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Fundamental View
AS OF 02 Apr 2026SBUX operates and licenses Starbucks cafe locations. The company is current midway through a restaurant revamp aimed at boosting traffic following weak results in 2024. The program aims at improving the in-store coffee shop experience by investing in labor and reducing the prioritization of takeaway.
The turnaround program has a large labor investment component that is weighing on margins. The company has a strong cash flow cushion and management has committed to high-BBB ratings, but leverage has crept to levels above the ratings range.
A JV deal with Boyu Capital, a Chinese private equity firm, is aimed to turn operations around in a struggling Chinese market, by both improving in-store experience and local relevance, and by expanding locations.
Business Description
AS OF 02 Apr 2026- SBUX is a leading coffee roaster and retailer. The company operates and licenses over 40,000 Starbucks locations worldwide where it sells premium coffee beverages as well as other specialty drinks and prepared foods. Slightly over half the locations are company operated (52%) and the rest are licensed to third party operators.
- In F2025, SBUX generated $37.2 bn in revenue and $5.5 bn in adjusted EBITDA. SBUX has three reporting segments: N. America (74% of F2025 revenue), which covers cafes in the U.S. and Canada; International (21%), which includes China, Japan, Latin America, and EMEA; and Channel Development (5.0%) which includes revenue from other branded products sold outside retail locations through partnerships with large consumer companies such as Nestle and PepsiCo.
- On a geographic basis, SBUX's two largest regions are the U.S. (47% of cafes), and China (37%).
Risk & Catalysts
AS OF 02 Apr 2026SBUX entered an agreement to form a JV with Boyu Capital to operate the company’s retail coffee business in China. The deal is expected to finalize in F2Q26, and management said it would use proceeds to repay debt. We estimate this could provide a three-tick improvement in lease adjusted leverage.
In response to the activist attacks, SBUX announced an unexpected change in CEO and hired Brian Niccol, a veteran of the quick service restaurant industry with a successful track record at Taco Bell and Chipotle.
Lower discretionary spending in the U.S. could continue to weigh on SBUX’s sales outlook. We view its premium-priced beverage offerings as having significant risk of consumer trade down into more value-oriented options.
Investments behind the company’s new store imaging have increased costs and weighed on margins, in large part due to significant investments in labor.
Key Metric
AS OF 02 Apr 2026| $ mn | Y22 | Y23 | Y24 | Y25 | LTM 1Q26 |
|---|---|---|---|---|---|
| Revenue | 32,250 | 35,976 | 36,176 | 37,184 | 37,702 |
| EBITDA | 6,385 | 7,252 | 7,001 | 5,463 | 5,340 |
| EBITDA Margin | 19.8% | 20.2% | 19.4% | 14.7% | 14.2% |
| EBITDA-Capex to Revenue | 14.1% | 13.7% | 11.7% | 8.5% | 9.0% |
| Total Debt | 15,044 | 15,400 | 15,568 | 16,075 | 16,080 |
| Net Debt | 12,226 | 11,848 | 12,282 | 12,855 | 12,667 |
| Net Leverage | 1.9x | 1.6x | 1.8x | 2.4x | 2.4x |
| Lease Adjusted Debt to EBITDAR | 3.1x | 2.8x | 3.0x | 3.8x | 3.9x |
| EV / EBITDA | 17.1x | 16.1x | 17.6x | 20.0x | 20.3x |
CreditSight View Comment
AS OF 29 Jan 2026SBUX is in the midst of an operational turnaround plan intent on reigniting foot traffic by improving the in-store experience. The “Back to Starbucks” program has come at the expense of margin due to heavy investments in labor. While the plan is ultimately to increase transactions and tickets due to improved experiences, we are skeptical that the company will be able to recoup the margin. Also, the strategy comes at a time when economic uncertainty could weigh on discretionary purchases. Management has committed to high-BBB ratings, but the margin compression is driving leverage creep. We recommend a wait and see approach to the name and favor McDonald’s bonds in the meanwhile.
Recommendation Reviewed: January 29, 2026
Recommendation Changed: May 01, 2024
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