Can China Momentum Balance Starbucks' U.S. Comps Challenges?

Starbucks Corporation SBUX is leaning on the fastest-growing international market as it navigates softer results in the United States. With consumer behavior shifting and competitive pressures rising, the question is whether China’s growth can offset domestic headwinds in the quarters ahead.

In the third quarter of fiscal 2025, U.S. comparable store sales fell 2% year over year, with transactions down nearly 4%. The decline was largely due to lapping heavy discounting and promotional activity from the prior year, which temporarily boosted traffic. Softer demand in certain dayparts added pressure, although the company noted that these trends reflect a more challenging comparison base rather than a sudden drop in customer engagement.

In contrast, China delivered solid and broad-based momentum. Comparable store sales in the market grew 2%, driven by a 6% increase in transactions. Growth was fueled by a strong pipeline of beverage innovation, refined pricing strategies that resonated with local consumers, and a surge in delivery sales as convenience becomes a bigger part of purchasing behavior. Starbucks’ continued investments in localized offerings and operational improvements are deepening brand relevance, drawing in more frequent visits and expanding its customer base in a competitive landscape.

While U.S. comps remain under strain, China’s ability to combine product innovation, pricing power and delivery strength offers a meaningful counterbalance. As Starbucks works to stabilize domestic performance, its execution in China will be a critical driver in shaping overall comparable sales trends heading into 2025.

SBUX’s Price Performance, Valuation & Estimates

Shares of Starbucks have gained 21.7% in the past year compared with the industry’s rise of 7.7%.

Other renowned firms that share the market space with SBUX include Dutch Bros Inc. BROS and Chipotle Mexican Grill, Inc. CMG. In the past year, shares of Dutch Bros have gained 127.2%, while Chipotle has declined 21.8%, respectively.

From a valuation standpoint, Starbucks trades at a forward price-to-sales ratio of 2.66, below the industry’s average of 3.83.

Notably, Dutch Bros and Chipotle are currently trading at a forward 12-month P/S ratio of 6.4 and 4.38, respectively.

The Zacks Consensus Estimate for SBUX’s fiscal 2025 EPS implies a decline of 30.5% year over year and the same for 2026 EPS indicates a rise of 18.2%. The EPS estimates for fiscal 2025 and 2026 have declined in the past 30 days.

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

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

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

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