Starbucks (SBUX) Faces Challenges Amid Ongoing Trade War and Consumer Sentiment

Starbucks (SBUX) is set to release its earnings report after market close on Tuesday, with analysts closely watching the results amid ongoing trade war concerns and uncertainty surrounding U.S. tariffs. New CEO Brian Niccol, who joined Starbucks from Chipotle (CMG) in the fall, is navigating the company through a challenging landscape as he attempts to implement a turnaround plan.

Key Earnings Expectations:

• Adjusted Earnings Per Share (EPS): $0.49 vs. $0.68 in Q2 2024

• Revenue: $8.8 billion vs. $8.8 billion in Q2 2024

• Same-Store Sales Growth: -0.6% vs. -4% in Q2 2024

Niccol’s turnaround plan has focused on streamlining operations, improving service speed, reducing menu complexity, and revitalizing Starbucks’ presence in China, a crucial but increasingly competitive market. Despite some positive signals, the company reported disappointing same-store sales in Q1 2025, with a 6% drop in China, although this was an improvement from the 14% decline in previous quarters.

Impact of the U.S.-China Trade War

The ongoing trade war, initiated by former President Trump, continues to affect consumer sentiment, especially in international markets. Proposed tariffs and rising inflation fears have added downward pressure on Starbucks’ international sales. Analysts, including Gregory Francfort from Guggenheim, note that Starbucks’ exposure to macroeconomic challenges and potential anti-American sentiment in China could dampen growth.

“With increasing competition from local coffee and tea chains, like Chagee in China, and broader economic pressures, we see downside risks to Starbucks’ performance in international markets,” said Francfort, who recently lowered his price target for the stock to $83 from $95.

Unionization and Internal Challenges

Alongside external pressures, Starbucks faces internal challenges as unionization efforts continue to impact operations. The company laid off over 1,000 employees in February and reversed its open-door policy toward non-customers. Meanwhile, Starbucks’ unionized workers in Buffalo rejected the company’s latest contract offer, highlighting ongoing labor disputes.

Analyst Opinions and Stock Performance

Analysts have mixed views on Starbucks’ future. While some believe that Niccol’s efforts to enhance operations and improve customer experience will eventually drive growth, others caution that macroeconomic challenges could delay progress. Dennis Geiger from UBS stated, “We expect turnaround efforts to improve sales, but the uncertain macro environment may hinder progress, delaying margin expansion.”

Starbucks stock has underperformed in 2025, down 8% year-to-date, lagging behind the S&P 500’s 6% decline. Over the past year, Starbucks shares have fallen about 5%, while the broader market has seen an 8.4% increase.

Conclusion: A Critical Earnings Report for Starbucks

Starbucks’ upcoming earnings report will be closely scrutinized as investors assess the effectiveness of Brian Niccol’s turnaround strategy amid external pressures like the U.S.-China trade war and internal challenges such as unionization. With analysts divided and uncertain macroeconomic conditions, the future outlook for Starbucks remains uncertain, though the company’s long-term prospects largely depend on its ability to navigate these headwinds.