What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-01 compared with 2021-07-27 · 148 added, 250 removed, 168 unchanged (70% 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, 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.

These statements include statements relating to trends in or expectations relating to the effects of our existing and any future 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, 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, future availability of governmental subsidies for COVID-19 or other public health events, 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.

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regulatory measures or voluntary actions that may be put in place to limit the spread of COVID-19, including restrictions on business operations or social distancing requirements, and the duration and efficacy of such restrictions;

the potential for a resurgence of COVID-19 infections in a given geographic region after it has hit its “peak”;

the potential for a resurgence of COVID-19 infections and the circulation of novel variants of COVID-19 in a given geographic region after it has hit its “peak”;

fluctuations in U.S.

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the acceptance of the Company’s products by our customers, evolving consumer preferences and tastes and changes in consumer spending behavior;

changes in the availability and cost of labor;

partner investments, changes in the availability and cost of labor including any union organizing efforts and our responses to such efforts;

significant increased logistics costs;

inflationary pressures;

the impact of competition;

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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 filed with the SEC on November 12, 2020.

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 (“MD&A”), contained in the 10-K filed with the SEC on November 19, 2021.

Introduction and Overview

Starbucks is the premier coffee roaster and retailer of specialty coffee with operations in 84 markets around the world.

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.

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.

As of January 2, 2022, Starbucks had over 34,300 company-operated and licensed stores, an increase of 4% from the prior year.

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

During the quarter ended January 2, 2022, our global comparable store sales grew 13%, demonstrating powerful momentum beyond recovery from the significant adverse impacts from the pandemic in the prior year period.

We have three reportable operating segments:

Americas, International and Channel Development.

Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.

1) North America, which is inclusive of the U.S.

and Canada, 2) International, which is inclusive of China, Japan, Asia Pacific, Europe, Middle East, Africa, Latin America and the Caribbean;

and 3) Channel

Non-reportable operating segments such as Evolution Fresh and unallocated corporate expenses are reported within Corporate and Other.

We believe our financial results and long-term growth model will continue to be driven by new store openings, comparable store sales growth and operating margin management, underpinned by disciplined capital allocation.

We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies.

Throughout this MD&A, we commonly discuss the following key operating metrics:

• New store openings and store count

• Comparable store sales growth

• Operating margin

Comparable store sales growth represents 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 growth 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.

Additionally, we monitor our two-year comparable sales metric based on a multiplicative basis (1) to better analyze our performance due to the adverse impacts from the pandemic.

Our fiscal year ends on the Sunday closest to September 30.

Our 2021 fiscal year includes 53 weeks, with the 53rd week falling in the fourth fiscal quarter, while fiscal year 2020 included 52 weeks.

Our fiscal 2022 year includes 52 weeks while our fiscal 2021 year included 53 weeks.

All references to store counts, including data for new store openings, are reported net of store closures, unless otherwise noted.

COVID-19 Update

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 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 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.

Starbucks results for the first quarter of fiscal 2022 demonstrate the overall strength and resilience of our brand.

Consolidated net revenues increased 19% to $8.1 billion in the first quarter of fiscal 2022 compared to $6.7 billion in the first quarter of fiscal 2021, primarily driven by strength in our U.S.

business attributable to strong holiday performance, partially offset by continued COVID-19 related disruptions in certain North America and International markets.

Consolidated operating margin expanded 110 basis points from the prior year to 14.6%, primarily due to sales leverage from business recovery, pricing in North America and lower restructuring costs, partially offset by investments in store partner wages and benefits as well as inflation.

For the North America segment, comparable store sales increased 18% for the first quarter of fiscal 2022 compared to a decline of 6% in the first quarter of fiscal 2021.

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 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 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.

market increased 18% for the first quarter of fiscal 2022 compared to a decline of 5% in the first quarter of fiscal 2021.

market also had a 12% increase in two-year comparable store sales, despite modified store operations related to the COVID-19 pandemic, which have been ongoing, whether intermittently or concentrated, since the COVID-19 pandemic began, The segment also experienced higher than anticipated costs, primarily related to enhancements in retail store partner wages, increased supply chain costs due to inflationary pressures and increased spend on new partner training and support costs to address labor market conditions.

For the International segment, comparable store sales declined 3%, inclusive of a 3% adverse impact from lapping the prior-year value-added tax benefit.

Comparable store sales for our China market declined 14% for the first quarter of fiscal 2022, inclusive of a 4% adverse impact from lapping the prior-year value-added tax benefit.

Our China market continued to experience pandemic-related restrictions that significantly impacted customer mobility during the quarter, while our other International markets were not as severely impacted.

Net revenues for our Channel Development segment increased $46 million, or 12%, when compared with the first quarter of fiscal 2021.

This was largely due to higher product sales to and royalty revenue from the Global Coffee Alliance and growth in our international ready-to-drink business.

Absent significant 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.

However, our business is experiencing, and expects to continue to experience, operating margin pressures such as accelerated inflation, increased spend due to labor market conditions and extended COVID-19 related pay and benefits for our partners.

We believe we have plans to effectively mitigate these pressures, such as improving retail store operations and potential adjustments to pricing.

However, if our mitigation plans are not effective, these pressures and other factors could have an adverse impact on our business.

(1) Two-year comparable store sales metric is calculated as ((1 + % change in comparable store sales in FY21) * (1 + % change in comparable store sales in FY22)) - 1.

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of 12% = ((1 + (-5%)) * (1 + 18%)) - 1.

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Comparable Store Sales

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

Transactions Change in

Consolidated 73% 75% (1)% 21% 7% 13%

Americas 84% 82% 1% 21% 4% 16%

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

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 Three Quarters Ended

Quarter Ended

Company-operated stores $ 6,722.4 $ 5,726.5 $ 995.9 17.4 %

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Total net revenues $ 8,050.4 $ 6,749.4 $ 1,301.0 19.3 %

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 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 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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For the quarter ended January 2, 2022 compared with the quarter ended December 27, 2020

Total net revenues for the first quarter of fiscal 2022 increased $1.3 billion, primarily due to higher revenues from company-operated stores ($1.0 billion).

The growth of company-operated stores revenue was driven by a 13% increase in comparable store sales ($719 million), attributable to a 10% increase in comparable transactions and a 3% increase in average ticket.

Also contributing to the increase were incremental revenues from 664 net new Starbucks ® company-operated stores, or a 4% increase, over the past 12 months ($254 million).

Licensed stores revenue increased $237 million also contributed to the increase in total net revenues, driven by higher product and equipment sales to and royalty revenues from our licensees ($206 million) and the conversion of our Korea market from a joint venture to a fully licensed market in the fourth quarter of fiscal 2021 ($39 million).

Other revenues increased $68 million, primarily due to higher product sales and royalty revenue in the Global Coffee Alliance and growth in our international ready-to-drink business.

Operating Expenses

Quarter Ended Three Quarters Ended

Change Jun 27,

As a % of Total

Quarter Ended

As a % of Total

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Income from equity investees 40.3 82.7 (42.4) 0.5 1.2

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 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 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 $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.

Operating income $ 1,177.8 $ 913.5 $ 264.3 14.6 % 13.5 %

Store operating expenses as a % of company-operated stores revenue 50.6 % 50.1 %

For the quarter ended January 2, 2022 compared with the quarter ended December 27, 2020

Product and distribution costs as a percentage of total net revenues increased 100 basis points for the first quarter of fiscal 2022, primarily due to supply chain costs due to inflationary pressures (approximately 180 basis points) and product mix changes (approximately 40 basis points), partially offset by pricing in North America (approximately 150 basis points).

Store operating expenses as a percentage of total net revenues decreased 30 basis points for the first quarter of fiscal 2022.

Store operating expenses as a percentage of company-operated stores revenue increased 50 basis points, primarily due to enhancements in retail store partner wages and benefits (approximately 180 basis points) and increased spend on new partner training and support costs to address labor market conditions (approximately 110 basis points), partially offset by sales leverage from business recovery.

Depreciation and amortization expenses as a percentage of total net revenues decreased 90 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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General and administrative expenses increased $54 million, primarily due to incremental investments in technology ($29 million) and increased partner wages and benefits ($19 million), partially offset by lower performance-based compensation ($8 million).

Restructuring and impairment expenses decreased $80 million, primarily due to lapping our North America store portfolio optimization in the prior year, specifically lower asset impairment charges ($41 million) and accelerated lease right-of-use asset amortization costs ($39 million).

Income from equity investees decreased $42 million, primarily due to the conversion of our Korea market from a joint venture to a fully licensed market in the fourth quarter of fiscal 2021 ($27 million) and lower income from our North American Coffee Partnership joint venture ($17 million).

The combination of these changes resulted in an overall increase in operating margin of 110 basis points for the first quarter of fiscal 2022.

Other Income and Expenses

Quarter Ended Three Quarters Ended

Change Jun 27,

As a % of Total

Quarter Ended

As a % of Total

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 %

Operating income $ 1,177.8 $ 913.5 $ 264.3 14.6 % 13.5 %

Interest income and other, net (0.1) 15.5 (15.6) — 0.2

Interest expense (115.3) (120.7) 5.4 (1.4) (1.8)

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 %

Earnings before income taxes 1,062.4 808.3 254.1 13.2 12.0

Income tax expense 246.3 186.1 60.2 3.1 2.8

Net earnings including noncontrolling interests 816.1 622.2 193.9 10.1 9.2

Net earnings attributable to noncontrolling interests 0.2 — 0.2 — —

Net earnings attributable to Starbucks $ 815.9 $ 622.2 $ 193.7 10.1 % 9.2 %

Effective tax rate including noncontrolling interests 23.2 % 23.0 %

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.

For the quarter ended January 2, 2022 compared with the quarter ended December 27, 2020

Interest income and other, net decreased $16 million, primarily due to higher net losses from certain investments.

Interest expense decreased $5 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 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 Three Quarters Ended

Change Jun 27,

As a % of Americas

Total Net Revenues

As a % of Americas

North America (1)

Quarter Ended

North America

Total Net Revenues

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Total operating expenses 4,649.2 3,872.8 776.4 81.1 82.8

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 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 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 income $ 1,083.1 $ 802.8 $ 280.3 18.9 % 17.2 %

Store operating expenses as a % of company-operated stores revenue 51.8 % 52.2 %

(1) North America licensed stores revenue, total net revenues, product and distribution costs, other operating expenses, total operating expenses and operating income for the quarter ended December 27, 2020, have been restated to conform with current period presentation.

For the quarter ended January 2, 2022 compared with the quarter ended December 27, 2020

North America total net revenues for the first quarter of fiscal 2022 increased $1.1 billion, or 23%, primarily due to an 18% increase in comparable store sales ($762 million) driven by a 12% increase in transactions and a 6% increase in average ticket.

Also contributing to these increases were the performance of new stores compared to the closure of underperforming stores in prior year including stores related to our restructuring plan ($140 million) and higher product and equipment sales to and royalty revenues from our licensees ($130 million) primarily due to business recovery from the COVID-19 pandemic.

Operating Margin

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).

North America operating income for the first quarter of fiscal 2022 increased 35% to $1.1 billion, compared to $803 million in the first quarter of fiscal 2021.

Operating margin increased 170 basis points to 18.9%, primarily due to sales leverage from business recovery.

Also contributing to the margin improvement was pricing (approximately 210 basis points), lower restructuring expenses (approximately 170 basis points), sourcing savings (approximately 70 basis points) and benefits from the closure of lower-performing stores (approximately 70 basis points).

These increases were partially offset by higher supply chain costs due to inflationary pressures (approximately 240 basis points), enhancements in retail store partner wages and benefits (approximately 190 basis points) and increased spend on new partner training and support costs to address labor market conditions (approximately 130 basis points).

International (1)

Quarter Ended Three Quarters Ended

Quarter Ended

As a % of International

Total Net Revenues As a % of International

Total Net Revenues

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General and administrative expenses 91.3 85.1 6.2 4.9 5.1

Restructuring and impairments — (0.2) 0.2 — — — (0.6) 0.6 — —

Total operating expenses 1,577.0 1,425.2 151.8 84.1 84.7

Income from equity investees 0.7 26.3 (25.6) — 1.6

Operating income/(loss) $ 318.3 $ (86.0) $ 404.3 19.2 % (9.1) % $ 844.6 $ 174.5 $ 670.1 17.2 % 4.8 %

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

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 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 income $ 299.6 $ 283.0 $ 16.6 16.0 % 16.8 %

Store operating expenses as a % of company-operated stores revenue 46.3 % 43.6 %

(1) International licensed stores revenue, total net revenues, product and distribution costs, other operating expenses, general and administrative expenses, total operating expenses and operating income for the quarter ended December 27, 2020, have been restated to conform with current period presentation.

For the quarter ended January 2, 2022 compared with the quarter ended December 27, 2020

International total net revenues for the first quarter of fiscal 2022 increased $194 million, or 12%, primarily due to 774 net new Starbucks company-operated store openings, or a 12% increase over the past 12 months ($113 million).

Additionally, there were higher product and equipment sales to and royalty revenues from our licensees ($76 million) primarily due to lapping the impact of the COVID-19 pandemic in the prior year.

Also contributing to the increase was the conversion of our Korea market from a joint venture to a fully licensed market in the fourth quarter of fiscal 2021 ($39 million).

These increases were partially offset by a 3% decline in comparable store sales ($43 million), driven by a 5% decrease in average ticket, partially offset by a 2% increase in transactions, as well as unfavorable foreign currency translation ($17 million).

Operating Margin

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).

International operating income for the first quarter of fiscal 2022 increased 6% to $300 million, compared to $283 million in the first quarter of fiscal 2021.

Operating margin decreased 80 basis points to 16.0%, primarily due to investments and growth in retail store partner wages and benefits (approximately 150 basis points), strategic investments, largely in China (approximately 110 basis points) and product mix changes (approximately 90 basis points).

These decreases were partially offset by sales leverage outside of China driven by lapping the more severe impact of the COVID-19 pandemic in the prior year.

Channel Development

Quarter Ended Three Quarters Ended

Change Jun 27,

Quarter Ended

As a % of Channel Development

Total Net Revenues As a % of Channel Development

Total Net Revenues

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Operating income $ 183.2 $ 180.8 $ 2.4 43.9 % 48.7 %

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 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 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.

For the quarter ended January 2, 2022 compared with the quarter ended December 27, 2020

Channel Development total net revenues for the first quarter of fiscal 2022 increased $46 million, or 12%, primarily due to higher Global Coffee Alliance product sales and royalty revenue ($31 million) and volume growth in our ready-to-drink businesses ($16 million).

Operating Margin

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.

Channel Development operating income for the first quarter of fiscal 2022 increased 1% to $183 million, compared to $181 million in the first quarter of fiscal 2021.

Operating margin decreased 480 basis points to 43.9%, primarily due to a decline in our North American Coffee Partnership joint venture income due to supply chain constraints and inflationary pressures as well as a business mix shift.

Corporate and Other (1)

Quarter Ended Three Quarters Ended

Quarter Ended

Net revenues:

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General and administrative expenses 354.5 314.0 40.5 12.9

Restructuring and impairments — 22.1 (22.1) nm — 22.4 (22.4) nm

Total operating expenses 413.2 373.6 39.6 10.6

Operating loss $ (388.1) $ (353.1) $ (35.0) 9.9 %

(1) Corporate and other general and administrative expenses, total operating expenses and operating loss for the fiscal year ended December 27, 2020, have been restated to conform with current period presentation.

Corporate and Other primarily consists of our unallocated corporate expenses, as well as Evolution Fresh.

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 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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For the quarter ended January 2, 2022 compared with the quarter ended December 27, 2020

Corporate and Other operating loss increased to $388 million for the first quarter of fiscal 2022, or 10%, compared to $353 million for the first quarter of fiscal 2021.

This increase was primarily driven by incremental investments in technology ($22 million) and increased partner wages and benefits ($9 million).

Quarterly Store Data

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

Quarter Ended Three Quarters Ended Stores open as of

Quarter Ended Stores open as of

North America

Company-operated stores 39 (80) 9,900 10,029

Licensed stores 23 30 6,988 6,861

Total Americas 55 (36) (179) 168 18,175 18,235

Total North America (1)

62 (50) 16,888 16,890

International

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Total International (1)

422 328 17,429 16,048

Total Company 484 278 34,317 32,938

(1) North America and International licensed stores as of December 27, 2020, have been recast as a result of our fiscal 2021 operating segment reporting structure realignment.

Financial Condition, Liquidity and Capital Resources

Investment Overview

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

Our cash and investments totaled $4.4 billion as of January 2, 2022 and $6.9 billion as of October 3, 2021.

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

As of January 2, 2022, approximately $3.0 billion of cash was held in foreign subsidiaries.

Borrowing Capacity

The 2018 credit facility

Our $2.0 billion unsecured 5-year revolving credit facility ("the 2018 credit facility"), of which $150 million may be used for issuances of letters of credit, is currently set to mature on October 25, 2022.

We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $500 million.

Borrowings under the credit facility are subject to terms defined within the 2018 credit facility and will bear interest at a variable rate based on LIBOR, and, for U.S.

dollar-denominated loans under certain circumstances, a Base Rate, in each case plus an applicable margin.

The applicable margin is based on the better of (i) the Company's long-term credit ratings assigned by Moody's and Standard & Poor's rating agencies and (ii) the Company's fixed charge coverage ratio, pursuant to a pricing grid set forth in the five-year credit agreement.

The current applicable margin is 1.100% for Eurocurrency Rate Loans and 0.100% for Base Rate Loans.

The 2018 credit facility is available for general corporate purposes.

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

The 364-day credit facility

Our $1.0 billion unsecured 364-day credit facility (the "364-day credit facility"), of which no amount may be used for issuances of letters of credit, is currently set to mature on September 22, 2021.

We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $500 million.

Borrowings under the credit facility are subject to terms defined within the 364-day credit facility and will bear interest at a variable rate based on LIBOR, and, for U.S.

dollar-denominated loans under certain circumstances, a Base Rate, in each case plus an applicable margin.

The applicable margin is 1.150% for Eurocurrency Rate Loans and 0.150% for Base Rate Loans.

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

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.

Revolving Credit Facility

Our $3 billion unsecured five-year revolving credit facility (the "2021 credit facility"), of which $150 million may be used for issuances of letters of credit, is currently set to mature on September 16, 2026.

The 2021 credit facility is available for working capital, capital expenditures and other corporate purposes, including acquisitions and share repurchases.

We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $1.0 billion.

Borrowings under the 2021 credit facility will bear interest at a variable rate based on LIBOR, and, for U.S.

dollar-denominated loans under certain circumstances, a Base Rate (as defined in the 2021 credit facility), in each case plus an applicable margin.

The applicable margin is based on the Company’s long-term credit ratings assigned by the Moody’s and Standard & Poor’s rating agencies.

The 2021 credit facility contains alternative interest rate provisions specifying rate calculations to be used at such time LIBOR ceases to be available as a benchmark due to reference rate reform.

The “Base Rate” is the highest of (i) the Federal Funds Rate (as defined in the 2021 credit facility) plus 0.025%, (ii) Bank of America’s prime rate and (iii) the Eurocurrency Rate (as defined in the 2021 credit facility) plus 1.025%.

The 2021 credit facility contains provisions requiring us to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio, which measures our ability to cover financing expenses.

As of January 2, 2022, we were in compliance with all applicable covenants.

No amounts were outstanding under our 2021 credit facility as of January 2, 2022 or October 3, 2021.

Commercial Paper

Under our commercial paper program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $3.0 billion, with individual maturities that may vary but not exceed 397 days from the date of issue.

Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under the 2018 and 364-day credit facilities discussed above.

Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under the 2021 credit facility discussed above.

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 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.

As of January 2, 2022, we had $200.0 million

borrowings outstanding under our commercial paper program.

Our total contractual borrowing capacity for general corporate purposes was $2.8 billion as of the end of our first quarter of fiscal 2022.

Credit facilities in Japan

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These are available for working capital needs and capital expenditures within our Japanese market.

• A ¥5 billion, or $45.1 million, facility is currently set to mature on December 30, 2021.

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 0.400%.

• A ¥10 billion, or $90.2 million, facility is currently set to mature on March 26, 2022.

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

• A ¥5 billion, or $43.4 million, credit facility is currently set to mature on December 31, 2022.

Borrowings under such 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 0.400%.

• A ¥10 billion, or $86.9 million, credit facility is currently set to mature on March 26, 2022.

Borrowings under such 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 January 2, 2022, we had no borrowings outstanding under these Japanese yen-denominated 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 June 27, 2021, we were in compliance with all applicable covenants.

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 long-term notes were issued.

As of January 2, 2022, 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.

Further, we may use our available cash resources to make proportionate capital contributions to our investees.

Furthermore, we may use our available cash resources to make proportionate capital contributions to our investees.

We may also seek strategic acquisitions to leverage existing capabilities and further build our business in support of our “Growth at Scale” agenda.

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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 for the remainder of fiscal 2021.

If necessary, we may pursue additional sources of financing, including both short-term and long-term borrowings and debt issuances.

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

3 unchanged sentences

to satisfy domestic liquidity needs.

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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.

On April 8, 2020, we announced a temporary suspension of our share repurchase program.

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

As of June 27, 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.

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

During the first quarter of fiscal 2022, our Board of Directors approved a quarterly cash dividend to shareholders of $0.49 per share to be paid on February 25, 2022 to shareholders of record as of the close of business on February 11, 2022.

During the first quarter of fiscal 2022, we resumed our share repurchase program which was temporarily suspended in March 2020.

During the quarter ended January 2, 2022, we repurchased 31.1 million shares of common stock for $3.5 billion.

As of January 2, 2022, 17.8 million shares remained available for repurchase under current authorizations.

Other than normal operating expenses, cash requirements for the remainder of fiscal 2022 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 2022 are expected to be approximately $2.0 billion.

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.

Contractual Obligations

In Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 10-K, we disclosed that we had $35.4 billion in total contractual obligations as of September 27, 2020.

There have been no material changes to our total obligations during the period covered by this 10-Q outside of the normal course of our business.

Off-Balance Sheet Arrangements

There has been no material change in our off-balance sheet arrangements discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 10-K.

In Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 10-K, we disclosed that we had $33.7 billion of current and long-term material cash requirements as of October 3, 2021.

There have been no

material changes to our material cash requirements during the period covered by this 10-Q outside of the normal course of our business.

Cash provided by operating activities was $1.9 billion for the first quarter of fiscal 2022, compared to $1.8 billion for the same period in fiscal 2021.

The increase was primarily due to higher net earnings, partially offset by lower losses on retirement and impairment of assets and increases in net cash used by changes in operating assets and liabilities.

Cash used in investing activities for the first quarter of fiscal 2022 totaled $401 million, compared to cash used in investing activities of $273 million for the same period in fiscal 2021.

The change was primarily due to a increase in spend on capital expenditures.

Cash used in financing activities for the first quarter of fiscal 2022 totaled $4.0 billion compared to cash used by financing activities of $1.0 billion for the same period in fiscal 2021.

The increase was primarily due to resuming our share repurchase program, partially offset by lower repayments of long-term debt .

Commodity Prices, Availability and General Risk Conditions

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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