Can Starbucks' $1.8B Debt Paydown Reinforce Financial Flexibility?
Starbucks Corporation SBUX is strengthening its balance sheet as it advances the Back to Starbucks strategy. In the third quarter of fiscal 2026, the company used a portion of the proceeds from its China transaction to repay approximately $1.8 billion of debt. This repayment reduced Starbucks’ leverage to 2.9 times, supporting its investment-grade profile.
In May 2026, Starbucks repurchased approximately $1.3 billion in aggregate principal amount of senior notes through cash tender offers. The repurchases covered five note series carrying stated interest rates ranging from 4.5% to 5.4% and maturities between 2028 and 2048. A separate $500 million note due in June 2026 was also no longer outstanding at quarter-end. Consequently, total long-term debt, including the current portion, declined to approximately $13.28 billion as of June 28, 2026, from $16.07 billion at the end of fiscal 2025.
Starbucks’ lower debt balance has begun to reduce quarterly financing costs. Fiscal third-quarter interest expense declined $8 million year over year, primarily driven by reduced debt balances. However, interest expense for the first nine months increased $14 million, mainly because of lower cross-currency interest-rate hedging savings, partly offset by the reduced debt balance. Upcoming long-term debt maturities total $1.5 billion in fiscal 2027, approximately $1.08 billion in fiscal 2028 and $1.75 billion in fiscal 2029.
The company ended the fiscal third quarter with $3.9 billion in cash and investments and $3 billion of available contractual borrowing capacity. Starbucks had no outstanding borrowings under its unsecured revolving credit facility or commercial paper program and remained in compliance with all applicable debt covenants.
Overall, lower leverage, substantial liquidity and unused borrowing capacity reinforce Starbucks’ financial flexibility. The company expects operating cash flows, existing cash and investments, and access to debt markets to fund its core operations and shareholder distributions for at least the next 12 months. These resources likely support continued business investment, debt repayment and cash returns to shareholders.
Peers Preserve Financial Flexibility Through Different Models
Dutch Bros Inc. BROS is maintaining liquidity while funding its shop-development program. The company ended the second quarter of 2026 with approximately $699 million in total liquidity, comprising $268.6 million in cash and $430.6 million available under its revolving credit facility. BROS’ operating cash flow increased 55.3% year over year to $196.9 million during the first six months, while 2026 capital expenditures are projected at $350-$370 million. Total debt stood at $200.5 million, of which $170 million is scheduled to mature in 2030. Dutch Bros expects operating cash flow and access to its credit facility to cover debt service, lease obligations, working capital and required distributions for at least the next 12 months.
McDonald’s Corporation MCD maintains financial flexibility supported by substantial cash generation and access to credit markets. The company generated $5.22 billion in operating cash flow during the first six months of 2026, exceeding capital expenditures by $3.7 billion. During the same period, McDonald’s made $581 million in long-term financing repayments, paid $2.64 billion in dividends and spent $1.25 billion on share repurchases. Long-term debt remained broadly stable at $39.86 billion compared with $39.97 billion at the end of 2025. Interest expense increased 6% year over year to $809 million during the first six months of 2026, primarily due to higher average interest rates and foreign-currency translation. For full-year 2026, McDonald’s expects interest expense to rise 4-6% year over year, mainly because of higher average interest rates.
SBUX’s Price Performance, Valuation & Estimates
Shares of Starbucks have gained 20.5% in the past year against the industry’s 7.5% decline.
SBUX’s One-Year Price Performance
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From a valuation standpoint, SBUX trades at a forward price-to-sales (P/S) multiple of 3.07, below the industry’s average of 3.29.
SBUX’s P/S Ratio (Forward 12-Month) vs. Industry
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The Zacks Consensus Estimate for SBUX’s fiscal 2026 earnings per share (EPS) implies a year-over-year increase of 21.1%. The EPS estimates for fiscal 2026 have increased in the past 60 days.
EPS Trend of SBUX Stock
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SBUX’s Zacks Rank
SBUX stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
