⚠ The Float Is Stable, Not GrowingModerate threat

Starbucks (SBUX) — threat to the moat

Fifteen billion dollars flowed through the cards last year and it was less than the year before, in a system that only works while customers choose to prepay.

1. ReportedThe stored value and loyalty balance went from $1,718.7 million to $1,751.7 million in fiscal 2025 — a 2% increase in a year when revenue rose 3%.
   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 ↗
2. ReportedThe flow through it actually fell: $15,245.8 million deferred in fiscal 2025 against $15,807.1 million the year before.
   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 ↗
3. ReportedThe offsetting evidence is that 90-day active membership hit a record 35.6 million and the June quarter's transaction growth was 4.2%, so the system is being used more rather than less right now.
   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 ↗

• Starbucks Corporation Form 10-K, FY2025 (SEC EDGAR)