Starbucks Q2 revenue increased by 5% year-on-year, exceeding expectations, with same-store sales in the U.S. declining for six consecutive quarters, while the Chinese market became a highlight | Financial Report Insights

Despite a sixth consecutive quarter of declining same-store sales in the U.S., the overall decline was better than expected, and Starbucks' reforms are beginning to show promise, leading the market to "believe first."

The financial report released on Wednesday showed that Starbucks' adjusted earnings per share were $0.50, below the market expectation of $0.65, but revenue exceeded expectations, reaching $9.5 billion, a year-on-year increase of 5%.

In major markets, same-store sales in the U.S. fell 2% in the second quarter, unchanged from the previous quarter, but better than the analysts' expected decline of 2.5%. Although comparable transaction volume decreased by 4%, it still outperformed Wall Street's expected decline of 4.5%. Same-store sales in China continued to grow, as Starbucks is trying to emerge from its slump.

As a result of this news, Starbucks' stock price rose nearly 6% in pre-market trading on Wednesday.

"We have addressed many issues and worked hard on difficult matters to build a solid operational foundation. Based on my transformation experience, our progress is ahead of schedule," said Brian Niccol, who successfully led Chipotle through its transformation, in the announcement.

CFO Cathy Smith stated that while the company did not provide specific performance guidance for the full year, "we are confident that the business will continue to improve by 2026." She also emphasized that given the current consumer uncertainty, the company is taking a cautious approach to the fourth quarter of this fiscal year.

U.S. Market Sales Remain Weak, but Reforms Begin to Show

To reverse the downturn, Starbucks has launched a series of reform measures in the U.S. market, including layoffs, requiring more employees to return to the office, and increasing manpower in stores while reshaping service models.

The new "Green Apron Service" program will be fully implemented by mid-August, and pilot store data shows improvements in transaction volume, sales, and service efficiency.

Additionally, Starbucks plans to invest approximately $150,000 per store for small-scale upgrades to rebuild a "comfortable café atmosphere," replacing the previous fast-casual store experience.

The construction cost of new stores has also been reduced by about 30%, and a new prototype store with 32 seats and a drive-thru will be launched in fiscal year 2026.

China Market Becomes a Global Growth "Oasis"

Against the backdrop of a 2% year-on-year decline in global same-store sales, the China market has become a highlight, with a year-on-year increase of 2%, surpassing the expected 1.4%. The growth mainly comes from an increase in transaction volume, despite a decline in average transaction value, which is related to the company's proactive price reductions to compete with Luckin Coffee.

This marks the second consecutive quarter of positive same-store sales growth in the China market.

Starbucks management stated that they are looking for local partners to expand their long-term layout and "jointly believe that there are significant growth opportunities in this market."

From "Selling" to "Co-Creation"

In response to past criticisms of having an overly complex menu, Starbucks' product innovation is also undergoing transformation The new generation menu will launch a protein cold milk cap beverage in the fourth quarter, each cup containing 15 grams of protein with no added sugar, along with coconut water tea drinks and higher quality handmade food items in development.

It is worth noting that this round of innovation has shifted from a "top-down" approach led by headquarters to "co-creation" with store partners, making it more aligned with actual operations.

Nicole stated, "We will no longer 'throw' new products from headquarters to the front line, but involve store partners from the very beginning."