STARBUCKS Q3 FY25 earnings call SBUX

Starbucks is actively executing its "Back to Starbucks" plan, focusing on improving operational foundations, partner engagement, and customer experience. The Green Apron Service model, a new foundational operating model establishing consistent standards, is being scaled across all U.S. company-operated coffeehouses in mid-August, ahead of schedule due to strong pilot results. This initiative includes an evolved staffing model and SmartQ technology for order sequencing, aiming to improve transaction times and customer service. A new "grow report" will be launched in Q1 FY26 to help coffeehouse leaders focus on key drivers of same-store sales growth.

The company is optimizing its store portfolio to enhance the customer experience and unit economics. This includes a new coffeehouse uplift program with a targeted investment of approximately $150,000 per store, aiming to complete at least 1,000 uplifts across North America by the end of calendar year 2026. Starbucks is also developing new, lower-cost prototype designs, including a 32-seat drive-thru model opening in FY26 and a 10-seat small format under construction. The mobile order and pickup-only concept will be sunset in FY26, as it was deemed too transactional and lacking human connection.

A robust innovation agenda is planned for fiscal year 2026, built on the new operational foundations. This includes new menu items such as protein cold foam, launching in late Q4, which adds 15 grams of protein to cold beverages. Early in calendar year 2026, a reimagined artisanal baked case and a new 1971 dark roast coffee will be introduced. Further innovations in 2026 will include global flavors, customizable energy offerings, and tests of gluten-free and high-protein food options. Significant enhancements are also planned for the Starbucks Rewards program and the new Starbucks app to improve loyalty and mobile order experiences.

The International segment achieved record-breaking quarterly revenue exceeding $2 billion, with 7 out of the top 10 markets showing positive comparable sales. China delivered 2% comparable sales growth and 6% transaction growth, driven by product innovation and marketing. Starbucks is actively evaluating strategic partners for its China business, having received interest from over 20 parties, with the goal of enhancing local operations and ensuring long-term growth while retaining a meaningful stake. Other markets like the U.K. and Latin America also demonstrated strong performance, with Mexico approaching the 1,000-store milestone.

Starbucks is making significant investments, including over $0.5 billion in additional labor hours for its U.S. company-operated portfolio over the next year, starting with the Green Apron Service rollout. To offset these investments and improve long-term margins, the company is focusing on driving a healthier and more efficient cost structure across the entire P&L. A comprehensive evaluation of the North American portfolio is underway to ensure disciplined capital deployment and optimize store locations for profitability and the Starbucks Experience. The goal is to build a more durable and sustainable cost structure for future growth.