Starbucks Q3 Earnings Hurt by Lower Comps, Signs of Turnaround Emerge

Starbucks Corporation SBUX reported mixed third-quarter fiscal 2025 results, with earnings missing the Zacks Consensus Estimate and net revenues beating the same. The top line increased year over year, but the bottom line declined.

SBUX Q3 Comps

In the third quarter of fiscal 2025, Starbucks reported a 2% decline in global comps, with a similar 2% decline in the U.S. market. This performance was largely shaped by a combination of internal strategic shifts and external challenges.

The decline in U.S. comparable transactions, down nearly 4%, was largely attributed to the company lapping heavy discounting and promotional activity from the prior year. Management emphasized that in third-quarter fiscal 2024, aggressive discounting had artificially inflated sales, making year-over-year comparisons tougher. Despite this headwind, there were encouraging signs. U.S. company-operated transaction comps improved sequentially for the third consecutive quarter, and more stores saw positive full-day and morning transactions. Notably, non-Rewards customers grew year over year for the first time since the pandemic recovery.

Another positive trend was a 2% increase in ticket size, reflecting a shift away from deep discounting. Starbucks reduced the share of discounted transactions by one-third to rebuild healthier transaction quality and improve customer value perception, especially among younger demographics like Gen Z and millennials.

On the international front, comparable store sales were buoyed by China’s performance, which saw a 2% comp growth and 6% transaction increase, aided by beverage innovation, new pricing strategies, and stronger delivery sales.

SBUX Guidance

While Starbucks did not issue formal guidance, management conveyed a conservative outlook for the fourth quarter of fiscal 2025. Executives acknowledged the unpredictable consumer environment and the uncertain mix of ticket and transaction growth. Although transactions are improving, the net effect on fourth-quarter fiscal 2025 comps remains unclear. The company is focused on scaling its “Green Apron Service” operating model and foundational changes, which are expected to gain traction through fiscal 2026.

Overall, while third-quarter fiscal 2025 comps were negative, Starbucks is optimistic that its back-to-basics strategy and operational revamp will stabilize and ultimately improve same-store sales performance in the quarters ahead.

SBUX’s Zacks Rank & Key Picks

Starbucks currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Cracker Barrel Old Country Store, Inc. CBRL, Yum China Holdings, Inc. YUMC and Yum! Brands, Inc. YUM.

Cracker Barrel currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cracker Barrel has gained 24.4% in the year-to-date period. The Zacks Consensus Estimate for Cracker Barrel’s fiscal 2026 sales and EPS indicates growth of 1.8% and 9.4%, respectively, from the year-ago period’s levels.

Yum China presently carries a Zacks Rank #2 (Buy). The stock has gained 5.2% in the past six months.

The Zacks Consensus Estimate for Yum China's 2025 sales and EPS implies growth of 2.8% and 6.9%, respectively, from the year-ago levels.

Yum! Brands presently carries a Zacks Rank #2. The stock has gained 9.4% in the year-to-date period.

The Zacks Consensus Estimate for Yum! Brands’ 2025 sales and EPS indicate an increase of 6.9% and 10%, respectively, from the year-ago levels.

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This article originally published on Zacks Investment Research (zacks.com).

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