What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-07-27 compared with 2021-04-27 · 173 added, 153 removed, 245 unchanged (57% of the section changed)

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Generally, these statements can be identified by the use of words such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “feel,” “forecast,” “intend,” “may,” “outlook,” “plan,” “potential,” “project,” “seek,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These statements include statements relating to trends in or expectations relating to the expected effects of our initiatives, strategies and plans, as well as trends in or expectations regarding our financial results and long-term growth model and drivers, the anticipated timing and effects of recovery of our business, the conversion of several market operations to fully licensed models, our plans for streamlining our operations, including store openings, closures, and changes in store formats and models, expanding our licensing to Nestlé of our consumer packaged goods and Foodservice businesses and its effects on our Channel Development segment results, tax rates, business opportunities and expansion, strategic acquisitions, expenses, dividends, share repurchases, commodity costs and our mitigation strategies, liquidity, cash flow from operations, use of cash and cash requirements, investments, borrowing capacity and use of proceeds, repatriation of cash to the U.S., the likelihood of the issuance of additional debt and the applicable interest rate, the impact of the COVID-19 outbreak on our financial results, credits available to us under the CARES Act and other government credits, the expected effects of new accounting pronouncements and the estimated impact of changes in U.S.

These statements include statements relating to trends in or expectations relating to the expected effects of our initiatives, strategies and plans, as well as trends in or expectations regarding our financial results and long-term growth model and drivers, the anticipated timing and effects of recovery of our business, the conversion of several market operations to fully licensed models, our plans for streamlining our operations, including store openings, closures, and changes in store formats and models, expanding our licensing to Nestlé of our consumer packaged goods and Foodservice businesses and its effects on our Channel Development segment results, tax rates, business opportunities and expansion, strategic acquisitions, the expected sale of our ownership share in and our future relationship with Starbucks Coffee Korea Co., Ltd., expenses, dividends, share repurchases, commodity costs and our mitigation strategies, liquidity, cash flow from operations, use of cash and cash requirements, investments, borrowing capacity and use of proceeds, continuing compliance with our covenants under our credit facilities and commercial paper program, repatriation of cash to the U.S., the likelihood of the issuance of additional debt and the applicable interest rate, the continuing impact of the COVID-19 pandemic on our financial results, credits available to us under the CARES Act and other government credits, the expected effects of new accounting pronouncements and the estimated impact of changes in U.S.

tax law, including on tax rates, investments funded by these changes, and potential outcomes and effects of legal proceedings.

23 unchanged sentences

We are under no obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

This information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this 10-Q and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the 10-K.

Introduction and Overview

Starbucks is the premier coffee roaster and retailer of specialty coffee with operations in 83 markets around the world.

As of March 28, 2021, Starbucks had over 32,900 company-operated and licensed stores, an increase of 3% from the prior year.

As of June 27, 2021, Starbucks had over 33,200 company-operated and licensed stores, an increase of 3% from the prior year.

Additionally, we sell a variety of consumer-packaged goods, or CPG, primarily through the Global Coffee Alliance established with Nestlé and other partnerships and joint ventures.

Our financial results and long-term growth model will continue to be driven by new store openings, comparable store sales and margin management.

Comparable store sales represent company-operated stores open for 13 months or longer, and exclude the impact of foreign currency translation.

Stores that are temporarily closed or operating at reduced hours due to the COVID-19 outbreak remain in comparable store sales while stores identified for permanent closure have been removed.

During the quarter ended March 28, 2021, our global comparable store sales grew 15%, a reflection of our recovery from the significant adverse impacts from the pandemic in the prior year period.

These key operating metrics are important indicators for the growth of our business and the effectiveness of our marketing and operational strategies.

Comparable store sales represent the percentage change in sales in one period from the same prior year period for company-operated stores open for 13 months or longer and exclude the impact of foreign currency translation.

We analyze comparable store sales on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements.

Stores that are temporarily closed or operating at reduced hours due to the COVID-19 pandemic remain in comparable store sales while stores identified for permanent closure have been removed.

During the quarter ended June 27,

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2021, our global comparable store sales grew 73%, demonstrating powerful momentum beyond recovery from the significant adverse impacts from the pandemic in the prior year period.

We have three reportable operating segments:

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COVID-19 Update

Starbucks results for the second quarter of fiscal 2021 reflect continued momentum in the recovery of our business from the effects of the COVID-19 pandemic.

Starbucks results for the third quarter of fiscal 2021 demonstrated powerful momentum beyond recovery from the COVID-19 pandemic.

The sequential improvements in our quarterly results demonstrate the overall strength and resilience of our brand.

Consolidated net revenues increased 11% to $6.7 billion in the second quarter of fiscal 2021 compared to $6.0 billion in the second quarter of fiscal 2020, driven primarily by lapping lost sales resulting from the COVID-19 outbreak in the prior year and strength in the U.S.

Consolidated net revenues increased 78% to $7.5 billion in the third quarter of fiscal 2021 compared to $4.2 billion in the third quarter of fiscal 2020, primarily due to lapping lost sales resulting from the COVID-19 pandemic in the prior year and strength in the U.S.

business in the current year.

For both the Americas segment and the U.S., comparable store sales increased 9% for the second quarter of fiscal 2021 compared to a decline of 3% in the second quarter of fiscal 2020.

market also had a 6% increase in two-year comparable store sales (1) , demonstrating our sales in the U.S.

had fully recovered from the adverse impacts from the pandemic.

We continued to incur incremental costs attributable to COVID-19, including catastrophe pay programs for company-operated store partners (employees).

For the Americas segment, comparable store sales increased 84% for the third quarter of fiscal 2021 compared to a decline of 41% in the third quarter of fiscal 2020.

Comparable store sales for our U.S.

market increased 83% for the third quarter of fiscal 2021 compared to a decline of 40% in the third quarter of fiscal 2020.

market also had a 10% increase in two-year comparable store sales (1) .

We continued to incur costs attributable to COVID-19, including catastrophe pay programs for company-operated store partners (employees).

These were partially offset by qualified tax credits provided by the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and the Canada Emergency Wage Subsidy (“CEWS”).

In fiscal year 2020, we announced a plan to optimize our Americas store portfolio, primarily in dense, metropolitan markets, by blending store formats to better cater to changing customer tastes and preferences.

During the second quarter of fiscal 2021, we closed approximately 300 stores in the U.S.

and Canada, and expect to close an additional 200 stores primarily over the next 9 to 12 months to complete our restructuring efforts.

Costs incurred related to the restructuring efforts are recorded as restructuring and impairments on our consolidated statement of earnings and will continue to be recorded as stores are identified for closure and are eventually closed.

For the International segment, comparable store sales increased 35% for the second quarter of fiscal 2021 compared to a decline of 31% in the second quarter of fiscal 2020.

Comparable store sales for our China market increased 91%, inclusive of value-added tax (“VAT”) favorability of approximately 9% which was reinstated for the second quarter of fiscal 2021.

During the third quarter of fiscal 2021, we closed approximately 50 stores in the U.S.

and Canada, and expect to close approximately 180 additional stores primarily over the next 6 to 12 months to complete our restructuring efforts.

Costs incurred related to the restructuring efforts are recorded as restructuring and impairments on our consolidated statements of earnings and will continue to be recorded as stores are identified for closure and are eventually closed.

We expect the majority of stores to be identified for closure and expect to recognize the remaining restructuring and impairment costs in 2021.

For the International segment, comparable store sales increased 41% for the third quarter of fiscal 2021 compared to a decline of 37% in the third quarter of fiscal 2020.

Comparable store sales for our China market increased 19%, inclusive of a 6% adverse impact from lapping the prior-year value-added tax (“VAT”) benefit.

Key markets in the International segment continued to experience pandemic-related restrictions that significantly impacted customer mobility during the quarter.

Although nearly all company-operated stores in these markets remained open, the modified operating protocols had an adverse impact to comparable store sales and results.

Most of our International licensed stores were also open with modified operations at the end of the second quarter of fiscal 2021.

Net revenues for our Channel Development segment declined $150 million, or 29%, when compared with the second quarter of fiscal 2020.

This was largely due to the transition of certain single-serve product activities to Nestlé beginning in the fourth quarter of fiscal 2020 and lapping Global Coffee Alliance transition-related activities.

Our Channel Development segment continues to grow category share as customers adjust to their at-home routines.

As we lap the adverse impacts of the pandemic in fiscal 2020, we expect the momentum in our business recovery to continue for the remainder of the fiscal year.

Absent significant and prolonged COVID-19 relapses or global economic disruptions, and based on the current trend of our retail business recovery and our focused efforts to expand contactless customer experiences, enhance digital capabilities and drive beverage innovation, we are confident in the strength of our brand and the durability of our long-term growth model.

Although nearly all company-operated stores in these markets remained open, the modified operating protocols had an adverse impact to comparable store sales and operating results.

Net revenues for our Channel Development segment declined $33 million, or 7%, when compared with the third quarter of fiscal 2020.

This was largely due to the transition of certain single-serve product activities to Nestlé beginning in the fourth quarter of fiscal 2020.

This was partially offset by higher product sales to and royalty revenue from the Global Coffee Alliance and growth in our ready-to-drink business.

Our Channel Development segment continues to grow category share despite a decline in the overall at-home coffee category as consumer mobility improved.

Absent significant and prolonged COVID-19 relapses or global economic disruptions, and based on the current trend of our retail business operations and our focused efforts to expand contactless customer experiences, enhance digital capabilities and drive beverage innovation, we are confident in the strength of our brand and the durability of our long-term growth model.

(1) Two-year comparable store sales metric is calculated as ((1 + % change in comparable store sales in FY20) * (1 + % change in comparable store sales in FY21)) - 1.

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of 10% = ((1 + (-40%)) * (1 + 83%)) - 1.

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Comparable Store Sales

Starbucks comparable store sales for the second quarter of fiscal 2021:

Quarter Ended Mar 28, 2021 Two Quarters Ended Mar 28, 2021

Starbucks comparable store sales for the third quarter of fiscal 2021:

Quarter Ended Jun 27, 2021 Three Quarters Ended Jun 27, 2021

Comparable Store Sales Change in

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International 41% 55% (9)% 21% 18% 3%

The above comparable store sales for the quarter ended March 28, 2021 reflect continued recovery from the pandemic, which had a significant adverse impact to our results during the same quarter in the prior year.

The above comparable store sales for the quarter ended June 27, 2021 reflect continued recovery from the pandemic, which had a significant adverse impact to our results during the same quarter in the prior year.

Refer to our Quarterly Store Data , also included in Item 2 of Part I of this 10-Q, for additional information on our company-operated and licensed store portfolio.

Results of Operations (in millions)

Quarter Ended Two Quarters Ended

Quarter Ended Three Quarters Ended

Company-operated stores $ 6,363.1 $ 3,444.4 $ 2,918.7 84.7 % $ 17,742.8 $ 13,991.0 $ 3,751.8 26.8 %

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Total net revenues $ 7,496.5 $ 4,222.1 $ 3,274.4 77.6 % $ 20,913.9 $ 17,314.9 $ 3,599.0 20.8 %

For the quarter ended March 28, 2021 compared with the quarter ended March 29, 2020

Total net revenues for the second quarter of fiscal 2021 increased $672 million, primarily due to higher revenues from company-operated stores ($887 million).

The growth of company-operated stores revenues was driven by a 15% increase in comparable store sales ($670 million) attributed to a 19% increase in average ticket, partially offset by a 4% decrease in transactions.

For the quarter ended June 27, 2021 compared with the quarter ended June 28, 2020

Total net revenues for the third quarter of fiscal 2021 increased $3.3 billion, primarily due to higher revenues from company-operated stores ($2.9 billion).

The growth of company-operated stores revenues was driven by a 73% increase in comparable store sales ($2.5 billion) attributed to a 75% increase in transactions offset by a 1% decrease in average ticket.

Also contributing to the increase were incremental revenues from 612 net new Starbucks ® company-operated stores, or a 4% increase, over the past 12 months ($268 million) and favorable foreign currency translation ($119 million).

Licensed stores revenue decreased $95 million, primarily driven by lower product and equipment sales to and royalty revenues from our licensees.

Other revenues decreased $120 million, primarily due to the transition of certain single-serve product activities to Nestlé and the lapping of product sales to Nestlé as part of the Foodservice order fulfillment transition.

These were partially offset by growth in at-home coffee and our ready-to-drink businesses.

For the two quarters ended March 28, 2021 compared with the two quarters ended March 29, 2020

Total net revenues for the first two quarters of fiscal 2021 increased $325 million, primarily due to higher revenues from company-operated stores ($833 million).

The growth of company-operated stores revenues was driven by a 4% increase in comparable store sales ($392 million) attributed to an 18% increase in average ticket, partially offset by a 12% decrease in transactions.

Licensed stores revenue increased $380 million, primarily driven by higher product and equipment sales to and royalty revenues from our licensees.

Other revenues decreased $24 million, primarily due to the transition of certain single-serve product activities to Nestlé.

This was partially offset by higher product sales and royalty revenue in the Global Coffee Alliance and growth in our ready-to-drink business.

For the three quarters ended June 27, 2021 compared with the three quarters ended June 28, 2020

Total net revenues for the first three quarters of fiscal 2021 increased $3.6 billion, primarily due to higher revenues from company-operated stores ($3.8 billion).

The growth of company-operated stores revenues was driven by a 21% increase in comparable store sales ($2.9 billion) attributed to a 13% increase in average ticket and a 7% increase in transactions.

Also contributing to the increase were incremental revenues from 612 net new Starbucks ® company-operated stores, or a 4% increase, over the past 12 months ($554 million) and favorable foreign currency translation ($291 million).

Licensed stores revenue decreased $273 million, primarily driven by lower product and equipment sales to and royalty revenues from our licensees.

Other revenues decreased $235 million, primarily due to the transition of certain single-serve product activities to Nestlé and the lapping of higher transition activities related to the Global Coffee Alliance.

Also contributing were lower Global Coffee Alliance revenues, mainly driven by the Foodservice business, which experienced softening due to COVID-19.

These were partially offset by growth in at-home coffee and our ready-to-drink businesses.

Licensed stores revenue increased $107 million, primarily driven by higher product and equipment sales to and royalty revenues from our licensees.

Other revenues decreased $259 million, primarily due to the transition of certain single-serve product activities to Nestlé and the lapping of higher transition activities related to the Global Coffee Alliance in the prior year.

These were partially offset by growth in our ready-to-drink business.

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Operating Expenses

Quarter Ended Two Quarters Ended

Change Mar 28,

Quarter Ended Three Quarters Ended

Change Jun 27,

As a % of Total

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Income from equity investees 105.5 68.4 37.1 1.4 1.6 265.3 210.3 55.0 1.3 1.2

Operating income $ 987.6 $ 487.4 $ 500.2 14.8 % 8.1 % $ 1,901.2 $ 1,707.2 $ 194.0 14.2 % 13.0 %

Operating income/(loss) $ 1,488.7 $ (703.9) $ 2,192.6 19.9 % (16.7) % $ 3,389.9 $ 1,003.4 $ 2,386.5 16.2 % 5.8 %

Store operating expenses as a % of company-operated store revenues 46.6 % 73.7 % 48.8 % 57.8 %

For the quarter ended March 28, 2021 compared with the quarter ended March 29, 2020

Product and distribution costs as a percentage of total net revenues decreased 340 basis points for the second quarter of fiscal 2021, primarily due to sales leverage driven by lapping the severe impact of the COVID-19 pandemic in the prior year.

Also contributing were the lapping of inventory write-offs and product waste in the prior year (approximately 90 basis points).

Store operating expenses as a percentage of total net revenues decreased 310 basis points for the second quarter of fiscal 2021.

Store operating expenses as a percentage of company-operated store revenues decreased 720 basis points, primarily due to sales leverage driven by lapping the severe impact of the COVID-19 pandemic in the prior year and higher benefits in the current year provided by temporary subsidies from the U.S.

For the quarter ended June 27, 2021 compared with the quarter ended June 28, 2020

Product and distribution costs as a percentage of total net revenues decreased 570 basis points for the third quarter of fiscal 2021, primarily due to sales leverage driven by lapping the severe impact of the COVID-19 pandemic in the prior year and pricing in the Americas.

Store operating expenses as a percentage of total net revenues decreased 2,050 basis points for the third quarter of fiscal 2021.

Store operating expenses as a percentage of company-operated store revenues decreased 2,710 basis points, primarily due to sales leverage from business recovery and lapping higher COVID-19 related costs in the prior year, mainly catastrophe and service pay for store partners, net of temporary subsidies from the U.S.

and certain foreign governments (approximately 840 basis points).

These were partially offset by additional investments and growth in retail store partners wages and benefits (approximately 300 basis points).

Other operating expenses decreased $7 million for the second quarter of fiscal 2021, due to lapping prior year incremental costs to develop and grow the Global Coffee Alliance.

These increases were partially offset by additional investments in retail store partners wages and benefits (approximately 100 basis points).

Other operating expenses decreased $62 million for the third quarter of fiscal 2021, primarily due to lower Global Coffee Alliance transaction costs, inclusive of lapping certain transition items from the prior year and a change in estimate relating to a transaction cost accrual.

Depreciation and amortization expenses as a percentage of total net revenues decreased 390 basis points, primarily due to sales leverage.

General and administrative expenses increased $58 million, primarily due to incremental strategic investments in technology ($25 million) and higher performance-based compensation, recognizing the better than expected business recovery ($25 million).

Restructuring and impairment expenses increased $24 million, primarily due to accelerated amortization of right-of-use lease assets associated with the closure of certain company-operated stores ($14 million) and higher asset impairment ($8 million) related to store portfolio optimization.

Income from equity investees increased $9 million, primarily due to higher income from our North American Coffee Partnership joint venture.

The combination of these changes resulted in an overall increase in operating margin of 670 basis points for the second quarter of fiscal 2021.

For the two quarters ended March 28, 2021 compared with the two quarters ended March 29, 2020

Product and distribution costs as a percentage of total net revenues decreased 220 basis points for the first two quarters of fiscal 2021, primarily due to sales leverage driven by lapping the severe impact of the COVID-19 pandemic in the prior year.

Also contributing were the lapping of inventory write-offs and product waste in the prior year (approximately 30 basis points).

Store operating expenses as a percentage of total net revenues increased 10 basis points for the first two quarters of fiscal 2021.

Store operating expenses as a percentage of company-operated store revenues decreased 260 basis points, primarily due to labor efficiencies (approximately 170 basis points), benefits provided by temporary subsidies from the U.S.

and certain foreign governments (approximately 80 basis points) and sales leverage driven by lapping the severe impact of the COVID-19 pandemic in the prior year.

These were partially offset by additional investments and growth in retail store partners wages and benefits (approximately 230 basis points).

Other operating expenses decreased $17 million for the first two quarters of fiscal 2021, due to lapping prior year incremental costs to develop and grow the Global Coffee Alliance.

General and administrative expenses increased $96 million, primarily due to incremental strategic investments in technology ($53 million) and higher performance-based compensation, recognizing the better than expected business recovery ($43 million).

Restructuring and impairment expenses increased $90 million, primarily due to higher asset impairment ($50 million) and accelerated amortization of right-of-use lease assets associated with the closure of certain company-operated stores ($40 million), related to store portfolio optimization.

Income from equity investees increased $18 million, primarily due to higher income from our North American Coffee Partnership joint venture, partially offset by temporary store closures and reduced operating hours in our South Korea and India joint ventures.

The combination of these changes resulted in an overall increase in operating margin of 120 basis points for the first two quarters of fiscal 2021.

General and administrative expenses increased $95 million, primarily due to higher performance-based compensation recognizing the better than expected business recovery ($64 million) and incremental strategic investments in technology ($21 million).

Restructuring and impairment expenses decreased $58 million, primarily due to lower asset impairment related to store portfolio optimization ($34 million) and lapping the intangible asset impairment from the prior year ($22 million).

Income from equity investees increased $37 million, primarily due to higher income from our South Korea joint venture attributable to net new store growth and lapping lower royalty income due to the severe impact of the COVID-19 pandemic in the prior year ($18 million).

Higher income from our North American Coffee Partnership joint venture also contributed ($13 million).

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The combination of these changes resulted in an overall increase in operating margin of 3,660 basis points for the third quarter of fiscal 2021.

For the three quarters ended June 27, 2021 compared with the three quarters ended June 28, 2020

Product and distribution costs as a percentage of total net revenues decreased 310 basis points for the first three quarters of fiscal 2021, primarily due to sales leverage driven by lapping the severe impact of the COVID-19 pandemic in the prior year and pricing in the Americas.

Store operating expenses as a percentage of total net revenues decreased 530 basis points for the first three quarters of fiscal 2021.

Store operating expenses as a percentage of company-operated store revenues decreased 900 basis points, primarily due to sales leverage from business recovery and lapping higher COVID-19 related costs in the prior year, mainly catastrophe and service pay for store partners, net of temporary subsidies from the U.S.

and certain foreign governments (approximately 280 basis points).

These increases were partially offset by additional investments in retail store partners wages and benefits (approximately 200 basis points).

Other operating expenses decreased $80 million for the first three quarters of fiscal 2021, primarily due to lower Global Coffee Alliance transaction costs, inclusive of lapping certain transition items from the prior year and a change in estimate relating to a transaction cost accrual.

Depreciation and amortization expenses as a percentage of total net revenues decreased 100 basis points, primarily due to sales leverage.

General and administrative expenses increased $191 million, primarily due to higher performance-based compensation recognizing the better than expected business recovery ($108 million) and incremental strategic investments in technology ($74 million).

Restructuring and impairment expenses increased $31 million, primarily due to accelerated amortization of right-of-use lease assets associated with the closure of certain company-operated stores ($39 million) and higher asset impairment ($16 million), related to store portfolio optimization, partially offset by lapping the intangible asset impairment from the prior year ($22 million).

Income from equity investees increased $55 million, primarily due to higher income from our North American Coffee Partnership joint venture ($33 million) as well as net new store growth in our South Korea joint venture and lapping lower royalty income due to the severe impact of the COVID-19 pandemic in the prior year ($10 million).

The combination of these changes resulted in an overall increase in operating margin of 1,040 basis points for the first three quarters of fiscal 2021.

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Other Income and Expenses

Quarter Ended Two Quarters Ended

Change Mar 28,

Quarter Ended Three Quarters Ended

Change Jun 27,

As a % of Total

Operating income $ 987.6 $ 487.4 $ 500.2 14.8 % 8.1 % $ 1,901.2 $ 1,707.2 $ 194.0 14.2 % 13.0 %

Operating income/(loss) $ 1,488.7 $ (703.9) $ 2,192.6 19.9 % (16.7) % $ 3,389.9 $ 1,003.4 $ 2,386.5 16.2 % 5.8 %

Interest income and other, net 36.0 12.7 23.3 0.5 0.3 68.6 30.7 37.9 0.3 0.2

Interest expense (113.4) (120.8) 7.4 (1.5) (2.9) (349.2) (312.1) (37.1) (1.7) (1.8)

Earnings before income taxes 889.9 390.2 499.7 13.3 6.5 1,698.1 1,534.1 164.0 12.7 11.7

Income tax expense 230.5 65.4 165.1 3.5 1.1 416.5 324.0 92.5 3.1 2.5

Net earnings including noncontrolling interests 659.4 324.8 334.6 9.9 5.4 1,281.6 1,210.1 71.5 9.6 9.2

Net loss attributable to noncontrolling interests — (3.6) 3.6 — (0.1) — (4.0) 4.0 — —

Net earnings attributable to Starbucks $ 659.4 $ 328.4 $ 331.0 9.9 % 5.5 % $ 1,281.6 $ 1,214.1 $ 67.5 9.6 % 9.3 %

Earnings/(loss) before income taxes 1,411.3 (812.0) 2,223.3 18.8 (19.2) 3,109.3 722.0 2,387.3 14.9 4.2

Income tax expense/(benefit) 257.1 (133.9) 391.0 3.4 (3.2) 673.6 190.0 483.6 3.2 1.1

Net earnings/(loss) including noncontrolling interests 1,154.2 (678.1) 1,832.3 15.4 (16.1) 2,435.7 532.0 1,903.7 11.6 3.1

Net earnings/(loss) attributable to noncontrolling interests 0.8 0.3 0.5 — — 0.8 (3.7) 4.5 — —

Net earnings/(loss) attributable to Starbucks $ 1,153.4 $ (678.4) $ 1,831.8 15.4 % (16.1) % $ 2,434.9 $ 535.7 $ 1,899.2 11.6 % 3.1 %

Effective tax rate including noncontrolling interests 18.2 % 16.5 % 21.7 % 26.3 %

For the quarter ended March 28, 2021 compared with the quarter ended March 29, 2020

Interest income and other, net increased $15 million, primarily due to additional gains from certain investments and net favorable fair value adjustments from derivatives used to manage our risk of commodity risk price fluctuations.

Interest expense increased $16 million, primarily due to additional interest incurred on long-term debt issued in March 2020 and May 2020.

The effective tax rate for the quarter ended March 28, 2021 was 25.9% compared to 16.8% for the same quarter in fiscal 2020.

The increase was primarily due to higher earnings, including the foreign rate differential on our jurisdictional mix of earnings, partially offset by lapping valuation allowances recorded against deferred tax assets of certain international jurisdictions in the prior year.

For the two quarters ended March 28, 2021 compared with the two quarters ended March 29, 2020

For the quarter ended June 27, 2021 compared with the quarter ended June 28, 2020

Interest income and other, net increased $23 million, primarily due to additional gains from certain investments.

Interest expense decreased $7 million, primarily due to lower debt balances attributed to repayments of short-term and current portion of long-term debt balances.

The effective tax rate for the quarter ended June 27, 2021 was 18.2% compared to 16.5% for the same quarter in fiscal 2020.

The increase was primarily due to the foreign rate differential on our mix of earnings by tax jurisdictions, as well as a change in the absolute pre-tax operating results when compared to the same period of the prior year.

This was partially offset by lapping valuation allowances recorded against deferred tax assets of certain international jurisdictions in the prior year (approximately 840 basis points), a current year remeasurement of deferred tax assets due to an enacted corporate rate change (approximately 510 basis points) and lapping the release of income tax reserves related to the expiration of statute of limitations in the prior year (approximately 330 basis points).

For the three quarters ended June 27, 2021 compared with the three quarters ended June 28, 2020

Interest income and other, net increased $38 million, primarily due to additional gains from certain investments and net favorable fair value adjustments from non-designated derivatives used to manage our risk of commodity price fluctuations.

Interest expense increased $37 million, primarily due to additional interest incurred on long-term debt issued in March 2020 and May 2020.

The effective tax rate for the first two quarters ended March 28, 2021 was 24.5% compared to 21.1% for the same period in fiscal 2020.

The effective tax rate for the first three quarters ended June 27, 2021 was 21.7% compared to 26.3% for the same period in fiscal 2020.

The decrease was primarily due to lapping valuation allowances recorded against deferred tax assets of certain international jurisdictions in the prior year (approximately 1,400 basis points) and a current year remeasurement of deferred tax assets due to an enacted corporate rate change (approximately 230 basis points).

This was partially offset by the foreign rate differential on our mix of earnings by tax jurisdiction and lapping the release of income tax reserves related to the expiration of statute of limitations in the prior year.

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Segment Information

Results of operations by segment (in millions) :

Quarter Ended Two Quarters Ended

Change Mar 28,

Quarter Ended Three Quarters Ended

Change Jun 27,

As a % of Americas

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Total operating expenses 4,084.6 3,210.4 874.2 75.6 114.4 11,733.7 10,831.2 902.5 79.5 89.2

Operating income $ 905.3 $ 621.2 $ 284.1 19.4 % 14.3 % $ 1,718.7 $ 1,720.0 $ (1.3) 18.3 % 18.4 %

Operating income/(loss) $ 1,315.7 $ (404.9) $ 1,720.6 24.4 % (14.4) % $ 3,034.4 $ 1,315.1 $ 1,719.3 20.5 % 10.8 %

Store operating expenses as a % of company-operated store revenues 47.6 % 80.0 % 50.3 % 58.9 %

For the quarter ended March 28, 2021 compared with the quarter ended March 29, 2020

Americas total net revenues for the second quarter of fiscal 2021 increased $335 million, or 8%, primarily due to a 9% increase in comparable store sales ($349 million) driven by a 22% increase in average ticket, partially offset by a 10% decrease in transactions and the opening of new company-operated stores ($45 million).

These increases were partially offset by lower product and equipment sales to and royalty revenues from our licensees ($70 million), primarily due to the impact of the COVID-19 pandemic.

For the quarter ended June 27, 2021 compared with the quarter ended June 28, 2020

Americas total net revenues for the third quarter of fiscal 2021 increased $2.6 billion, or 92%, primarily due to an 84% increase in comparable store sales ($2.1 billion) driven by an 82% increase in transactions and a 1% increase in average ticket, and the opening of new company-operated stores ($172 million).

Also contributing to these increases were higher product and equipment sales to and royalty revenues from our licensees ($231 million), primarily due to lapping the severe impact of the COVID-19 pandemic in the prior year, and favorable foreign currency translation ($39 million).

Operating Margin

Americas operating income for the second quarter of fiscal 2021 increased 46% to $905 million, compared to $621 million in the second quarter of fiscal 2020.

Operating margin increased 510 basis points to 19.4%, primarily due to the lapping of COVID-19 related costs, mostly catastrophe and service pay for store partners (approximately 140 basis points) and inventory write-offs (approximately 110 basis points), sales leverage from business recovery, and pricing (approximately 120 basis points).

Temporary subsidies provided by the CARES Act and CEWS (approximately 70 basis points) and benefits from closure of lower-performing stores (approximately 70 basis points) also contributed.

These increases were partially offset by additional growth and investments in retail store partners wages and benefits (approximately 320 basis points) and higher restructuring expenses relating to our Americas portfolio optimization (approximately 50 basis points).

For the two quarters ended March 28, 2021 compared with the two quarters ended March 29, 2020

Americas total net revenues for the first two quarters of fiscal 2021 increased $27 million, primarily due to a 1% increase in comparable store sales ($107 million) driven by a 21% increase in average ticket, partially offset by a 16% decrease in transactions and the opening of new company-operated stores ($106 million).

These increases were partially offset by lower product and equipment sales to and royalty revenues from our licensees ($190 million), primarily due to the impact of the COVID-19 pandemic.

Americas operating income for the third quarter of fiscal 2021 was $1.3 billion, compared to a loss of $405 million in the third quarter of fiscal 2020.

Operating margin increased 3,880 basis points to 24.4%, primarily due to sales leverage from business recovery and lapping higher COVID-19 related costs in the prior year, mainly catastrophe and service pay for store partners, net of temporary subsidies provided by the CARES Act and CEWS (approximately 930 basis points).

Also contributing to the margin improvements were lower restructuring expenses (approximately 160 basis points), pricing (approximately 150 basis points) and benefits from the closure of lower-performing stores (approximately 80 basis points).

These increases were partially offset by additional investments in retail store partners wages and benefits (approximately 110 basis points) and increased supply chain costs attributed to inflation (approximately 70 basis points).

For the three quarters ended June 27, 2021 compared with the three quarters ended June 28, 2020

Americas total net revenues for the first three quarters of fiscal 2021 increased $2.6 billion, or 22% primarily due to a 21% increase in comparable store sales ($2.2 billion) driven by a 16% increase in average ticket and a 4% increase in transactions, and the opening of new company-operated stores ($278 million).

Also contributing to these increases were favorable foreign

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currency translation ($56 million) and higher product and equipment sales to and royalty revenues from our licensees ($41 million), primarily due to lapping the severe impact of the COVID-19 pandemic in the prior year.

Operating Margin

Americas operating income for the first two quarters of fiscal 2021 was relatively flat at $1.7 billion, compared to the second quarter of fiscal 2020.

Operating margin decreased 10 basis points to 18.3%, primarily due to additional growth and investments in retail store partners wages and benefits (approximately 250 basis points).

Higher restructuring expenses relating to our Americas portfolio optimization (approximately 90 basis points) also contributed to the decrease.

Partially offsetting these decreases were improved labor efficiencies (approximately 170 basis points), pricing (approximately 120 basis points) and temporary benefits provided by the CARES Act and CEWS (approximately 60 basis points).

Americas operating income for the first three quarters of fiscal 2021increased 131% to $3.0 billion, compared to $1.3 billion for the same period in fiscal 2020.

Operating margin increased 970 basis points to 20.5%, primarily due to sales leverage from business recovery, lower COVID-19 related costs, mostly catastrophe and service pay for store partners, net of temporary subsidies provided by the CARES Act and CEWS (approximately 260 basis points), pricing (approximately 130 basis points) and benefits from the closure of lower-performing stores (approximately 60 basis points).

These increases were partially offset by additional investments in retail store partners wages and benefits (approximately 220 basis points) and higher restructuring expenses relating to our Americas portfolio optimization (approximately 30 basis points).

International

Quarter Ended Two Quarters Ended

Quarter Ended Three Quarters Ended

As a % of International

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Store operating expenses as a % of company-operated store revenues 43.3 % 55.2 % 43.9 % 53.6 %

For the quarter ended March 28, 2021 compared with the quarter ended March 29, 2020

International total net revenues for the second quarter of fiscal 2021 increased $476 million, or 42%, primarily due to a 35% increase in comparable store sales ($322 million), driven by a 26% increase in transactions and a 7% increase in average ticket.

Also contributing were favorable foreign currency translation ($86 million) and 699 net new Starbucks ® company-operated stores, or an 11% increase, over the past 12 months ($79 million).

These were partially offset by lower product and equipment sales to and royalty revenues from our licensees ($32 million), primarily due to the impact of the COVID-19 pandemic.

For the quarter ended June 27, 2021 compared with the quarter ended June 28, 2020

International total net revenues for the third quarter of fiscal 2021 increased $709 million, or 75%.

Company-operated store revenues increased $558 million, primarily due to a 41% increase in comparable store sales ($373 million), driven by a 55% increase in transactions, partially offset by a 9% decrease in average ticket.

Additionally there were 761 net new stores, a 12% increase, over the past 12 months ($96 million).

Also contributing to the increase in net revenues were higher product and equipment sales to and royalty revenues from our licensees ($135 million) and favorable foreign currency translation ($94 million).

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Operating Margin

International operating income for the second quarter of fiscal 2021 was $252 million, compared to the operating loss of $15 million in the second quarter of fiscal 2020.

Operating margin increased 1,700 basis points to 15.6%, primarily due to sales leverage driven by lapping the severe impact of the COVID-19 pandemic in the prior year, as well as temporary government subsidies (approximately 270 basis points).

For the two quarters ended March 28, 2021 compared with the two quarters ended March 29, 2020

International total net revenues for the first two quarters of fiscal 2021 increased $560 million, or 21%, primarily due to a 13% increase in comparable store sales ($285 million), driven by an 8% increase in average ticket and a 4% increase in transactions.

Also contributing were 699 net new Starbucks ® company-operated stores, or an 11% increase, over the past 12 months

($180 million) and favorable foreign currency translation ($164 million).

These were partially offset by lower product and equipment sales to and royalty revenues from our licensees ($93 million), primarily due to the impact of the COVID-19 pandemic.

International operating income for the third quarter of fiscal 2021 was $318 million, compared to a loss of $86 million in the third quarter of fiscal 2020.

Operating margin increased 2,830 basis points to 19.2%, primarily due to sales leverage driven by lapping the severe impact of the COVID-19 pandemic in the prior year as well labor efficiencies (approximately 310 basis points).

Also contributing to this increase was lower catastrophe pay (approximately 290 basis points), lapping temporary royalty relief provided to licensees in the prior year (approximately 230 basis points) and higher temporary government subsidies (approximately 200 basis points).

For the three quarters ended June 27, 2021 compared with the three quarters ended June 28, 2020

International total net revenues for the first three quarters of fiscal 2021 increased $1.3 billion, or 35%, primarily due to a 21% increase in comparable store sales ($658 million), driven by an 18% increase in transactions and a 3% increase in average ticket.

Also contributing to this increase were 761 net new Starbucks ® company-operated stores, or a 12% increase, over the past 12 months ($276 million).

Additionally, there were favorable foreign currency translation ($258 million) and higher product and equipment sales to and royalty revenues from our licensees ($42 million), primarily due to lapping the severe impact of the COVID-19 pandemic in the prior year.

Operating Margin

International operating income for the first two quarters of fiscal 2021 was $526 million, compared to $261 million for the same period in fiscal 2020.

Operating margin increased 650 basis points to 16.1%, primarily due to sales leverage driven by lapping the severe impact of the COVID-19 pandemic in the prior year, as well as temporary government subsidies (approximately 120 basis points).

International operating income for the first three quarters of fiscal 2021 increased 384% to $845 million, compared to $175 million for the same period in fiscal 2020.

Operating margin increased 1,240 basis points to 17.2%, primarily due to sales leverage driven by lapping the severe impact of the COVID-19 pandemic in the prior year, as well as higher temporary government subsidies (approximately 140 basis points) and labor efficiencies (approximately 140 basis points).

Also contributing to this increase was lapping temporary royalty relief provided to licensees in the prior year (approximately 80 basis points).

Channel Development

Quarter Ended Two Quarters Ended

Change Mar 28,

Quarter Ended Three Quarters Ended

Change Jun 27,

As a % of Channel Development

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Operating income $ 216.0 $ 124.2 $ 91.8 52.2 % 27.8 % $ 569.3 $ 489.3 $ 80.0 49.3 % 33.5 %

For the quarter ended March 28, 2021 compared with the quarter ended March 29, 2020

Channel Development total net revenues for the second quarter of fiscal 2021 decreased $149 million, or 29%, primarily due to the transition of certain single-serve product activities to Nestlé ($106 million), lapping of additional product sales to Nestlé to transition Foodservice order fulfillment ($39 million).

These were partially offset by growth in our ready-to-drink business.

For the quarter ended June 27, 2021 compared with the quarter ended June 28, 2020

Channel Development total net revenues for the third quarter of fiscal 2021 decreased $33 million, or 7%, primarily due to the transition of certain single-serve product activities to Nestlé ($74 million).

This was partially offset by higher product sales and royalty revenue in the Global Coffee Alliance ($30 million) and growth in our ready-to-drink business.

We expect the impacts from the transition to be substantially completed by the end of fiscal 2021.

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Operating Margin

Channel Development operating income for the second quarter of fiscal 2021 decreased 9% to $173 million, compared to $190 million in the second quarter of fiscal 2020.

Operating margin increased 1,020 basis points to 46.7%, primarily due to the transfer of certain single-serve products to Nestlé as part of the Global Coffee Alliance (approximately 480 basis points) and lapping Global Coffee Alliance transition-related activities (approximately 210 basis points).

Channel Development operating income for the third quarter of fiscal 2021 increased 74% to $216 million, compared to $124 million in the third quarter of fiscal 2020.

Operating margin increased 2,440 basis points to 52.2%, primarily due to lower Global Coffee Alliance transaction costs, inclusive of lapping certain transition items from prior year (approximately 780 basis points) and a change in estimate relating to a transaction cost accrual (approximately 550 basis points), as well as the transfer of certain single-serve products to Nestlé as part of the Global Coffee Alliance (approximately 700 basis points).

Strong performance from our North American Coffee Partnership joint venture also contributed.

For the two quarters ended March 28, 2021 compared with the two quarters ended March 29, 2020

Channel Development total net revenues for the first two quarters of fiscal 2021 decreased $273 million, or 27%, primarily due to the transition of certain single-serve product activities to Nestlé ($197 million) and the lapping of higher transition activities related to the Global Coffee Alliance ($73 million).

Also contributing were lower Global Coffee Alliance revenues ($27 million), mainly driven by the Foodservice business, which experienced softening due to COVID-19.

For the three quarters ended June 27, 2021 compared with the three quarters ended June 28, 2020

Channel Development total net revenues for the first three quarters of fiscal 2021 decreased $306 million, or 21%, primarily due to the transition of certain single-serve product activities to Nestlé ($270 million) and the lapping of higher transition activities related to the Global Coffee Alliance in the prior year ($80 million).

These were partially offset by growth in our ready-to-drink business.

Operating Margin

Channel Development operating income for the first two quarters of fiscal 2021 decreased 3% to $353 million, compared to $365 million for the same period in fiscal 2020.

Operating margin increased 1,170 basis points to 47.7%, primarily due to the transfer of certain single-serve products to Nestlé as part of the Global Coffee Alliance (approximately 650 basis points) and lapping Global Coffee Alliance transition-related activities (approximately 100 basis points).

Channel Development operating income for the first three quarters of fiscal 2021 increased 16% to $569 million, compared to $489 million for the same period in fiscal 2020.

Operating margin increased 1,580 basis points to 49.3%, primarily due to the transfer of certain single-serve products to Nestlé as part of the Global Coffee Alliance (approximately 660 basis points), lower Global Coffee Alliance transaction costs, inclusive of lapping certain transition items from the prior year (approximately 320 basis points), a change in estimate relating to a transaction cost accrual (approximately 200 basis points) and lapping Global Coffee Alliance transition-related activities (approximately 70 basis points).

Strong performance from our North American Coffee Partnership joint venture also contributed.

Corporate and Other

Quarter Ended Two Quarters Ended

Quarter Ended Three Quarters Ended

Net revenues:

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Unallocated corporate expenses include corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments.

For the quarter ended March 28, 2021 compared with the quarter ended March 29, 2020

Corporate and Other operating loss increased to $342 million for the second quarter of fiscal 2021, or 11%, compared to $308 million for the second quarter of fiscal 2020.

This increase was primarily driven by incremental strategic investments in technology and higher performance-based compensation, recognizing the better than expected business recovery.

For the two quarters ended March 28, 2021 compared with the two quarters ended March 29, 2020

Corporate and Other operating loss increased to $697 million for the first two quarters of fiscal 2021, or 9%, compared to $638 million for the same period in fiscal 2020.

This increase was primarily driven by incremental strategic investments in technology and higher performance-based compensation , recognizing the better than expected business recovery.

For the quarter ended June 27, 2021 compared with the quarter ended June 28, 2020

Corporate and Other operating loss increased to $361 million for the third quarter of fiscal 2021, or 7%, compared to $337 million for the third quarter of fiscal 2020.

This increase was primarily driven by higher performance-based compensation recognizing the better than expected business recovery ($37 million) and incremental strategic investments in technology ($19 million).

For the three quarters ended June 27, 2021 compared with the three quarters ended June 28, 2020

Corporate and Other operating loss increased to $1,058 million for the first three quarters of fiscal 2021, or 8%, compared to $976 million for the same period in fiscal 2020.

This increase was primarily driven by incremental strategic investments in technology ($67 million) and higher performance-based compensation, recognizing the better than expected business recovery ($57 million).

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Quarterly Store Data

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Net stores opened/(closed) and transferred during the period

Quarter Ended Two Quarters Ended Stores open as of

Quarter Ended Three Quarters Ended Stores open as of

Company-operated stores 40 (34) (249) 43 9,860 10,017

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Investment Overview

Our cash and investments totaled $4.3 billion as of March 28, 2021 and $4.8 billion as of September 27, 2020.

Our cash and investments totaled $5.2 billion as of June 27, 2021 and $4.8 billion as of September 27, 2020.

We actively manage our cash and investments in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, make acquisitions and return cash to shareholders through common stock cash dividend payments and share repurchases.

Our investment portfolio primarily includes highly liquid available-for-sale securities, including corporate debt securities, government treasury securities (foreign and domestic) and commercial paper.

As of March 28, 2021, approximately $2.3 billion of cash was held in foreign subsidiaries.

As of June 27, 2021, approximately $2.5 billion of cash was held in foreign subsidiaries.

Borrowing Capacity

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The 2018 credit facility is available for general corporate purposes.

As of March 28, 2021, we had no borrowings under the 2018 credit facility.

As of June 27, 2021, we had no borrowings under the 2018 credit facility.

The 364-day credit facility

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The 364-day credit facility is available for general purposes.

As of March 28, 2021, we had no borrowings under the 364-day credit facility.

As of June 27, 2021, we had no borrowings under the 364-day credit facility.

Due to the financial impacts from COVID-19, we reached an agreement with our lenders to amend the fixed charge coverage ratio covenant for our combined $3 billion revolving lines of credit, through the fourth quarter of fiscal 2021.

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recovery in our cash flows, we are currently in compliance with the covenant prior to the amendment and expect our continued compliance upon the amendment expiration at the end of fiscal 2021.

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The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock and share repurchases.

As of March 28, 2021, we had no borrowings outstanding under our commercial paper program.

As such, our total contractual borrowing capacity for general corporate purposes as of the end of our second quarter of fiscal 2021 was $6.0 billion when combining the unused commercial paper program and credit facilities, less outstanding borrowing.

As of June 27, 2021, we had no borrowings outstanding under our commercial paper program.

As such, as of the end of our third quarter of fiscal 2021, our total contractual borrowing capacity for general corporate purposes, inclusive of all available capacity under our credit facilities (consisting of $2.0 billion under the 2018 credit facility and $1.0 billion under the 364-day credit facility) and the unused commercial paper program was $3.0 billion.

Credit facilities in Japan

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Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.350%.

As of March 28, 2021, we had $18.3 million of borrowings outstanding under these credit facilities.

As of June 27, 2021, we had no borrowings outstanding under these credit facilities.

See Note 7, Debt, to the consolidated financial statements included in Item 1 of Part I of this 10-Q for details of the components of our long-term debt.

Our ability to incur new liens and conduct sale and leaseback transactions on certain material properties is subject to compliance with terms of the indentures under which the Senior Notes were issued.

As of March 28, 2021, we were in compliance with all applicable covenants.

As of June 27, 2021, we were in compliance with all applicable covenants.

We expect to use our available cash and investments, including, but not limited to, additional potential future borrowings under the credit facilities, commercial paper program and the issuance of debt to support and invest in our core businesses, including investing in new ways to serve our customers and supporting our store partners, repaying maturing debts, as well as returning cash to shareholders through common stock cash dividend payments and discretionary share repurchases and investing in new business opportunities related to our core and developing businesses.

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In this regard, we may incur additional debt, within targeted levels, as part of our plans to fund our capital programs, including cash returns to shareholders through future dividends and discretionary share repurchases.

To further strengthen our liquidity in the near term, we currently expect the suspension of share repurchases to continue into late fiscal 2021.

To further strengthen our liquidity in the near term, we currently expect the suspension of share repurchases to continue for the remainder of fiscal 2021.

We regularly review our cash positions and our determination of indefinite reinvestment of foreign earnings.

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to satisfy domestic liquidity needs.

During the second quarter of fiscal 2021, our Board of Directors approved a quarterly cash dividend to shareholders of $0.45 per share to be paid on May 28, 2021 to shareholders of record as of the close of business on May 13, 2021.

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During the third quarter of fiscal 2021, our Board of Directors approved a quarterly cash dividend to shareholders of $0.45 per share to be paid on August 27, 2021 to shareholders of record as of the close of business on August 12, 2021.

As of the date of this report, we do not expect to reduce our quarterly dividend as a result of the COVID-19 pandemic.

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Repurchases pursuant to this program were last made in mid-March 2020.

As of March 28, 2021, 48.9 million shares remained available for repurchase under current authorizations.

The existing share repurchase program remains authorized by the Board of Directors, however, we have temporarily suspended our share repurchase program until we restore certain financial leverage targets, which we currently expect to occur in late fiscal 2021.

As of June 27, 2021, 48.9 million shares remained available for repurchase under current authorizations.

We currently expect the suspension of our share repurchase program to continue for the remainder of fiscal 2021.

Other than normal operating expenses, cash requirements for the remainder of fiscal 2021 are expected to consist primarily of capital expenditures for investments in our new and existing stores and our supply chain and corporate facilities.

Total capital expenditures for fiscal 2021 are expected to be approximately $1.7 billion.

Cash provided by operating activities was $2.7 billion for the first two quarters of fiscal 2021, compared to $0.5 billion for the same period in fiscal 2020.

The increase was primarily due to the timing of tax payments and refunds.

Cash used in investing activities for the first two quarters of fiscal 2021 totaled $0.6 billion, compared to cash used in investing activities of $0.7 billion for the same period in fiscal 2020.

The change was primarily due to an increase in purchase of investments, partially offset by higher maturities and calls of investments and decrease in spend on capital expenditures.

Cash used in financing activities for the first two quarters of fiscal 2021 totaled $2.7 billion compared to cash provided by financing activities of $0.2 billion for the same period in fiscal 2020.

Cash provided by operating activities was $4.5 billion for the first three quarters of fiscal 2021, compared to $107.1 million for the same period in fiscal 2020.

The increase was primarily due to higher net earnings and the timing of tax payments and refunds.

Cash used in investing activities for the first three quarters of fiscal 2021 totaled $1.0 billion, compared to cash used in investing activities of $1.3 billion for the same period in fiscal 2020.

The change was primarily due to higher maturities and calls of investments and a decrease in spend on capital expenditures, partially offset by an increase in purchases of investments.

Cash used in financing activities for the first three quarters of fiscal 2021 totaled $3.2 billion compared to cash provided by financing activities of $2.5 billion for the same period in fiscal 2020.

The change was primarily due to increased debt repayments and lower net proceeds from new debt issuances, partially offset by the temporary suspension of our share repurchase program.

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Our business is subject to moderate seasonal fluctuations, of which our fiscal second quarter typically experiences lower revenues and operating income.

However, the COVID-19 outbreak may have an impact on consumer behaviors and customer traffic that result in changes in the seasonal fluctuations of our business.

However, the COVID-19 pandemic may have an impact on consumer behaviors and customer traffic that result in changes in the seasonal fluctuations of our business.

Additionally, as our stored value cards are issued to and loaded by customers during the holiday season, we tend to have higher cash flows from operations during the first quarter of the fiscal year.

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See Note 1 , Summary of Significant Accounting Policies, to the consolidated financial statements included in Item 1 of Part I of this 10-Q, for a detailed description of recent accounting pronouncements.

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Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis