basis points due to inflation, coffee prices, and investments in its "Back to Starbucks" strategy. The EPS came in at $0.52, slightly below estimates of $0.556. The company's U.S. comparable store sales were flat year-over-year, with ticket growth offset by fewer transactions.

Publication Date: Oct -31

📋 Highlights
  • Revenue Growth:: Q4 consolidated revenue reached $9.6 billion, reflecting a 5% year-over-year increase driven by 2% net new store growth and 1% global comparable store sales growth.
  • Delivery Expansion:: Delivery sales grew nearly 30% YoY in Q4, surpassing $1 billion in annual sales for the first time.
  • International Performance:: International segment achieved 3% comp sales growth in Q4 and reported $2.1 billion in revenue, a 9% YoY increase.
  • Green Apron Service Impact:: Full U.S. rollout of the service improved customer experience scores and reduced hourly staff turnover to record lows.
  • Strategic Closures and Costs:: 107 net store closures globally are expected to slightly improve operating margins by 2026, offset by sales transfers to nearby locations.

Operational Highlights

The company made significant progress in its "Back to Starbucks" strategy, with the implementation of its Green Apron Service standard across its U.S. company-operated portfolio. This led to strong partner engagement, record low hourly partner turnover, and improved customer experience scores. The company's delivery business also grew nearly 30% year-over-year, surpassing $1 billion in sales for the full fiscal year.

Margin Pressures and Cost Management

Despite the revenue growth, the company's operating margin was under pressure due to inflation and investments in its strategy. However, the company has taken decisive action to accelerate its turnaround, including simplifying its support organization and closing 107 net stores globally. These closures are expected to be slightly accretive to the company's profitability going forward.

Valuation and Outlook

With a P/E Ratio of 51.1 and an EV/EBITDA of 26.18, the company's valuation appears to be stretched. However, the company's expected revenue growth of 4.0% in FY2026 and its focus on improving profitability could support the stock. The company's ROE is negative, at -24.05%, but its ROIC is 8.74%, indicating that the company is generating returns on its invested capital. As the company continues to execute its strategy and improve its operational performance, investors will be watching to see if the company can deliver on its growth expectations.

Growth Opportunities

The company is optimistic about its protein drink platform, which has exceeded expectations and is being expanded to additional markets. The company is also seeing growth opportunities in its license business, particularly in China. However, the company faces increasing competition from emerging beverage brands, and will need to continue to innovate and improve its customer experience to stay ahead.

3. NewsRoom

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Market Today: WBD Sale Bids, Meta Cuts, Apple Shake-Up

Dec -04

Source: gurufocus.com

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Starbucks Workers United holds rally in NYC as strikes continue for a third week

Dec -04

Source: cnbc.com

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How Good Has Starbucks (SBUX) Stock Actually Been?

Dec -04

Source: fool.com

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Starbucks (SBUX) Laps the Stock Market: Here's Why

Dec -03

Source: zacks.com

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Zohran Mamdani Says Starbucks CEO Brian Niccol Made $95 Million Last Year, While His Workers Struggle For The 'Bare Minimum'

Dec -03

Source: feeds.benzinga.com

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Market Today: Deal Talks, Retail Wins, AI Chips, and Crypto Volatility

Dec -02

Source: gurufocus.com

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Starbucks Declares Quarterly Cash Dividend

Dec -02

Source: businesswire.com

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Starbucks To Pay $38.9 Million To Settle Violations Of New York City Labor Law

Dec -02

Source: forbes.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.50%)

6. Segments

North America

Expected Growth: 6.3%

Starbucks' strong brand recognition, increasing demand for premium coffee, and strategic store expansion in the US and Canada will drive growth.

International

Expected Growth: 6.3%

Starbucks International's growth is driven by increasing demand for premium coffee, expanding presence in emerging markets, and strategic partnerships to enhance customer experience.

Channel Development

Expected Growth: 10.4%

Starbucks' Channel Development segment is poised for growth, driven by expanding digital platforms, strategic retail store openings, and increasing penetration in the grocery channel, all of which will enhance customer reach and drive sales.

Corporate and Other

Expected Growth: 4.1%

Starbucks' headquarters and support centers will drive growth through strategic planning, cost savings initiatives, and investments in digital transformation, supply chain optimization, and employee development.

7. Detailed Products

Beverages

Starbucks offers a wide range of hot and cold beverages, including coffee, tea, iced coffee, Refreshers, and seasonal offerings.

Coffee

Starbucks sources high-quality Arabica coffee beans from around the world and roasts them in-house to bring out the unique flavors and aromas.

Food

Starbucks offers a variety of baked goods, sandwiches, salads, and snacks, including healthy and indulgent options.

Merchandise

Starbucks sells a range of branded merchandise, including mugs, tumblers, and accessories.

Gift Cards

Starbucks offers digital and physical gift cards that can be used to purchase Starbucks products and experiences.

Starbucks Rewards

Starbucks Rewards is a loyalty program that rewards customers for their purchases and offers personalized benefits and offers.

Mobile Order and Pay

Starbucks offers a mobile ordering and payment service that allows customers to order and pay for their drinks and food ahead of time.

8. Starbucks Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Starbucks faces moderate threat from substitutes such as tea, juice, and other beverages. However, the company's strong brand loyalty and customer experience help to mitigate this threat.

Bargaining Power Of Customers

Starbucks customers have low bargaining power due to the company's strong brand and limited alternatives. However, the company's customer-centric approach helps to maintain customer loyalty.

Bargaining Power Of Suppliers

Starbucks has a diversified supply chain and long-term contracts with suppliers, reducing the bargaining power of suppliers. The company's scale and global presence also give it negotiating power.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the coffee shop industry, including high startup costs and the need for a strong brand and supply chain.

Intensity Of Rivalry

The coffee shop industry is highly competitive, with many established players and a high level of rivalry. Starbucks competes with other coffee chains, as well as independent coffee shops and cafes.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 148.15%
Debt Cost 3.95%
Equity Weight -48.15%
Equity Cost 8.76%
WACC 1.63%
Leverage -307.70%

11. Quality Control: Starbucks Corporation passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Booking

A-Score: 6.3/10

Value: 3.8

Growth: 8.7

Quality: 8.0

Yield: 1.0

Momentum: 7.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Yum!

A-Score: 5.9/10

Value: 4.0

Growth: 4.8

Quality: 6.4

Yield: 4.0

Momentum: 7.0

Volatility: 9.3

1-Year Total Return ->

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Stock-Card
PulteGroup

A-Score: 5.8/10

Value: 5.9

Growth: 8.8

Quality: 7.6

Yield: 2.0

Momentum: 4.0

Volatility: 6.3

1-Year Total Return ->

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Stock-Card
McDonald's

A-Score: 5.5/10

Value: 3.6

Growth: 4.8

Quality: 6.5

Yield: 4.0

Momentum: 4.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Starbucks

A-Score: 4.8/10

Value: 3.6

Growth: 5.6

Quality: 4.3

Yield: 5.0

Momentum: 3.0

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
Chipotle Mexican Grill

A-Score: 3.9/10

Value: 2.2

Growth: 8.4

Quality: 5.7

Yield: 0.0

Momentum: 1.0

Volatility: 6.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

85.12$

Current Price

85.12$

Potential

0.00%

Expected Cash-Flows