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Starbucks (SBUX) delivered mixed 3Q25 results, with EPS of $0.50 missing expectations, while revenue of $9.5 bln surpassed the FactSet consensus forecast of $9.29 bln. Despite the EPS shortfall, the stock is trading sharply higher, reflecting investor relief that results were better-than-feared and optimism sparked by CEO Brian Niccol’s upbeat commentary on the U.S. turnaround. Niccol’s emphasis on early progress in the “Back to Starbucks” initiative, coupled with stabilizing demand, overshadowed the earnings miss and fueled positive sentiment among investors.

• The EPS miss was primarily driven by a significant 660-bps contraction in the non-GAAP operating margin to 10.1%, largely due to strategic investments tied to the “Back to Starbucks” turnaround plan. These costs included a substantial $500 mln commitment to additional labor hours for U.S. stores, set to begin with the Green Apron service rollout in mid-August, and expenses from the Leadership Experience 2025 conference, which alone accounted for an 11-cent hit to EPS.
• Investors appear willing to overlook these temporary pressures, as the margin decline reflects deliberate efforts to reposition the U.S. business, which is showing signs of stabilization and improved customer engagement.
• In the U.S., SBUX reported a 2% decline in comparable store sales, consistent with the prior quarter but slightly better than analysts’ expectations. Foot traffic remained a challenge, with transactions down 4%, though this was partially offset by a 2% increase in average ticket, signaling resilience in customer spending per visit. 
• Adding to the positive sentiment, CEO Brian Niccol, who successfully revitalized Chipotle (CMG) during his tenure there as CEO, noted that SBUX’s turnaround is progressing ahead of schedule, leveraging his proven expertise in operational transformation to bolster investor confidence.
• In China, SBUX demonstrated notable improvement, with comparable store sales rising 2%, driven by a robust 6% increase in transactions. This marks a significant rebound from prior quarters of decline, reflecting the company’s strategic price adjustments, such as a 5-yuan reduction on select iced drinks to counter competition from local rivals like Luckin Coffee. SBUX is also exploring a strategic partnership for its China business which could further strengthen its market position and drive sustained growth in this critical region.

SBUX's Q3 results reveal encouraging green shoots in the U.S. business, with the “Back to Starbucks” plan gaining traction through improved customer engagement and operational enhancements. While challenges remain, the stabilization in U.S. comparable sales and strong recovery in China suggest that Niccol’s strategic vision is beginning to deliver, providing the critical momentum investors are seeking for long-term value creation.