Starbucks Corp. (NASDAQ:SBUX)

The financial performance, as measured by economic profit, demonstrates significant fluctuations over the observed period. Net operating profit after taxes (NOPAT) experienced substantial growth between 2020 and 2021, followed by a decline in 2022, and a subsequent recovery in 2023. While NOPAT remained relatively stable in 2024, a notable decrease is projected for 2025.

Economic Profit Trend

Economic profit transitioned from a substantial loss in 2020 to positive territory in 2021, peaking at US$1,491,019 thousand. It remained positive through 2023, reaching US$1,651,649 thousand, before a projected decline into negative territory in 2025, with a loss of US$609,264 thousand. This suggests a weakening of value creation in the most recent projected year.

NOPAT Analysis

NOPAT increased dramatically from US$1,475,541 thousand in 2020 to US$4,625,159 thousand in 2021. A decrease to US$3,732,356 thousand occurred in 2022, followed by a rebound to US$4,602,842 thousand in 2023. The figure is forecast to be US$4,408,732 thousand in 2024, and then decrease significantly to US$2,453,553 thousand in 2025.

Cost of Capital

The cost of capital exhibited a slight increasing trend from 12.77% in 2020 to 13.31% in 2023, before decreasing to 13.05% in 2024 and further to 12.75% in 2025. While the changes are relatively small, the cost of capital generally increased over the first three years of the period.

Invested Capital

Invested capital initially increased from US$22,970,900 thousand in 2020 to US$23,683,800 thousand in 2021. A decrease was observed in 2022 to US$20,459,700 thousand, followed by an increase to US$22,171,000 thousand in 2023. Projections indicate further increases to US$23,526,800 thousand in 2024 and US$24,013,900 thousand in 2025.

The interplay between NOPAT, cost of capital, and invested capital drives the observed economic profit trend. The projected decline in NOPAT for 2025, coupled with a continued increase in invested capital, is the primary driver of the anticipated negative economic profit in that year. The slight fluctuations in the cost of capital appear to have a less significant impact on the overall economic profit compared to the changes in NOPAT and invested capital.

The financial data reveals notable fluctuations in Starbucks Corp.'s profitability over the examined periods. Both net earnings attributable to the company and net operating profit after taxes (NOPAT) demonstrate cyclical trends with periods of significant increases followed by declines.

Net Earnings Attributable to Starbucks

The net earnings show a strong increase from approximately 928 million US dollars in late 2020 to over 4.1 billion in early 2021. Following this peak, there is a decline to around 3.28 billion in late 2022, then a rebound to about 4.12 billion in early 2023. Subsequently, net earnings decrease again to approximately 3.76 billion and further decline to 1.86 billion by late 2025. This pattern suggests volatility in profitability with significant year-to-year variation.

Net Operating Profit After Taxes (NOPAT)

NOPAT trends closely parallel net earnings, starting at about 1.48 billion in 2020 and increasing sharply to over 4.62 billion in 2021. It then decreases to roughly 3.73 billion in 2022 before rising to nearly 4.60 billion in 2023. After this, NOPAT slightly declines to about 4.41 billion in 2024 and experiences a substantial drop to 2.45 billion by 2025. This indicates that operating efficiency and tax-related impacts also varied significantly over the time horizon, affecting profitability.

Overall, the data suggests that the company experienced pronounced growth in profitability around 2021 and 2023, but these gains were not consistently sustained into later periods. The declines toward 2025 could indicate emerging operational or market challenges impacting earnings and operating profit. This volatility warrants closer examination of underlying drivers such as cost management, revenue fluctuations, and external economic conditions influencing performance.

The analysis of the tax-related financial data displays variable trends in both income tax expense and cash operating taxes over the observed periods.

Income Tax Expense

The income tax expense demonstrates a fluctuating pattern with an initial value of 239,700 thousand US dollars, substantially rising to a peak of 1,157,600 thousand US dollars by the second period. This peak is followed by a decrease to 948,500 thousand US dollars, then an increase again to 1,277,200 thousand US dollars, maintaining a relatively high level in the next period at 1,207,300 thousand US dollars before declining sharply to 650,600 thousand US dollars in the latest period. Overall, the trend suggests volatility with a recent downward correction.

Cash Operating Taxes

Cash operating taxes show a broadly similar trend marked by significant increases and decreases. Starting at 405,721 thousand US dollars, this figure rises steeply to 1,427,074 thousand US dollars in the subsequent year, then declines to 1,074,728 thousand US dollars. Subsequently, there is a rise to a peak of 1,512,061 thousand US dollars, followed by a slight decrease to 1,412,248 thousand US dollars before dropping significantly to 858,305 thousand US dollars in the last recorded period. This pattern suggests notable fluctuations with peaks that generally coincide with the trends observed in income tax expenses.

The financial data over the span of six years reveals several key trends concerning debt, shareholders' equity, and invested capital.

Total Reported Debt & Leases

The total reported debt and leases initially decreased from approximately 24.82 billion USD in 2020 to around 23.61 billion USD in 2021, indicating a reduction in debt levels. However, from 2021 onward, there was a consistent upward trend, reaching approximately 26.61 billion USD by 2025. This suggests a gradual increase in borrowing or lease obligations over this period, possibly reflecting increased leverage or financing activities.

Shareholders’ Deficit

The shareholders’ deficit showed considerable fluctuation across the years. Starting with a deficit of about -7.81 billion USD in 2020, it improved significantly to approximately -5.32 billion USD in 2021. This improvement could indicate a reduction in accumulated losses or liabilities exceeding equity. However, the deficit then worsened to about -8.71 billion USD in 2022, before improving slightly in the subsequent years but remaining negative through 2025. The persistent negative shareholders’ equity highlights ongoing challenges in equity capitalization or retained earnings, signaling potential financial stress or large accumulations of losses.

Invested Capital

Invested capital showed an initial increase from 22.97 billion USD in 2020 to 23.68 billion USD in 2021, followed by a notable decline to approximately 20.46 billion USD in 2022. After 2022, invested capital steadily increased year over year, reaching around 24.01 billion USD in 2025. This pattern may reflect variations in total capital deployed in the business, possibly influenced by asset acquisitions, disposals, or changes in working capital management. The recovery and growth in invested capital post-2022 suggest renewed investment or improved operational capacity.

Overall, the company displayed a fluctuating financial structure with increasing debt levels in recent years alongside a persistent negative shareholders’ deficit, which raises concerns regarding financial stability. The invested capital trend indicates some volatility but a general recovery trend after 2022, potentially aligned with strategic investments or operational enhancements.

The economic spread ratio exhibited considerable fluctuation over the observed period. Initially negative in 2020, it transitioned to positive values and peaked in 2023 before declining again in 2025. This variability suggests a dynamic relationship between the company’s economic profit and its invested capital.

Economic Spread Ratio - Overall Trend

The economic spread ratio began at -6.35% in 2020, indicating that the company’s return on invested capital was less than its cost of capital. A substantial improvement followed, with the ratio reaching 6.30% in 2021 and continuing to 7.45% in 2023, demonstrating increasing value creation. However, a reversal occurred in the subsequent two years, falling to 5.69% in 2024 and ultimately to -2.54% in 2025. This recent decline warrants further investigation.

The economic spread ratio’s movement closely mirrors that of economic profit. The negative economic spread in 2020 and 2025 corresponds with periods of negative economic profit, while the positive spread in 2021, 2022, and 2023 aligns with positive economic profit. This correlation highlights the direct impact of profitability on the economic spread.

Relationship with Invested Capital

Invested capital generally increased over the period, from US$22,970,900 in 2020 to US$24,013,900 in 2025. Despite this overall increase, the economic spread ratio did not consistently benefit. The peak ratio in 2023 occurred with invested capital lower than in 2021 and 2025, suggesting that improvements in profitability were more influential than changes in the capital base during those years. The decline in the ratio in 2025, despite continued investment, indicates that the returns generated from the increased capital were insufficient to offset the cost of that capital.

The shift from positive to negative economic spread in 2025 is a significant development. It suggests a potential erosion of the company’s competitive advantage or an increase in the cost of capital, or a combination of both. Further analysis is needed to determine the underlying drivers of this change and its implications for future performance.

The economic profit margin exhibited considerable fluctuation over the observed period. Initially negative in 2020, it transitioned to positive values and peaked in 2023 before declining again. This analysis details the observed trends in economic profit, adjusted net revenues, and the resulting economic profit margin.

Economic Profit

Economic profit began at a negative US$1,458,062 thousand in 2020, indicating the company’s return on capital employed was less than its cost of capital. A substantial positive shift occurred in 2021, reaching US$1,491,019 thousand. This positive trend continued, albeit at a slower pace, to US$1,651,649 thousand in 2023. However, a significant decrease is observed in 2025, with economic profit falling to a negative US$609,264 thousand. The 2024 value of US$1,338,053 thousand represents an intermediate point in this overall pattern.

Adjusted Net Revenues

Adjusted net revenues demonstrated a consistent upward trend throughout the period. Starting at US$23,559,600 thousand in 2020, revenues increased to US$29,064,700 thousand in 2021, then to US$32,112,800 thousand in 2022. This growth continued, reaching US$35,856,000 thousand in 2023, US$36,119,000 thousand in 2024, and finally US$37,052,800 thousand in 2025. The rate of revenue growth appears to decelerate in the later years.

Economic Profit Margin

The economic profit margin began at -6.19% in 2020, reflecting the negative economic profit. It improved significantly to 5.13% in 2021, and continued to increase, reaching a peak of 4.61% in 2023. A subsequent decline is evident, with the margin decreasing to 3.70% in 2024 and ultimately falling to -1.64% in 2025. The margin’s movement closely follows the trend in economic profit, as expected. Despite consistent revenue growth, the margin’s decline in the final two years suggests increasing costs or a less efficient capital structure.

The divergence between revenue growth and economic profit margin in the later years warrants further investigation. While revenues continue to rise, the decreasing margin indicates that the company is becoming less effective at converting those revenues into economic profit. The negative economic profit margin in 2025 is a particular concern, signaling that the company’s capital is not generating returns exceeding its cost.