Starbucks Corporation

The filings show rising sales alongside weaker earnings. Fiscal 2025 revenue reached $37.18 billion, up 2.8% from $36.18 billion, yet net income fell to $1.86 billion from $3.76 billion, a decline of about 50%. Operating income fell to $2.94 billion from $5.41 billion, about 46% lower, and operating cash flow fell to $4.75 billion from $6.1 billion. The Beneish M-Score is -2.880. Its label places it below -1.78, outside the elevated manipulation-risk zone. That is a screening result, not proof either way, and it does not place the company in the elevated zone. The Altman Z-Score variant shown here is -1.02, which the label places in the distress zone. This is a statistical screen built from balance sheet ratios, and its inputs include book equity, which was negative at -$8.1 billion at fiscal 2025 year-end. Readers may want to look at the debt and liability schedules rather than treating the score as a default forecast. The Piotroski F-Score is 5 of 7 computable signals, a mixed result on the nine-part checklist of profitability, leverage and efficiency. The operating cash flow to net income ratio of 2.56 is high mainly because net income fell, not because cash rose. The concrete items to track are comparable store sales, the Global Coffee Alliance, the Nashville support office, the store closures under the restructuring plan, and the China joint venture disclosures. The risk factor excerpt emphasizes brand erosion from negative publicity and social media, and the excerpt does not show the full list of risks.

Catalyst.According to the MD&A, the 'Back to Starbucks' turnaround is the current driver. In the second quarter of fiscal 2026, consolidated net revenues rose 8.8% to $9,531.5 million, led by a 6.2% increase in global comparable store sales, with U.S. comparable transactions up 4.3% and average ticket up 2.7%. Operating margin expanded 180 basis points to 8.7%, which management attributes mainly to sales leverage and lower store operating and depreciation costs tied to the China retail assets classified as held for sale, partly offset by labor investments. For the two quarters, revenue rose 7.1% to $19,446.6 million. Other revenues, which include the Global Coffee Alliance, rose $166.1 million in the quarter.

Hidden risk.The most material tension is that part of the margin gain reflects accounting timing. The MD&A says ceasing depreciation and store operating costs on the China assets held for sale helped lift operating margin. The China joint venture closed on March 30, 2026, with Boyu Capital acquiring a 60% stake and Starbucks keeping 40%. Starting in the third quarter of fiscal 2026, reported revenue is expected to fall and operating margin to rise, because 7,991 company-operated stores move to a licensed model. The balance sheet is also thin: at fiscal 2025 year-end, liabilities of $40.11 billion exceeded assets of $32.02 billion, and long-term debt was $14.58 billion. Management plans to use proceeds for debt reduction, but the amount is not in the excerpt.