✦ China as a RoyaltyNarrow moat

Starbucks (SBUX) — the future bets

Starbucks has stopped trying to win China and started charging rent there instead, which is the right decision taken late.

1. ReportedThe transaction closed on 30 March 2026: Boyu Capital acquired 60% of Starbucks' Chinese retail operations at a cash-free, debt-free enterprise value of approximately $4 billion, with Starbucks taking $3.1 billion of total consideration — inclusive of its share of debt raised by the new joint venture — and retaining a 40% interest carried at about $1.2 billion.
   Starbucks announcement of its reimagined Starbucks Rewards program and subsequent coverage, 2026. The updated program launched on 10 March 2026 and introduces three levels of membership — Green, Gold and Reserve — offering new and exclusive benefits. Evolving from the previous structure, in which Star earning was tied solely to payment type, the new program enables members to accelerate their Star earning as their activity grows; Green level members can keep Stars from expiring with monthly activity, while Gold and Reserve level members unlock Stars that never expire. The 60-point reward, which offers a $2 discount on any item, has become Starbucks Rewards' most-used benefit, accounting for about one-third of all loyalty point redemptions. In the United States, 90-day active Starbucks Rewards membership grew 4% year over year to a record 35.6 million as reported with second-quarter fiscal 2026 results, and the loyalty program has been growing membership and driving frequency following the changes that went live in March. Under the new structure Green members earn 1 Star per dollar with Stars valid for six months, extendable monthly with qualifying activity; Gold members, qualifying on 500 Stars earned in 12 months, earn 1.2 Stars per dollar with Stars that never expire; and Reserve members, qualifying on 2,500 Stars earned in 12 months, earn 1.7 Stars per dollar, also with Stars that never expire. Chief financial officer Cathy Smith reported the 35.6 million figure, and chief executive Brian Niccol said a growing number of customers are visiting four or more times a week since the relaunch and that digital card loading volumes exceeded expectations, adding that the company had to stop doing all that discounting and make the programme about engagement. — 2026 · publ. 2026-03 · source ↗
2. Reported7,991 company-operated stores became licensed stores inside the International segment, and Starbucks continues to own and license the brand and IP to the venture.
   Starbucks Corporation, Form 10-Q for the quarter ended 28 June 2026 (SEC, CIK 829224). Net revenues for the quarter: company-operated stores $7,506.1M against $7,812.5M, licensed stores $1,200.8M against $1,105.6M, other $615.8M against $537.9M, total $9,322.7M against $9,456.0M; for the three quarters $28,769.3M against $27,615.4M. Restructuring and impairments $302.6M against $20.8M for the quarter and $415.8M against $137.0M for the three quarters. Income from equity investees $78.6M. Operating income $980.4M against $935.6M for the quarter and $2,699.3M against $2,658.4M for the three quarters. Net gain resulting from divestiture of certain operations $536.3M. Net earnings attributable to Starbucks $1,045.3M against $558.3M; diluted EPS $0.91 against $0.49 for the quarter and $1.62 against $1.51 for the three quarters, on 1,143.8 million diluted shares; shares outstanding 1,140.0 million as of 23 July 2026. Starbucks has a presence in 90 markets and, as of 28 June 2026, more than 41,000 company-operated and licensed stores, an increase of 1% from the prior year. Consolidated net revenues decreased 1% to $9.3 billion primarily due to the conversion of Starbucks retail operations in China to the licensed joint venture model, offset by a 7.9% increase in global comparable store sales driven by a 7.9% increase in the US market, where the increase was driven by a 4.2% increase in comparable transactions and a 3.6% increase in average ticket, primarily driven by higher delivery sales and strength in customer food attach and beverage modifications; consolidated operating margin expanded 60 basis points to 10.5%, primarily driven by sales leverage and lower inflation paired with tariff refunds, offset by higher restructuring costs and labour investments largely in support of Back to Starbucks. North America total net revenues for the quarter were $7,395.1M (company-operated $6,754.8M, licensed $639.4M), up 7%, driven by an 8.1% increase in comparable store sales on a 4.5% increase in comparable transactions and a 3.5% increase in average ticket; North America operating income increased 10% to $1,008.9M with the margin expanding 30 basis points to 13.6%, driven by sales leverage (approximately 340 basis points), lapping of the Leadership Experience 2025 (approximately 120) and lower inflation paired with tariff refunds (approximately 110), partially offset by higher restructuring costs (approximately 240), labour investments (approximately 190) and product mix shift (approximately 100); store operating expenses were 56.1% of company-operated store revenue against 56.5%, and 57.3% against 56.4% for the three quarters. For the first three quarters North America revenue rose 5% on a 6.2% increase in comparable store sales, with operating income down 10% to $2.6 billion and the margin contracting 210 basis points to 11.8%, primarily driven by labour investments largely in support of Back to Starbucks (approximately 240 basis points). International quarter revenues were $1,322.6M against $2,010.7M, with company-operated store revenue falling from $1,526.8M to $751.3M and licensed store revenue rising from $465.1M to $561.4M. On 30 March 2026 Starbucks completed the divestiture of its retail operations in China; Boyu Capital acquired a 60% interest based on a cash-free, debt-free mutually agreed total enterprise value of approximately $4 billion, the transaction was partially financed with debt issued by the newly formed joint venture, and Starbucks received total consideration of $3.1 billion inclusive of its share of the debt proceeds, retaining a 40% interest of approximately $1.2 billion accounted for under the equity method. Starbucks derecognised net assets with a carrying value of $3.4 billion and reclassified approximately $282.8 million of cumulative translation adjustment losses and $99.7 million of net investment hedge losses from accumulated other comprehensive income into earnings, recognising a pre-tax gain of $536.3 million; incremental income tax expense associated with the gain is approximately $198.6 million and transaction costs were approximately $44.1 million for the quarter and $73.8 million for the three quarters. Upon completion, 7,991 company-operated stores previously included in the disposal group were converted to licensed stores within the International segment, and Starbucks continues to own and license the Starbucks brand and intellectual property to the joint venture; for the third quarter, revenues generated from the joint venture were $52.5 million and related product and distribution costs $18.5 million, with the carrying value of the investment $1.2 billion. Starbucks expects the conversion to the licensed joint venture model to continue to drive lower revenues and higher operating margin, used a portion of transaction proceeds for debt reduction, and states a shared long-term aspiration to grow to as many as 20,000 locations in China over time. In the second quarter of fiscal 2026 management approved a restructuring plan to relocate certain functions of the support organisation to an additional office in Nashville, Tennessee; in the third quarter it announced an additional fiscal 2026 restructuring plan focused on further transformation of the global support organisation and non-retail facilities and on reducing the future operational complexity of Starbucks Reserve and Roastery locations, resulting in a reassessment and impairment of the associated asset group. — Q3 FY2026 · publ. 2026-07-29 · source ↗
3. ReportedChina was $3,160.8 million of revenue — 8.5% of the company — and consumed a disproportionate share of capital and attention.
   Starbucks Corporation, Form 10-K FY2025 — Note 11, Deferred Revenue, Note 17, Segment Reporting, Note 18, Restructuring, and Note 19, Subsequent Event. During fiscal 2018 Starbucks licensed the rights to sell and market its products in authorized channels through the Global Coffee Alliance and received an up-front prepaid royalty from Nestlé; the up-front payment of approximately $7 billion was recorded as deferred revenue because Starbucks has continuing performance obligations to support the alliance, including providing Nestlé access to certain intellectual properties and products for future resale, and is being recognised as other revenue on a straight-line basis over the estimated economic life of the arrangement of 40 years (a term beginning in fiscal 2018 and therefore running to 2058), a ratable pattern reflecting obligations that are generally constant throughout the term. As of 28 September 2025 the current and long-term deferred revenue related to the Nestlé up-front payment was $177.0 million and $5.6 billion respectively, against $177.0 million and $5.8 billion a year earlier, and Starbucks recognised $176.5 million of prepaid royalty revenue related to Nestlé in each of fiscal 2025, 2024 and 2023. Changes in the deferred revenue balance for stored value cards and the loyalty program: opening balance at 29 September 2024 of $1,718.7 million, revenue deferred from card activations, card reloads and Stars earned of $15,245.8 million, revenue recognised from card and Stars redemptions and breakage of $(15,199.5) million, other $(13.3) million, closing balance at 28 September 2025 of $1,751.7 million; the prior year ran from $1,567.5 million with $15,807.1 million deferred and $(15,665.1) million recognised. For the fiscal years ended 28 September 2025, 29 September 2024 and 1 October 2023, Starbucks recognised breakage revenue of $200.4 million, $187.6 million and $196.1 million in company-operated store revenues, and $22.0 million, $20.0 million and $18.9 million in licensed store revenues. Total breakage recognised in fiscal 2025 across company-operated and licensed store revenues was therefore $222.4 million. Customers who register their stored value card in the US, Canada and certain other countries are automatically enrolled in Starbucks Rewards, primarily a spend-based loyalty program in which members earn Stars; in many company-operated markets including the US the cards do not expire and no service fees decrement balances, and a portion is recognised as breakage over time in proportion to redemptions based on historical redemption rates by market. Segment revenue mix by product type: beverage $22,539.9M (61%), food $7,049.9M (19%), other $7,594.6M (20%) for fiscal 2025. Information by geographic area: net revenues United States $27,124.7M, China $3,160.8M, other countries $6,898.9M; long-lived assets United States $15,952.7M, China $4,276.8M, other countries $4,407.9M; no customer accounts for 10% or more of revenues. Segment financials fiscal 2025: North America $27,373.1M, International $7,819.9M, Channel Development $1,871.7M, Corporate and Other $119.7M; fiscal 2024: $27,009.5M, $7,338.9M, $1,769.8M, $58.0M; fiscal 2023: $26,569.6M, $7,487.6M, $1,893.8M. On 3 November 2025 Starbucks announced an agreement to form a joint venture with Boyu Capital to operate Starbucks retail in China, under which Boyu will acquire up to a 60% interest based on a cash-free, debt-free mutually agreed total enterprise value of approximately $4 billion, with Starbucks retaining a 40% interest and continuing to own and license the Starbucks brand and intellectual property to the new entity, expected to close by early calendar year 2026. — FY2025 · publ. 2025-11-14 · source ↗
4. ReportedStarbucks used part of the proceeds to reduce debt.
   Starbucks Corporation, Form 10-K FY2025 — consolidated statements of earnings, balance sheets and cash flows. Net revenues: company-operated stores $30,744.8M, $29,765.9M and $29,462.3M; licensed stores $4,350.4M, $4,505.1M and $4,512.7M; other $2,089.2M, $1,905.2M and $2,000.6M; total $37,184.4M, $36,176.2M and $35,975.6M for fiscal 2025, 2024 and 2023. Product and distribution costs $11,658.2M; store operating expenses $17,058.9M against $15,286.5M and $14,720.3M; other operating expenses $584.6M; depreciation and amortisation $1,684.7M; general and administrative $2,617.2M; restructuring and impairments $892.0M against nil and $21.8M; total operating expenses $34,495.6M; income from equity investees $247.8M against $301.2M and $298.4M; operating income $2,936.6M against $5,408.8M and $5,870.8M; interest income and other net $113.3M; interest expense $542.6M against $562.0M and $550.1M; earnings before income taxes $2,507.3M; income tax expense $650.6M; net earnings attributable to Starbucks $1,856.4M against $3,760.9M and $4,124.5M; diluted EPS $1.63 against $3.31 and $3.58 on 1,139.8 million diluted shares. Balance sheet at 28 September 2025: cash and cash equivalents $3,219.8M, short-term investments $247.2M, accounts receivable $1,277.5M, inventories $2,185.6M, total current assets $7,382.3M, equity investments $466.2M, property plant and equipment net $8,493.5M, operating lease right-of-use asset $9,315.7M, goodwill $3,368.9M, total assets $32,019.7M; accounts payable $1,852.8M, accrued liabilities $2,359.7M, current portion of operating lease liability $1,564.5M, stored value card liability and current portion of deferred revenue $1,840.6M, current portion of long-term debt $1,498.9M, total current liabilities $10,210.4M, long-term debt $14,575.9M, operating lease liability $8,972.2M, deferred revenue $5,772.6M, total liabilities $40,108.9M, retained deficit $(8,272.5)M, total shareholders' deficit $(8,096.6)M, with 1,136.9 million shares issued and outstanding against 1,133.5 million. Cash flows: net earnings including noncontrolling interests $1,856.7M, depreciation and amortisation $1,771.5M, non-cash lease costs $1,513.8M, loss on disposal, impairment and accelerated amortisation of assets $834.7M, stock-based compensation $318.3M; net cash provided by operating activities $4,747.5M against $6,095.6M and $6,008.7M; additions to property, plant and equipment $2,305.5M against $2,777.5M and $2,333.6M. Historic figures from EDGAR XBRL: revenue $19,162.7M (FY2015), $21,315.9M, $22,386.8M, $24,719.5M, $26,508.6M, $23,518.0M (FY2020), $29,060.6M, $32,250.3M, $35,975.6M, $36,176.2M and $37,184.4M (FY2025); net income $2,757.4M, $2,817.7M, $2,884.7M, $4,518.3M, $3,599.2M, $928.3M, $4,199.3M, $3,281.6M, $4,124.5M, $3,760.9M and $1,856.4M; diluted EPS $1.82, $1.90, $1.97, $3.24, $2.92, $0.79, $3.54, $2.83, $3.58, $3.31 and $1.63; operating income $3,601.0M, $4,171.9M, $4,134.7M, $3,883.3M, $4,077.9M, $1,561.7M, $4,872.1M, $4,617.8M, $5,870.8M, $5,408.8M and $2,936.6M. Return on invested capital computed from the same EDGAR filings as NOPAT over average operating invested capital (NOPAT = operating income x (1 - effective tax rate); invested capital = total assets - current liabilities - cash) runs 38.4%, 37.7%, 36.1%, 34.9%, 32.7%, 8.8%, 22.2%, 21.9%, 27.5%, 23.0% and 11.6% for fiscal 2015 through 2025; the step-down after fiscal 2019 reflects the adoption of lease accounting, which added roughly $9 billion of operating lease right-of-use assets to the denominator. — FY2025 · publ. 2025-11-14 · source ↗
5. ReportedThe ambition attached to it is not modest: a shared long-term aspiration to grow to as many as 20,000 locations in China, against roughly 8,000 today, with Boyu supplying local expertise and capital.
   Starbucks Corporation, Form 10-Q for the quarter ended 28 June 2026 (SEC, CIK 829224). Net revenues for the quarter: company-operated stores $7,506.1M against $7,812.5M, licensed stores $1,200.8M against $1,105.6M, other $615.8M against $537.9M, total $9,322.7M against $9,456.0M; for the three quarters $28,769.3M against $27,615.4M. Restructuring and impairments $302.6M against $20.8M for the quarter and $415.8M against $137.0M for the three quarters. Income from equity investees $78.6M. Operating income $980.4M against $935.6M for the quarter and $2,699.3M against $2,658.4M for the three quarters. Net gain resulting from divestiture of certain operations $536.3M. Net earnings attributable to Starbucks $1,045.3M against $558.3M; diluted EPS $0.91 against $0.49 for the quarter and $1.62 against $1.51 for the three quarters, on 1,143.8 million diluted shares; shares outstanding 1,140.0 million as of 23 July 2026. Starbucks has a presence in 90 markets and, as of 28 June 2026, more than 41,000 company-operated and licensed stores, an increase of 1% from the prior year. Consolidated net revenues decreased 1% to $9.3 billion primarily due to the conversion of Starbucks retail operations in China to the licensed joint venture model, offset by a 7.9% increase in global comparable store sales driven by a 7.9% increase in the US market, where the increase was driven by a 4.2% increase in comparable transactions and a 3.6% increase in average ticket, primarily driven by higher delivery sales and strength in customer food attach and beverage modifications; consolidated operating margin expanded 60 basis points to 10.5%, primarily driven by sales leverage and lower inflation paired with tariff refunds, offset by higher restructuring costs and labour investments largely in support of Back to Starbucks. North America total net revenues for the quarter were $7,395.1M (company-operated $6,754.8M, licensed $639.4M), up 7%, driven by an 8.1% increase in comparable store sales on a 4.5% increase in comparable transactions and a 3.5% increase in average ticket; North America operating income increased 10% to $1,008.9M with the margin expanding 30 basis points to 13.6%, driven by sales leverage (approximately 340 basis points), lapping of the Leadership Experience 2025 (approximately 120) and lower inflation paired with tariff refunds (approximately 110), partially offset by higher restructuring costs (approximately 240), labour investments (approximately 190) and product mix shift (approximately 100); store operating expenses were 56.1% of company-operated store revenue against 56.5%, and 57.3% against 56.4% for the three quarters. For the first three quarters North America revenue rose 5% on a 6.2% increase in comparable store sales, with operating income down 10% to $2.6 billion and the margin contracting 210 basis points to 11.8%, primarily driven by labour investments largely in support of Back to Starbucks (approximately 240 basis points). International quarter revenues were $1,322.6M against $2,010.7M, with company-operated store revenue falling from $1,526.8M to $751.3M and licensed store revenue rising from $465.1M to $561.4M. On 30 March 2026 Starbucks completed the divestiture of its retail operations in China; Boyu Capital acquired a 60% interest based on a cash-free, debt-free mutually agreed total enterprise value of approximately $4 billion, the transaction was partially financed with debt issued by the newly formed joint venture, and Starbucks received total consideration of $3.1 billion inclusive of its share of the debt proceeds, retaining a 40% interest of approximately $1.2 billion accounted for under the equity method. Starbucks derecognised net assets with a carrying value of $3.4 billion and reclassified approximately $282.8 million of cumulative translation adjustment losses and $99.7 million of net investment hedge losses from accumulated other comprehensive income into earnings, recognising a pre-tax gain of $536.3 million; incremental income tax expense associated with the gain is approximately $198.6 million and transaction costs were approximately $44.1 million for the quarter and $73.8 million for the three quarters. Upon completion, 7,991 company-operated stores previously included in the disposal group were converted to licensed stores within the International segment, and Starbucks continues to own and license the Starbucks brand and intellectual property to the joint venture; for the third quarter, revenues generated from the joint venture were $52.5 million and related product and distribution costs $18.5 million, with the carrying value of the investment $1.2 billion. Starbucks expects the conversion to the licensed joint venture model to continue to drive lower revenues and higher operating margin, used a portion of transaction proceeds for debt reduction, and states a shared long-term aspiration to grow to as many as 20,000 locations in China over time. In the second quarter of fiscal 2026 management approved a restructuring plan to relocate certain functions of the support organisation to an additional office in Nashville, Tennessee; in the third quarter it announced an additional fiscal 2026 restructuring plan focused on further transformation of the global support organisation and non-retail facilities and on reducing the future operational complexity of Starbucks Reserve and Roastery locations, resulting in a reassessment and impairment of the associated asset group. — Q3 FY2026 · publ. 2026-07-29 · source ↗
6. ReportedThe trade is explicit and Starbucks states it: the conversion "will continue to drive lower revenues and higher operating margin." Fewer dollars, better ones.
   Starbucks Corporation, Form 10-K FY2025 — consolidated statements of earnings, balance sheets and cash flows. Net revenues: company-operated stores $30,744.8M, $29,765.9M and $29,462.3M; licensed stores $4,350.4M, $4,505.1M and $4,512.7M; other $2,089.2M, $1,905.2M and $2,000.6M; total $37,184.4M, $36,176.2M and $35,975.6M for fiscal 2025, 2024 and 2023. Product and distribution costs $11,658.2M; store operating expenses $17,058.9M against $15,286.5M and $14,720.3M; other operating expenses $584.6M; depreciation and amortisation $1,684.7M; general and administrative $2,617.2M; restructuring and impairments $892.0M against nil and $21.8M; total operating expenses $34,495.6M; income from equity investees $247.8M against $301.2M and $298.4M; operating income $2,936.6M against $5,408.8M and $5,870.8M; interest income and other net $113.3M; interest expense $542.6M against $562.0M and $550.1M; earnings before income taxes $2,507.3M; income tax expense $650.6M; net earnings attributable to Starbucks $1,856.4M against $3,760.9M and $4,124.5M; diluted EPS $1.63 against $3.31 and $3.58 on 1,139.8 million diluted shares. Balance sheet at 28 September 2025: cash and cash equivalents $3,219.8M, short-term investments $247.2M, accounts receivable $1,277.5M, inventories $2,185.6M, total current assets $7,382.3M, equity investments $466.2M, property plant and equipment net $8,493.5M, operating lease right-of-use asset $9,315.7M, goodwill $3,368.9M, total assets $32,019.7M; accounts payable $1,852.8M, accrued liabilities $2,359.7M, current portion of operating lease liability $1,564.5M, stored value card liability and current portion of deferred revenue $1,840.6M, current portion of long-term debt $1,498.9M, total current liabilities $10,210.4M, long-term debt $14,575.9M, operating lease liability $8,972.2M, deferred revenue $5,772.6M, total liabilities $40,108.9M, retained deficit $(8,272.5)M, total shareholders' deficit $(8,096.6)M, with 1,136.9 million shares issued and outstanding against 1,133.5 million. Cash flows: net earnings including noncontrolling interests $1,856.7M, depreciation and amortisation $1,771.5M, non-cash lease costs $1,513.8M, loss on disposal, impairment and accelerated amortisation of assets $834.7M, stock-based compensation $318.3M; net cash provided by operating activities $4,747.5M against $6,095.6M and $6,008.7M; additions to property, plant and equipment $2,305.5M against $2,777.5M and $2,333.6M. Historic figures from EDGAR XBRL: revenue $19,162.7M (FY2015), $21,315.9M, $22,386.8M, $24,719.5M, $26,508.6M, $23,518.0M (FY2020), $29,060.6M, $32,250.3M, $35,975.6M, $36,176.2M and $37,184.4M (FY2025); net income $2,757.4M, $2,817.7M, $2,884.7M, $4,518.3M, $3,599.2M, $928.3M, $4,199.3M, $3,281.6M, $4,124.5M, $3,760.9M and $1,856.4M; diluted EPS $1.82, $1.90, $1.97, $3.24, $2.92, $0.79, $3.54, $2.83, $3.58, $3.31 and $1.63; operating income $3,601.0M, $4,171.9M, $4,134.7M, $3,883.3M, $4,077.9M, $1,561.7M, $4,872.1M, $4,617.8M, $5,870.8M, $5,408.8M and $2,936.6M. Return on invested capital computed from the same EDGAR filings as NOPAT over average operating invested capital (NOPAT = operating income x (1 - effective tax rate); invested capital = total assets - current liabilities - cash) runs 38.4%, 37.7%, 36.1%, 34.9%, 32.7%, 8.8%, 22.2%, 21.9%, 27.5%, 23.0% and 11.6% for fiscal 2015 through 2025; the step-down after fiscal 2019 reflects the adoption of lease accounting, which added roughly $9 billion of operating lease right-of-use assets to the denominator. — FY2025 · publ. 2025-11-14 · source ↗

• Starbucks Corporation Form 10-K, FY2025 (SEC EDGAR)
• Starbucks Corporation Form 10-Q, quarter ended 28 June 2026 (SEC EDGAR)