Starbucks Q2 Earnings Disappoint: ETFs in Focus

Starbucks SBUX reported second-quarter fiscal 2025 results on April 29 after market hours. The world’s largest coffee house chain currently has a Zacks Growth Score of A but has a Zacks Rank #5 (Strong Sell).

Negative investor sentiments were witnessed as the company delivered an underwhelming earnings performance. Following the results, SBUX stock declined 9.6% before market open on April 30. However, the coffee chain has gained about 6.6% since then (as of May 1).

Starbucks CEO, Brian Niccol, as quoted on the company’s earnings release, expressed growing optimism in the company’s “Back to Starbucks” plan as the right strategy to revive growth and seize future opportunities.

According to TradingView, with the Back to Starbucks plan, the coffee house is prioritizing atmosphere, improving throughput, and boosting customer satisfaction, with a focus on hiring more staff and expanding digital engagement.

Breaking Down Earnings

The bottom line decreased 39.7% year over year from adjusted earnings of $0.68 per share reported in the prior-year quarter, reaching $0.41 in fiscal second-quarter 2025. SBUX missed the Zacks Consensus Estimate of $0.49 by 16.3%.

Starbucks’ top line increased 2.3% year over year to $8.76 billion. However, even after this rise, revenues fell short of the Zacks Consensus Estimate of $8.79 billion.

Global comparable store sales declined 1% year over year. The downside was due to a decrease of 2% in comparable transactions, partially overshadowed by a 1% increase in average tickets. During the quarter, Starbucks opened 213 net new stores worldwide, taking the total store count to 40,789 at the quarter’s end.

The company’s non-GAAP operating margin contracted 4.60% to 8.2% from the prior year, primarily due to deleverage and increased labor costs associated with the Back to Starbucks initiative.

Segmental Earnings Breakdown

The net revenues for the company’s North America segment were $6.47 billion, up 1% year over year. Operating margin contracted 6.4% to 11.6% from 18% in the prior-year quarter, with our model expecting this segment’s operating margin to be 13.4%.

The international segment’s net revenues of $1.87 billion increased 6% year over year. Operating margin contracted 1.7% year over year to 11.6%.

ETFs in Focus

Investors wanting to monitor the coffee house chain can consider the following ETFs with exposure to the company.

Hennessy Stance ESG ETF (STNC)

Hennessy Stance ESG ETF charges an annual fee of 0.85% and has amassed an asset base of $87.3 million.

Hennessy Stance ESG ETF has an exposure of 2.5% in SBUX.

Consumer Discretionary Select Sector SPDR Fund (XLY)

Consumer Discretionary Select Sector SPDR Fund charges an annual fee of 0.08% and has amassed an asset base of $19.5 billion.

Consumer Discretionary Select Sector SPDR Fund has an exposure of 2.65% in SBUX.

Vanguard Consumer Discretionary ETF (VCR)

Vanguard Consumer Discretionary ETF charges an annual fee of 0.09% and has amassed an asset base of $5.35 billion.

Vanguard Consumer Discretionary ETF has an exposure of 2.02% in SBUX.

Fidelity MSCI Consumer Discretionary Index ETF (FDIS)

Fidelity MSCI Consumer Discretionary Index ETF charges an annual fee of 0.08% and has amassed an asset base of $1.73 billion.

Fidelity MSCI Consumer Discretionary Index ETF has an exposure of 2% in SBUX.

iShares U.S. Consumer Discretionary ETF (IYC)

iShares U.S. Consumer Discretionary ETF charges an annual fee of 0.39% and has amassed an asset base of $1.3 billion.

iShares U.S. Consumer Discretionary ETF has an exposure of 1.59% in SBUX.

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

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