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Starbucks Eyes China Partnership: Can It Unlock the Next Growth Cycle?
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Key Takeaways
Starbucks is exploring a China partnership to accelerate long-term growth.
More than 20 potential partners have expressed interest in working with SBUX.
China delivered a third straight quarter of revenue growth, led by higher traffic.
Starbucks Corporation (SBUX - Free Report) is sharpening its focus on China, where management is actively pursuing a strategic partnership to accelerate long-term growth. The company disclosed that more than 20 potential partners have expressed interest, underscoring the brand’s enduring appeal in the world’s second-largest coffee market. The goal is to achieve operational alignment with a local player who can enhance scale, consumer reach and cultural resonance.
China has emerged as a bright spot for Starbucks, with the market delivering its third consecutive quarter of revenue growth in third-quarter fiscal 2025. During the quarter, comparable sales rose 2%, while transactions climbed 6%, driven by beverage innovation and pricing adjustments that broadened the customer base and boosted traffic. Management believes that, with the right partner, China can support thousands of additional stores, positioning the region as a key engine of growth over the upcoming periods.
Crucially, Starbucks plans to retain a meaningful stake in its China operations, ensuring long-term upside while offloading some of the operational intensity required to navigate local competition and regulatory complexity. The move mirrors strategies adopted by global peers in other high-growth but complex markets, giving the company a chance to both accelerate expansion and protect profitability.
The initiative arrives as Starbucks invests heavily in its “Back to Starbucks” plan in the United States, highlighted by more than $0.5 billion in incremental labor hours to support the nationwide Green Apron Service rollout. These investments, along with elevated G&A tied to the Leadership Experience 2025 training event, have weighed on the company's fiscal third quarter profitability. At the same time, management is addressing cost structure resets across the P&L, from supply chain efficiencies to portfolio optimization, to help offset these pressures over time.
Against this backdrop, investors are closely watching whether the international segment — particularly China, which posted its third straight quarter of revenue growth — can provide a counterbalance. A strategic partnership in China could accelerate store expansion, deepen local engagement and convert one of Starbucks’ most volatile markets into a structured, scalable growth engine that complements its U.S. turnaround initiative.
Starbucks’ Competitive Position
McDonald’s Corporation (MCD - Free Report) emphasized China as a long-term growth market during the second quarter of 2025. Management noted that internationally operated markets delivered resilient results. McDonald’s digital engagement, loyalty programs, and delivery channels were highlighted as key drivers supporting traffic and stabilizing performance. At the same time, value platforms remain central to maintaining affordability and brand relevance in a cautious spending environment. McDonald’s stressed that its integrated digital and delivery ecosystem in China provides a durable foundation for navigating near-term macro volatility while positioning the brand for sustained growth in the region.
Shake Shack Inc. (SHAK - Free Report) reiterated in the second quarter of 2025 that international licensed units remain a core growth driver, with Asia — including China — forming part of its broader expansion strategy. Management highlighted system-wide sales growth of 16% year over year, with licensed Shacks continuing to outperform, particularly in international markets. The company noted that licensed partners oversee critical functions such as supply chain and real estate, which allows Shake Shack to expand more rapidly and efficiently than through company-operated development. By pursuing this asset-light model, Shake Shack is likely to broaden its footprint and capture international demand.
SBUX’s Price Performance, Valuation & Estimates
Shares of Starbucks have gained 2% in the past three months against the industry’s 3.1% decline.
SBUX Three-Month Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Starbucks trades at a forward price-to-sales ratio of 2.55, below the industry’s average of 3.78.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SBUX’s fiscal 2025 EPS implies a decline of 33.2% year over year, while the same for fiscal 2026 EPS indicates a rise of 22.4%. The EPS estimates for fiscal 2025 and 2026 have declined 12% and 9.7%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
Starbucks stock currently carries a Zacks Rank #4 (Sell).
Image: Bigstock
Starbucks Eyes China Partnership: Can It Unlock the Next Growth Cycle?
Key Takeaways
Starbucks Corporation (SBUX - Free Report) is sharpening its focus on China, where management is actively pursuing a strategic partnership to accelerate long-term growth. The company disclosed that more than 20 potential partners have expressed interest, underscoring the brand’s enduring appeal in the world’s second-largest coffee market. The goal is to achieve operational alignment with a local player who can enhance scale, consumer reach and cultural resonance.
China has emerged as a bright spot for Starbucks, with the market delivering its third consecutive quarter of revenue growth in third-quarter fiscal 2025. During the quarter, comparable sales rose 2%, while transactions climbed 6%, driven by beverage innovation and pricing adjustments that broadened the customer base and boosted traffic. Management believes that, with the right partner, China can support thousands of additional stores, positioning the region as a key engine of growth over the upcoming periods.
Crucially, Starbucks plans to retain a meaningful stake in its China operations, ensuring long-term upside while offloading some of the operational intensity required to navigate local competition and regulatory complexity. The move mirrors strategies adopted by global peers in other high-growth but complex markets, giving the company a chance to both accelerate expansion and protect profitability.
The initiative arrives as Starbucks invests heavily in its “Back to Starbucks” plan in the United States, highlighted by more than $0.5 billion in incremental labor hours to support the nationwide Green Apron Service rollout. These investments, along with elevated G&A tied to the Leadership Experience 2025 training event, have weighed on the company's fiscal third quarter profitability. At the same time, management is addressing cost structure resets across the P&L, from supply chain efficiencies to portfolio optimization, to help offset these pressures over time.
Against this backdrop, investors are closely watching whether the international segment — particularly China, which posted its third straight quarter of revenue growth — can provide a counterbalance. A strategic partnership in China could accelerate store expansion, deepen local engagement and convert one of Starbucks’ most volatile markets into a structured, scalable growth engine that complements its U.S. turnaround initiative.
Starbucks’ Competitive Position
McDonald’s Corporation (MCD - Free Report) emphasized China as a long-term growth market during the second quarter of 2025. Management noted that internationally operated markets delivered resilient results. McDonald’s digital engagement, loyalty programs, and delivery channels were highlighted as key drivers supporting traffic and stabilizing performance. At the same time, value platforms remain central to maintaining affordability and brand relevance in a cautious spending environment. McDonald’s stressed that its integrated digital and delivery ecosystem in China provides a durable foundation for navigating near-term macro volatility while positioning the brand for sustained growth in the region.
Shake Shack Inc. (SHAK - Free Report) reiterated in the second quarter of 2025 that international licensed units remain a core growth driver, with Asia — including China — forming part of its broader expansion strategy. Management highlighted system-wide sales growth of 16% year over year, with licensed Shacks continuing to outperform, particularly in international markets. The company noted that licensed partners oversee critical functions such as supply chain and real estate, which allows Shake Shack to expand more rapidly and efficiently than through company-operated development. By pursuing this asset-light model, Shake Shack is likely to broaden its footprint and capture international demand.
SBUX’s Price Performance, Valuation & Estimates
Shares of Starbucks have gained 2% in the past three months against the industry’s 3.1% decline.
SBUX Three-Month Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Starbucks trades at a forward price-to-sales ratio of 2.55, below the industry’s average of 3.78.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SBUX’s fiscal 2025 EPS implies a decline of 33.2% year over year, while the same for fiscal 2026 EPS indicates a rise of 22.4%. The EPS estimates for fiscal 2025 and 2026 have declined 12% and 9.7%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
Starbucks stock currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.