What does Starbucks China's same-store sales rebound signal?

Starbucks' fiscal 2025 third-quarter report showed global same-store sales down 2%, the sixth straight quarterly decline, while China revenue reached $790 million, up 8% year on year, and same-store sales rose 2%. That is China's first positive growth in 18 months, against a 14% drop a year earlier. Total quarterly revenue was $9.46 billion, $15 million above expectations.

On rumors of a China stake sale, CEO Niccol said more than 20 interested parties have expressed interest and the company hopes to keep a considerable proportion of equity. Starbucks also plans to accelerate the Green Apron service model, close some pickup-only stores, and renovate over a thousand coffeehouses to rebuild human connection. Coffee reached China long before this expansion, but the brand's current adjustments show how much the market has changed.

Starbucks' financial report for the third quarter of fiscal year 2025 shows that global same-store sales have declined for the sixth consecutive quarter, but the Chinese market has delivered a standout result: revenue grew 8% year-on-year, and same-store sales rose 2%, marking the first positive growth in 18 months. Regarding rumors of a stake sale in its China business, CEO Niccol responded that more than 20 interested parties have expressed interest, and Starbucks hopes to retain a considerable proportion of equity. At the same time, the brand announced that it will accelerate the rollout of the "Green Apron Service Model," and plans to close some pickup-only stores and renovate over a thousand coffeehouses in order to rebuild warm human connections. Front Street Coffee continues to follow Starbucks' strategic adjustments and operational changes in the global and Chinese markets.

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Recently, Starbucks released its financial report for the third quarter of fiscal year 2025, and its CEO also made a clear response regarding the progress of the previously closely watched sale of its China stake.

The financial report data shows that Starbucks' total revenue in the third quarter was $9.46 billion, $15 million above market expectations. However, global same-store sales fell 2%, a sharper decline than the expected 1.3%. This is already the sixth consecutive quarter of negative growth for this metric, and it is hard for the outside world not to feel somewhat more concerned about Starbucks' long-term trajectory.

However, judging from the official financial report, Starbucks achieved an impressive result in the Chinese market. In this fiscal quarter, Starbucks China's revenue reached $790 million, up 8% year-on-year; same-store sales grew 2%, forming a sharp contrast with the 14% decline in the same period last year, and this is also the first positive growth for this metric in 18 months.

China's strong performance naturally made the outside world focus once again on earlier rumors of a stake sale. Earlier this year, media outlets such as CNBC, citing "people familiar with the matter," reported that more than 30 institutions had valued and bid for Starbucks' China business, and it was said that Hillhouse Capital, KKR, and Centurium Capital, the major shareholder of Luckin, had all participated in bidding for a stake in Starbucks China.

On this topic, Starbucks CEO Niccol gave a more specific statement: "More than 20 interested partners have expressed strong interest in Starbucks' China business, and we are evaluating various options." He also stressed, "Our commitment to the Chinese market remains unchanged, and we hope to retain a considerable proportion of equity."

Niccol further explained that the partners Starbucks is looking for need to meet two conditions. First, they must share Starbucks' mission and values, "must be aligned on this fundamental point"; second, they must be able to serve as an excellent partner for more efficient operations in the local market.

In addition, in light of the sales situation reflected in the financial report, Starbucks proposed a series of improvement measures for store operations, including the decision to accelerate the rollout of the "Green Apron Service Model."

Starbucks' CEO introduced that this model is Starbucks' largest-ever investment in operating standards and customer service, centered on five key moments that define the experience Starbucks wants to provide to every customer, with a focus on craft and customer connection, covering welcome interaction, order taking, beverage/food preparation, order handoff, and follow-up connection.

It is understood that 1,500 stores piloted the "Green Apron Service Model," and after only eight weeks it received "very positive feedback," with improvements in transaction volume, sales, and customer service time. Therefore, the brand decided to fully roll out the model across all Starbucks company-operated stores in the United States starting in mid-August.

In addition, BBC reported that Starbucks will gradually close pickup-only stores. At present, about 90 Starbucks stores in the United States do not provide seating for customers, adopting an operating model in which customers place orders through online channels and then pick up their orders upon arriving at the store. Although such stores are welcomed by some users, in the view of Starbucks executives, this format is too transactional and lacks the warmth and human relationships unique to the brand.

Therefore, Starbucks said it will renovate at least 1,000 coffeehouses in the United States by the end of next year, giving them a new look and planning to replace thousands of seats that had been removed, phasing out some pickup-only stores, and creating a more comfortable in-store experience for users.

Image source: Internet

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