Did Starbucks Really Beat Expectations?
Financial entertainment television has it wrong again
The Starbucks Q3 earnings report is out. The Bloomberg TV chyron flashed the breaking news that Starbucks’ same-store sales exceeded expectations. They did not.
Investors must stop getting their news from TV. When earnings reports are filed, the company issues a news release of the facts it reported to the SEC. Despite Bloomberg’s chyron, the facts tell a different story:
Global comparable store sales actually declined 2% in Q3 FY25.
In the US comp sales also fell 2%, driven by a 4% drop in transactions, slightly offset by a 2% increase in ticket size.
China showed improvement, with comp sales up 2%, thanks to a 6% boost in transactions, although average ticket shrank 4%.
So, China performed well, but company wide, there was no truth that comps “exceeded expectations.” It’s a slight miss globally and a notable underperformance in the US.
Moreover, while the Y/Y picture showed a +3.8% modest growth in revenue, overall EPS dropped about 46.5%. Operating margins dropped from 16.7% a year ago to this quarter’s 10.0%. And cash flow YTD dropped -26% from $4.56B to $3.37B,
Anybody except maybe Bloomberg and CNBC can see that Starbucks did not perform well. I view Starbucks as one of the Global Best 100 watchlist companies, but the stock (SBUX) is a different matter. It’s been on my Preferred List for a while — as in Prefer to Avoid.