While Starbucks contends with store closures and declining profitability in its home market, a high-stakes financial contest is unfolding in China that could determine the coffee giant’s future trajectory. Private equity heavyweights including Carlyle and EQT are competing for strategic ownership in Starbucks’ Chinese operations—a development that may significantly influence the company’s stock performance in coming quarters.
Mixed Financial Results Reveal Underlying Challenges
The company’s latest financial reports present a complex narrative. Consolidated net revenues for the full 2025 fiscal year increased by 3% to reach $37.2 billion. However, the fourth quarter told a different story, with operating income plummeting dramatically from $1.3 billion in the previous year to just $308.5 million. This sharp decline resulted in an operating margin contraction of 1,150 basis points, leaving it at a modest 2.9%.
Several factors contributed to this downturn, including a multi-billion dollar restructuring initiative, inflationary cost pressures, and substantial investments directed toward the “Back to Starbucks” strategic plan. Overall profits have declined by 35.6% over the past year, while debt levels remain elevated.
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Private Equity Battle for Chinese Operations
Behind the scenes, a competitive bidding process is underway with Carlyle, EQT, and HongShan emerging as the remaining contenders vying for a stake in Starbucks China. This intense investor interest underscores the substantial strategic importance that financial markets attribute to China’s growth potential. The ultimate outcome of these negotiations could fundamentally reshape the company’s operational framework and financial trajectory throughout the region.
Divergent Analyst Views Reflect Market Uncertainty
Market experts display notable disagreement regarding Starbucks’ prospects. UBS reduced its price target to $94, while Morgan Stanley established a more optimistic outlook with a $105 target. This analytical divergence highlights the prevailing uncertainty about how various elements—including the China strategy, restructuring efforts, and labor relations—will collectively impact long-term corporate valuation.
One positive development emerged in the latest figures: global comparable store sales increased by 1% during the fourth quarter, marking the first growth in seven quarters. Whether this improvement signals the beginning of sustained recovery or merely represents a temporary respite remains the crucial question for investors monitoring the company’s performance.
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