⚠ Interest Cover Halved While Nobody LookedModerate threat

Starbucks (SBUX) — threat to the moat

Interest cover was better than ten times in 2023 and is closer to five now, and nobody mentioned it because the balance sheet did not change.

Starbucks pays $542.6 million of interest a year on a balance sheet with no equity in it.

Interest cover, operating income to interest expense$5,871MFY2023 op income ($M)$550MFY2023 interest ($M)$2,937MFY2025 op income ($M)$543MFY2025 interest ($M)Better than ten times, then closer to five. The debt barely moved; the operating income halved.
Nobody mentioned the coverage deteriorating because the balance sheet did not change — only what it has to cover.

The position: $16,074.8 million of debt across long-term and current, $10,536.7 million of lease liabilities, total liabilities of $40,108.9 million against total assets of $32,019.7 million, and a shareholders' deficit of $8,096.6 million.1 Interest expense was $542.6 million in fiscal 2025.2

The deficit itself is benign — it is the accounting residue of buybacks above book value, and McDonald's shows the same thing. What is not benign is the interaction with a collapsing operating result. Interest cover was $5,870.8 million of operating income against $550.1 million of interest in fiscal 2023, better than ten times. In fiscal 2025 it was $2,936.6 million against $542.6 million — closer to five.3

Nothing here threatens solvency. Operating cash flow of $4,747.5 million covers interest, capital expenditure of $2,305.5 million and the dividend with room, and Starbucks used part of the China proceeds to reduce debt.4

The constraint is optionality. A company with no equity, $16 billion of debt, a dividend it will not cut and a turnaround to fund has very little capacity for a large acquisition or a sharp downturn at the same time.

Watch operating cash flow against the sum of capital expenditure and the dividend. In fiscal 2025 that was $4.7 billion against roughly $5.1 billion of capex and shareholder returns combined, and the gap was funded from the balance sheet.

References
  1. ReportedThe position: $16,074.8 million of debt across long-term and current, $10,536.7 million of lease liabilities, total liabilities of $40,108.9 million against total assets of $32,019.7 million, and a shareholders' deficit of $8,096.6 million.
    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 ↗
  2. ReportedInterest expense was $542.6 million in fiscal 2025.
    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 ↗
  3. ReportedIn fiscal 2025 it was $2,936.6 million against $542.6 million — closer to five.
    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 ↗
  4. ReportedOperating cash flow of $4,747.5 million covers interest, capital expenditure of $2,305.5 million and the dividend with room, and Starbucks used part of the China 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 ↗
Sources
Generated September 23, 2026