Bufetico
Baylor Baucom has been a Starbucks barista for five years, and on a Saturday morning in August, baristas shut a store in Goodlettsville, just north of Nashville, for the day. A crowd of workers and neighbors chanted that no contract meant no coffee, and cars kept pulling into the drive-through anyway. Some honked. Some stopped to ask what was going on. The Nashville Banner was there and talked to him.
What the baristas told the paper is pretty simple. Staffing has gone down year after year, and what’s expected of the people left hasn’t. Some shifts run with two people on the floor. Baucom talked about everything those two have to cover: the drinks, the food, the orders at the counter and the orders at the window. He said it gets to your mental health: you’re short, you’re told to go faster, and then you turn around and a customer is yelling because the wait was too long. “We’re serious, and we need help,” he said.
Rachael Cullen, who works at the Goodlettsville store and has been a barista for two years, was angry about something else. In May the company and the state announced a corporate office in Nashville, 2,000 jobs, with a $30 million grant from Tennessee to help it along. The Banner says starting pay for a barista in 43 states is $15.25 to $16 an hour. Starbucks told the Banner it keeps bargaining in good faith and that pay and benefits for eligible hourly workers average more than $30 an hour.
Nearly every store the company runs is rented. The last annual report counts 21,514 company-operated stores, almost all of them leased, so the one they closed that Saturday almost certainly is too. That’s where the balance sheet comes in. The two lines on it that get quoted most are about those stores and about the shareholders, and they get mixed up all the time.
One balance sheet, two lines that get mixed up
At the end of June, Starbucks had shareholders’ equity of minus $7,674 million. A few lines up on the same balance sheet, under liabilities, there’s $7,884 million of long-term lease obligations, most of it rent on stores like the one in Goodlettsville.
Those two are almost the same size and point opposite ways. I’ve seen both used as proof of the same thing, that the company is in trouble. They’re about two unrelated things. One is there because the company decided to do something. The other is there because an accounting rule changed.
The decision
Equity went below zero at the end of 2018 and has stayed there since, and the reason is sitting on the cash flow statement: the company spent $7,133 million on buybacks in fiscal 2018 and $10,222 million in fiscal 2019. Do that long enough, at that size, and the running total goes below zero: everything ever put into the company, minus everything ever taken out. That’s all negative equity is. The company has handed back more than was ever put in, on a business that kept earning.
By itself that’s a history, and reading it as distress is the mistake I wrote about with Etsy the other day. The habit didn’t end with the big years, either. In fiscal 2025, profit came in at $1,856 million, down from $3,761 million the year before, and the company still paid $2,771 million in dividends. It bought back no shares that year, after $1,267 million the year before. I don’t know what that pause means. All the filing says is that it happened the same year the profit halved.
The rule
Look at the lease line by year. Fiscal 2019, there’s no such line. Fiscal 2020, $7,662 million. The stores didn’t appear overnight. From fiscal 2020 the accounting rules made companies put their lease commitments on the balance sheet, where before they’d lived in a note at the back, described in words and a table. The company owed the same rent the day before the rule as the day after, to the same landlords. What changed is that you could see it without turning to the notes.
I keep coming back to this one because of what it says about every year before it. If a balance sheet ratio told you a coffee chain was comfortable in 2018, it was telling you that while leaving out a fixed commitment about the size of the company’s debt.
What the two lines say about a Saturday in Goodlettsville
Put them side by side and you can’t say the company is in trouble, and you can’t say it’s fine either. Starbucks has given enormous sums back to shareholders, which is why the equity line is negative. It also carries close to $7.9 billion of rent with no way out of it, which is the cost of having stores where people drive past. The two numbers got there for different reasons. Both of them decide what’s left for the shareholders once the landlords are paid. Neither one measures how the last six months went.
Now, that shift with two people on the floor. The rent on that store is set by a contract, and the annual report puts the average remaining term on the company’s leases at 8.6 years. The hours are set by whoever writes the schedule. When a Saturday runs with two baristas, the rent for that Saturday is the same as on a Saturday with three. Of everything it costs to keep that store open, the hours can be cut and the rent can’t. Any other chain works the same way.
So one line tells you what already happened, and the other tells you what’s owed. I look at whether the cash the business makes covers what it’s promised, and how much is left over after that.
Where this breaks
The risk with all this is that it sounds reassuring. I’ve spent this article saying negative equity isn’t distress and the lease line isn’t new debt. Both are true. That doesn’t make either number harmless. Starbucks owes that rent. The rent comes due on a date, to a landlord, and unlike a dividend you can’t skip it in a bad year. A company with a big fixed commitment and a shrinking profit has less room than one without. Getting the accounting right doesn’t change that.
There’s a trap in that June number too. The June balance sheet carries the sale of the China business, which the company stopped counting as its own in that same quarter after selling 60 percent of it to Boyu Capital. The lease line leaves those stores out, which is most of why $7,884 million is lower than the $8,972 million of last September, and the equity line carries a $536.3 million pre-tax gain on the sale. So the two dates aren’t counting the same stores.
The line that store is on
The rent itself shows up in the lease note at the back of the annual report, in a small table of supplemental information: cash paid related to operating lease liabilities, $1,901.4 million in fiscal 2025, up from $1,672.5 million the year before. That’s the fixed rent, paid to the landlords of stores like the one in Goodlettsville. Further down the same note is what falls due in fiscal 2026: $1,940.6 million.