SBUX

The headline revenue line looks calm — up 2.8% to $37.2B in FY2025 — but earnings quality collapsed beneath it. Net income fell 50.6% to $1.86B, diluted EPS dropped 50.8% to $1.63, and operating margin compressed to 7.9%. The MD&A is candid that this is self-inflicted: deliberate 'Back to Starbucks' investments (the Green Apron Service model, added staffing and hours) ahead of any payoff. More telling, the modest top-line growth came from net new company-operated stores, the 23.5 Degrees acquisition, and the Global Coffee Alliance — not the existing base. Comparable store sales fell 2%, with transactions down 4%, only partly masked by 2% average-ticket growth that management attributes to the annualization of prior pricing. The core demand signal is shrinking, not growing.

The balance sheet adds caution. Stockholders' equity is -$8.10B and worsening, retained earnings -$8.27B — largely structural from years of buybacks, but buybacks are now zeroed ($0 vs prior years) while the dividend rose 7.2% to $2.77B, which exceeds free cash flow (operating cash flow $4.75B, itself down 22%, less $2.31B capex ≈ $2.44B). Total debt is roughly $16B and the current ratio sits at ~0.72. Cash generation is still real, but it is being stretched across a rising dividend, store-closure restructuring (584 North America closures, International closures continuing into 1H FY2026), and a margin-dilutive investment program.