What changed in this filing

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Item 1. Financial Statements

2023-02-02 compared with 2022-08-02 · 125 added, 277 removed, 582 unchanged (41% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Quarter Ended Three Quarters Ended

Quarter Ended

Net revenues:

28 unchanged sentences

(in millions, unaudited)

Quarter Ended Three Quarters Ended

Quarter Ended

Net earnings including noncontrolling interests $ 855.2 $ 816.1

63 unchanged sentences

(in millions, unaudited)

Three Quarters Ended

Quarter Ended

OPERATING ACTIVITIES:

26 unchanged sentences

Net proceeds/(payments) from issuance of commercial paper ( 175.0 ) 200.0

Net proceeds from issuance of short-term debt 38.9 215.6

Repayments of short-term debt ( 38.9 ) ( 346.2 )

Proceeds from issuance of long-term debt 1,498.1 —

Repayments of long-term debt ( 1,000.0 ) ( 1,250.0 )

Proceeds from issuance of common stock 45.9 41.3

2 unchanged sentences

Minimum tax withholdings on share-based awards ( 79.0 ) ( 113.6 )

Other ( 9.2 ) —

Net cash used in financing activities ( 5,073.2 ) ( 3,167.9 )

Net cash provided by/(used in) financing activities ( 1,007.8 ) ( 3,969.2 )

Effect of exchange rate changes on cash and cash equivalents 62.0 13.0

10 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY

For the Quarters Ended July 3, 2022 and June 27, 2021

(in millions, except per share data, unaudited)

Common Stock Additional Paid-in Capital Retained

Earnings/(Deficit) Accumulated

Comprehensive

Income/(Loss) Shareholders’

Equity/(Deficit) Noncontrolling

Interests Total

Shares Amount

Balance, April 3, 2022

1,146.9 $ 1.1 $ 41.1 $ ( 9,070.5 ) $ 260.3 $ ( 8,768.0 ) $ 6.8 $ ( 8,761.2 )

Net earnings — — — 912.9 — 912.9 0.8 913.7

Other comprehensive loss — — — — ( 325.3 ) ( 325.3 ) — ( 325.3 )

Stock-based compensation expense — — 58.2 — — 58.2 — 58.2

Exercise of stock options/vesting of RSUs 0.2 — 5.8 — — 5.8 — 5.8

Sale of common stock 0.2 — 12.0 — — 12.0 — 12.0

Cash dividends declared, $ 0.49 per share

— — — ( 562.1 ) — ( 562.1 ) — ( 562.1 )

Balance, July 3, 2022

1,147.3 $ 1.1 $ 117.1 $ ( 8,719.7 ) $ ( 65.0 ) $ ( 8,666.5 ) $ 7.6 $ ( 8,658.9 )

Balance, March 28, 2021

1,177.9 $ 1.2 $ 595.4 $ ( 8,124.3 ) $ ( 126.3 ) $ ( 7,654.0 ) $ 5.7 $ ( 7,648.3 )

Net earnings — — — 1,153.4 — 1,153.4 0.8 1,154.2

Other comprehensive income — — — — 96.6 96.6 — 96.6

Stock-based compensation expense — — 80.9 — — 80.9 — 80.9

Exercise of stock options/vesting of RSUs 1.0 — 41.7 — — 41.7 — 41.7

Sale of common stock 0.1 — 11.3 — — 11.3 — 11.3

Cash dividends declared, $ 0.45 per share

— — — ( 530.7 ) — ( 530.7 ) — ( 530.7 )

Balance, June 27, 2021

1,179.0 $ 1.2 $ 729.3 $ ( 7,501.6 ) $ ( 29.7 ) $ ( 6,800.8 ) $ 6.5 $ ( 6,794.3 )

See Notes to Consolidated Financial Statements.

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

For the Three Quarters Ended July 3, 2022 and June 27, 2021

For the Quarters Ended January 1, 2023 and January 2, 2022

(in millions, except per share data, unaudited)

16 unchanged sentences

— — — ( 608.6 ) — ( 608.6 ) — ( 608.6 )

Net distributions to noncontrolling interests — — — — — — ( 0.6 ) ( 0.6 )

Balance, July 3, 2022

Balance, January 1, 2023

1,148.5 $ 1.1 $ 67.2 $ ( 8,203.2 ) $ ( 538.9 ) $ ( 8,673.8 ) $ 7.9 $ ( 8,665.9 )

Balance, September 27, 2020

Balance, October 3, 2021

1,180.0 $ 1.2 $ 846.1 $ ( 6,315.7 ) $ 147.2 $ ( 5,321.2 ) $ 6.7 $ ( 5,314.5 )

Cumulative effect of adoption of new accounting guidance — — — ( 2.2 ) — ( 2.2 ) — ( 2.2 )

Net earnings — — — 815.9 — 815.9 0.2 816.1

3 unchanged sentences

Sale of common stock 0.1 — 11.8 — — 11.8 — 11.8

Repurchase of common stock ( 31.1 ) — ( 829.8 ) ( 2,691.1 ) — ( 3,520.9 ) — ( 3,520.9 )

Cash dividends declared, $0.49 per share

— — — ( 562.1 ) — ( 562.1 ) — ( 562.1 )

Balance, June 27, 2021

Balance, January 2, 2022

1,151.6 $ 1.2 $ 41.1 $ ( 8,753.0 ) $ 253.5 $ ( 8,457.2 ) $ 6.9 $ ( 8,450.3 )

3 unchanged sentences

Note 1 Summary of Significant Accounting Policies and Estimates

Note 2 Acquisitions, Divestitures and Strategic Alliance

Note 3 Derivative Financial Instruments

7 unchanged sentences

Note 12 Employee Stock Plans

Note 12 Income Taxes

Note 13 Earnings per Share

1 unchanged sentence

Note 15 Segment Reporting

Note 16 Subsequent Event

STARBUCKS CORPORATION

2 unchanged sentences

Financial Statement Preparation

The unaudited consolidated financial statements as of July 3, 2022, and for the quarter and three quarters ended July 3, 2022 and June 27, 2021, have been prepared by Starbucks Corporation under the rules and regulations of the Securities and Exchange Commission (“SEC”).

In the opinion of management, the financial information for the quarter and three quarters ended July 3, 2022 and June 27, 2021 reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods.

The unaudited consolidated financial statements as of January 1, 2023, and for the quarters ended January 1, 2023 and January 2, 2022, have been prepared by Starbucks Corporation under the rules and regulations of the Securities and Exchange Commission (“SEC”).

In the opinion of management, the financial information for the quarters ended January 1, 2023 and January 2, 2022 reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods.

In this Quarterly Report on Form 10-Q (“10-Q”), Starbucks Corporation is referred to as “Starbucks,” the “Company,” “we,” “us” or “our.”

Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes.

In the fourth quarter of fiscal 2021, certain changes were made to our management team, and our operating segment reporting structure was realigned as a result.

We realigned our fully licensed Latin America and Caribbean markets from our Americas operating segment to our International operating segment.

We renamed the Americas operating segment to the North America operating segment, since it is comprised of our company-operated and licensed stores in the U.S.

We also made certain other immaterial changes between our International operating segment and Corporate and Other.

Certain prior period information for our North America and International operating segments and our Corporate and Other reportable segment has been reclassified to conform to the current year presentation.

There was no impact on consolidated net revenues, total operating expenses, operating income or net earnings per share as a result of these changes.

Certain prior period information on the consolidated balance sheets and consolidated statements of cash flows have been reclassified to conform to the current presentation.

Certain prior period information on the consolidated statements of cash flows have been reclassified to conform to the current presentation.

The financial information as of October 2, 2022 is derived from our audited consolidated financial statements and notes for the fiscal year ended October 2, 2022 (“fiscal 2022”) included in Item 8 in the Fiscal 2022 Annual Report on Form 10-K (“10-K”).

The information included in this 10-Q should be read in conjunction with the footnotes and management’s discussion and analysis of the consolidated financial statements in the 10-K.

The results of operations for the quarter and three quarters ended July 3, 2022 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending October 2, 2022 (“fiscal 2022”).

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

Our fiscal 2022 year includes 52 weeks while our fiscal 2021 year included 53 weeks, with the 53rd week falling in the fourth quarter of fiscal 2021.

The results of operations for the quarter ended January 1, 2023 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending October 1, 2023 (“fiscal 2023”).

The novel coronavirus, known as the global COVID-19 pandemic, was first identified in December 2019 before spreading to markets where we have company-operated or licensed stores.

We have since established the necessary protocols to operate safely, and our businesses demonstrated powerful momentum beyond recovery from the COVID-19 pandemic.

Certain markets, primarily China, continue to experience pandemic-related restrictions impacting sales as they battle COVID-19 resurgences and navigate through prolonged lockdowns.

We have since established the necessary protocols to operate safely, and in many of our markets, our businesses demonstrated powerful momentum beyond recovery from the COVID-19 pandemic.

During the first quarter of fiscal 2023, our China market continued to experience pandemic-related business interruptions, including escalating COVID outbreaks that suppressed customer mobility.

We continue to monitor the COVID-19 pandemic and its effect on our business and results of operations;

however, we cannot predict the duration, scope or severity of the COVID-19 pandemic or its future impact on our business, results of operations, cash flows and financial condition.

Government Subsidies

In response to the COVID-19 pandemic, certain governments have provided subsidies and assistance to companies.

The most substantial of these were the U.S.

Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the Canada Emergency Wage Subsidy (“CEWS”), which were no longer applicable in late fiscal 2021.

During the quarter and three quarters ended June 27, 2021, qualified payroll and other credits reduced our store operating expenses by $ 56.4 million and $ 173.7 million, respectively, on our consolidated statements of earnings.

After netting the qualified credits against our payable, a receivable of $ 81.2 million and $ 172.4 million was included in prepaid expenses and other current assets as of July 3, 2022 and October 3, 2021, respectively.

As of July 3, 2022, deferred payroll tax payments of $ 116.4 million were included in accrued liabilities on our consolidated balance sheets.

As of October 3, 2021, deferred payroll tax payments of $ 116.4 million were included in both accrued liabilities and other long-term liabilities on our consolidated balance sheets.

Restructuring

In the third quarter of fiscal 2022, we announced a plan to reinvent Starbucks to increase efficiency, enabling us to seamlessly handle increasing demand in our U.S.

stores, and to elevate the partner and customer experiences.

As of July 3, 2022, we identified an immaterial amount of stores for closure due to safety concerns under our U.S.

reinvention restructuring plan;

the resulting restructuring and impairments costs are immaterial to our consolidated statement of earnings.

We estimate future

restructuring costs attributable to our reinvention plan to range from approximately $ 15 million to $ 20 million.

Future restructuring costs are expected to be incurred over the next three to nine months.

In fiscal 2021, we substantially completed our plan to reposition our North America store portfolio, primarily in dense metropolitan markets by pursuing strategic store closures and focusing on new store formats that better cater to changing customer tastes and preferences.

As a result, we recorded approximately $ 19.8 million and $ 115.0 million to restructuring and impairments on our consolidated statements of earnings during the quarter ended and three quarters ended June 27, 2021.

Of these totals, $ 7.8 million and $ 59.0 million related to the impairment of store assets for which either a triggering event occurred and the assets were determined not to be recoverable or the store was permanently closed, respectively.

During the quarter and three quarters ended June 27, 2021, an additional $ 12.2 million and $ 56.2 million, respectively, was associated with accelerated amortization of right-of-use (“ROU”) lease assets and other lease costs due to planned store closures prior to the end of contractual lease terms.

As this restructuring plan was substantially completed in fiscal 2021, we did not recognize any material restructuring and impairment amounts related to this plan during the quarter and three quarters ended July 3, 2022.

As of July 3, 2022 and October 3, 2021, there were no material restructuring-related accrued liabilities on our consolidated balance sheets.

In fiscal 2022, we announced our plan in the U.S.

market to increase efficiency while elevating the partner and customer experience (the “Reinvention Plan”).

We believe the investments in partner wages and trainings will increase retention and productivity while the acceleration of purpose-built store concepts and innovations in technologies will provide additional convenience and connection with our customers.

As a result of the restructuring efforts in connection with the Reinvention Plan, we recorded an immaterial charge on our consolidated statements of earnings during the quarter ended January 1, 2023.

Future restructuring and impairment costs attributable to our Reinvention Plan are not expected to be material.

As of January 1, 2023 and October 2, 2022, there were no material restructuring-related accrued liabilities on our consolidated balance sheets.

Recently Adopted Accounting Pronouncements

2 unchanged sentences

The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2024.

The adoption of the new guidance did not have a material impact to our financial statements.

In June 2016, the FASB issued guidance replacing the incurred loss impairment methodology with a new methodology that reflects current expected credit losses on financial assets, including receivables and available-for-sale securities.

The new methodology requires entities to estimate and recognize expected credit losses each reporting period.

The guidance was adopted during the first quarter of fiscal 2021 under the modified retrospective approach and resulted in a $ 2.2 million transition adjustment to opening shareholders' retained deficit on our consolidated statements of equity.

The adoption of the new guidance did not have a material impact on our financial statement s.

Acquisitions, Divestitures and Strategic Alliance

In the fourth quarter of fiscal 2022, we sold our Evolution Fresh brand and business to Bolthouse Farms.

This transaction did not have a material impact on our consolidated financial statements.

Derivative Financial Instruments

22 unchanged sentences

For de-designated cash flow hedges in which the underlying transactions are no longer probable of occurring, the related accumulated derivative gains or losses are recognized in interest income and other, net on our consolidated statements of earnings.

Due to ongoing global supply chain disruptions, certain coffee cash flow hedges have been de-designated early which resulted in insignificant amounts recognized in earnings during the quarter and three quarters ended July 3, 2022.

These derivatives may be accounted for prospectively as non-designated derivatives until maturity, re-designated to new hedging relationships or terminated early.

6 unchanged sentences

Net Gains/(Losses) Expected to be Reclassified from AOCI into Earnings within 12 Months Outstanding Contract/Debt Remaining Maturity

Jul 3, 2022 Oct 3, 2021

Jan 1, 2023 Oct 2, 2022

Cash Flow Hedges:

14 unchanged sentences

Location of gain/(loss)

Jul 3, 2022 Jun 27, 2021 Jul 3, 2022 Jun 27, 2021

Jan 1, 2023 Jan 2, 2022 Jan 1, 2023 Jan 2, 2022

Cash Flow Hedges:

5 unchanged sentences

2.2 ( 1.5 ) Product and distribution costs

Interest rates 18.8 ( 25.1 ) ( 0.6 ) ( 0.3 ) Interest expense

Net Investment Hedges:

Cross-currency swaps 37.0 20.6 3.8 3.3 Interest expense

Foreign currency debt 72.2 11.8 — —

Three Quarters Ended

Gains/(Losses) Recognized in

OCI Before Reclassifications Gains/(Losses) Reclassified from

AOCI to Earnings Location of gain/(loss)

Jul 3, 2022 Jun 27, 2021 Jul 3, 2022 Jun 27, 2021

Cash Flow Hedges:

Coffee $ 76.1 $ 80.5 $ 56.6 $ ( 5.2 ) Product and distribution costs

Cross-currency swaps 22.3 13.5 ( 3.7 ) 1.8 Interest expense

0.2 — Interest income and other, net

Dairy 6.6 ( 0.1 ) 6.8 2.5 Product and distribution costs

Foreign currency - other 51.1 ( 23.9 ) 11.0 0.2 Licensed stores revenue

( 2.5 ) ( 5.0 ) Product and distribution costs

Interest rates — 1.2 ( 0.5 ) ( 0.4 ) Interest expense

— ( 3.6 ) Interest income and other, net

Net Investment Hedges:

3 unchanged sentences

Gains/(Losses) Recognized in Earnings

Location of gain/(loss) recognized in earnings Quarter Ended Three Quarters Ended

Jul 3, 2022 Jun 27, 2021 Jul 3, 2022 Jun 27, 2021

Location of gain/(loss) recognized in earnings Quarter Ended

Jan 1, 2023 Jan 2, 2022

Non-Designated Derivatives:

Dairy Interest income and other, net $ 0.1 $ — $ 0.2 $ —

Foreign currency - other Interest income and other, net $ ( 11.6 ) $ 10.2

5 unchanged sentences

Notional amounts of outstanding derivative contracts (in millions) :

Jul 3, 2022 Oct 3, 2021

Jan 1, 2023 Oct 2, 2022

Coffee $ 401 $ 649

5 unchanged sentences

Derivative Assets

Balance Sheet Location Jul 3, 2022 Oct 3, 2021

Balance Sheet Location Jan 1, 2023 Oct 2, 2022

Designated Derivative Instruments:

Cross-currency swaps Other long-term assets $ 85.4 $ 115.4

Coffee Prepaid expenses and other current assets — 130.5

Dairy Prepaid expenses and other current assets 0.2 0.5

1 unchanged sentence

Other long-term assets 13.8 33.5

Interest rate swaps Other long-term assets 54.5 22.7

Non-designated Derivative Instruments:

1 unchanged sentence

Foreign currency Prepaid expenses and other current assets 15.8 34.3

Other long-term assets — 7.3

Derivative Liabilities

Balance Sheet Location Jul 3, 2022 Oct 3, 2021

Balance Sheet Location Jan 1, 2023 Oct 2, 2022

Designated Derivative Instruments:

3 unchanged sentences

Other long-term liabilities 10.1 —

Interest rate swaps Other long-term liabilities 17.4 1.3

Interest rate Accrued liabilities 20.4 12.0

Interest rate swap Other long-term liabilities 33.6 34.0

Non-designated Derivative Instruments:

Dairy Accrued liabilities — 0.2

Diesel fuel and other commodities Accrued liabilities 0.4 —

Foreign currency Accrued liabilities 1.3 5.8

The following amounts were recorded on the consolidated balance sheets related to fixed-to-floating interest rate swaps designated in fair value hedging relationships:

The following amounts were recorded on the consolidated balance sheets related to fixed-to-floating interest rate swaps designated in fair value hedging relationships ( in millions ):

Carrying amount of hedged item Cumulative amount of fair value hedging adjustment included in the carrying amount

Jul 3, 2022 Oct 3, 2021 Jul 3, 2022 Oct 3, 2021

Jan 1, 2023 Oct 2, 2022 Jan 1, 2023 Oct 2, 2022

Location on the balance sheet

4 unchanged sentences

Fair Value Measurements at Reporting Date Using

July 3, 2022 Quoted Prices in Active Markets for Identical Assets

January 1, 2023 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

7 unchanged sentences

Total available-for-sale debt securities 32.3 8.9 23.4 —

Structured deposits 28.8 — 28.8 —

Marketable equity securities 62.8 62.8 — —

12 unchanged sentences

Derivative assets 99.2 — 99.2 —

Structured Deposit 29.9 — 29.9 —

Total assets $ 3,731.7 $ 3,203.0 $ 528.7 $ —

12 unchanged sentences

Available-for-sale debt securities

Commercial paper 63.0 — 63.0 —

Corporate debt securities 22.4 — 22.4 —

Mortgage and other asset-backed securities 0.1 — 0.1 —

government treasury securities 9.3 9.3 — —

Total available-for-sale debt securities 31.7 9.3 22.4 —

Structured deposits 275.1 — 275.1 —

Marketable equity securities 57.7 57.7 — —

4 unchanged sentences

Available-for-sale debt securities

Auction rate securities 6.0 — — 6.0

Corporate debt securities 134.7 — 134.7 —

14 unchanged sentences

The fair values of any financial instruments presented above exclude the impact of netting assets and liabilities when a legally enforceable master netting agreement exists.

Gross unrealized holding gains and losses on available-for-sale debt securities and marketable equity securities were not material as of July 3, 2022 and October 3, 2021.

Gross unrealized holding gains and losses on available-for-sale debt securities, structured deposits and marketable equity securities were not material as of January 1, 2023 and October 2, 2022.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

2 unchanged sentences

The estimated fair value of our long-term debt based on the quoted market price (Level 2) is included at Note 8 , Debt.

There were no material fair value adjustments during the three quarters ended July 3, 2022 and June 27, 2021.

There were no material fair value adjustments during the quarters ended January 1, 2023 and January 2, 2022.

Inventories (in millions) :

Jul 3, 2022 Oct 3, 2021

Jan 1, 2023 Oct 2, 2022

Unroasted $ 1,015.1 $ 1,018.6

5 unchanged sentences

Inventory levels vary due to seasonality, commodity market supply and price fluctuations.

As of July 3, 2022, we had committed to purchasing green coffee totaling $ 483 million under fixed-price contracts and an estimated $ 1.2 billion under price-to-be-fixed contracts.

As of January 1, 2023, we had committed to purchasing green coffee totaling $ 333.3 million under fixed-price contracts and an estimated $ 773.2 million under price-to-be-fixed contracts.

A portion of our price-to-be-fixed contracts are effectively fixed through the use of futures.

7 unchanged sentences

Prepaid Expenses and Other Current Assets

Jul 3, 2022 Oct 3, 2021

Jan 1, 2023 Oct 2, 2022

Income tax receivable $ 10.0 $ 27.7

3 unchanged sentences

Property, Plant and Equipment, net

Jul 3, 2022 Oct 3, 2021

Jan 1, 2023 Oct 2, 2022

Land $ 46.1 $ 46.1

9 unchanged sentences

Accrued Liabilities

Jul 3, 2022 Oct 3, 2021

Jan 1, 2023 Oct 2, 2022

Accrued occupancy costs $ 77.9 $ 84.6

6 unchanged sentences

Store Operating Expenses

Quarter Ended Three Quarters Ended

Jul 3, 2022 Jun 27, 2021 Jul 3, 2022 Jun 27, 2021

Quarter Ended

Jan 1, 2023 Jan 2, 2022

Wages and benefits $ 2,215.7 $ 2,010.7

4 unchanged sentences

Indefinite-Lived Intangible Assets

(in millions) Jul 3, 2022 Oct 3, 2021

(in millions) Jan 1, 2023 Oct 2, 2022

Trade names, trademarks and patents $ 97.8 $ 97.5

Finite-Lived Intangible Assets

Jul 3, 2022 Oct 3, 2021

Jan 1, 2023 Oct 2, 2022

(in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

5 unchanged sentences

Total finite-lived intangible assets $ 1,222.4 $ ( 1,168.8 ) $ 53.6 $ 1,182.1 $ ( 1,123.7 ) $ 58.4

Amortization expense for finite-lived intangible assets was $ 47.6 million and $ 147.0 million for the quarter and three quarters ended July 3, 2022, respectively and $ 50.0 million and $ 173.4 million for the quarter and three quarters ended June 27, 2021, respectively.

Estimated future amortization expense as of July 3, 2022 ( in millions ):

Amortization expense for finite-lived intangible assets was $ 5.6 million for the quarter ended January 1, 2023 and $ 50.2 million for the quarter ended January 2, 2022, respectively.

Estimated future amortization expense as of January 1, 2023 ( in millions ):

Fiscal Year Total

2022 (excluding the three quarters ended July 3, 2022)

2023 (excluding the quarter ended January 1, 2023)

Thereafter 2.1

5 unchanged sentences

0.3 99.2 — — 99.5

Goodwill balance at July 3, 2022

Goodwill balance at January 1, 2023

$ 491.4 $ 2,855.9 $ 34.7 $ 1.0 $ 3,383.0

10 unchanged sentences

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 July 3, 2022, we were in compliance with all applicable covenants.

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

As of January 1, 2023, we were in compliance with all applicable covenants.

No amounts were outstanding under our 2021 credit facility as of January 1, 2023 or October 2, 2022.

Short-term Debt

2 unchanged sentences

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 July 3, 2022, we had $ 200 million in borrowings outstanding under the program.

As of October 3, 2021, we had no borrowings outstanding under this program.

As of January 1, 2023, we had no borrowings outstanding under the program.

As of October 2, 2022, we had $ 175.0 million in borrowings outstanding under this program.

Additionally, we hold the following Japanese yen-denominated credit facilities that are available for working capital needs and capital expenditures within our Japanese market:

• A ¥ 5 billion, or $ 36.8 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 Tokyo Interbank Offered Rate ("TIBOR") plus an applicable margin of 0.400 %.

• A ¥ 5 billion, or $ 37.6 million, credit facility is currently set to mature on January 4, 2024 .

Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on Tokyo Interbank Offered Rate ("TIBOR") plus an applicable margin of 0.400 %.

• A ¥ 10 billion, or $ 75.2 million, credit facility is currently set to mature on March 27, 2023 .

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 July 3, 2022 and October 3, 2021, we had no borrowings outstanding under these Japanese yen-denominated credit facilities.

Borrowings under this 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 1, 2023 and October 2, 2022, we had no borrowings outstanding under these Japanese yen-denominated credit facilities.

Long-term Debt

Components of long-term debt including the associated interest rates and related estimated fair values by calendar maturity ( in millions, except interest rates) :

Jul 3, 2022 Oct 3, 2021 Stated Interest Rate Effective Interest Rate (1)

Jan 1, 2023 Oct 2, 2022 Stated Interest Rate Effective Interest Rate (1)

Issuance Amount Estimated Fair Value Amount Estimated Fair Value

May 2022 notes $ — $ — $ 500.0 $ 503.1 1.300 % 1.334 %

June 2022 notes — — 500.0 506.7 2.700 % 2.819 %

March 2023 notes $ 1,000.0 $ 996.6 $ 1,000.0 $ 996.5 3.100 % 3.107 %

29 unchanged sentences

Refer to Note 3 , Derivative Financial Instruments, for additional information on our interest rate swaps designated as fair value hedges.

(3) Floating rate notes which bear interest at a rate equal to Compounded SOFR (as defined in the February 2024 notes) plus 0.420 %, resulting in a stated interest rate of 1.504% at July 3, 2022.

(3) Floating rate notes which bear interest at a rate equal to Compounded SOFR (as defined in the February 2024 notes) plus 0.420 %, resulting in a stated interest rate of 4.590 % at January 1, 2023.

(4) Japanese yen-denominated long-term debt.

The following table summarizes our long-term debt maturities as of July 3, 2022 by fiscal year ( in millions ):

The following table summarizes our long-term debt maturities as of January 1, 2023 by fiscal year ( in millions ):

Fiscal Year Total

3 unchanged sentences

The components of lease costs (in millions) :

Quarter Ended Three Quarters Ended

Jul 3, 2022 Jun 27, 2021 Jul 3, 2022 Jun 27, 2021

Quarter Ended

Jan 1, 2023 Jan 2, 2022

Operating lease costs (1)

5 unchanged sentences

The following table includes supplemental information (in millions) :

Three Quarters Ended

Jul 3, 2022 Jun 27, 2021

Quarter Ended

Jan 1, 2023 Jan 2, 2022

Cash paid related to operating lease liabilities $ 404.1 $ 410.0

Operating lease liabilities arising from obtaining ROU assets 367.3 346.8

Jul 3, 2022 Jun 27, 2021

Jan 1, 2023 Jan 2, 2022

Weighted-average remaining operating lease term 8.5 years 8.6 years

1 unchanged sentence

Finance lease assets are recorded in property, plant and equipment, net with the corresponding lease liabilities included in accrued liabilities and other long-term liabilities on the consolidated balance sheet.

There were no material finance leases as of July 3, 2022 and October 3, 2021.

There were no material finance leases as of January 1, 2023 and October 2, 2022.

Minimum future maturities of operating lease liabilities (in millions) :

Fiscal Year Total

2022 (excluding the three quarters ended July 3, 2022)

2023 (excluding the quarter ended January 1, 2023)

Thereafter 3,600.2

2 unchanged sentences

Total $ 8,892.9

As of July 3, 2022, we have entered into operating leases that have not yet commenced of $ 1.1 billion, primarily related to real estate leases.

These leases will commence between fiscal year 2022 and fiscal year 2028 with lease terms ranging from ten to twenty years.

As of January 1, 2023, we have entered into operating leases that have not yet commenced of $ 1.2 billion, primarily related to real estate leases.

These leases will commence between fiscal year 2023 and fiscal year 2028 with lease terms ranging from three to twenty years.

Deferred Revenue

Our deferred revenue primarily consists of the prepaid royalty from Nestlé, for which we have continuing performance obligations to support the Global Coffee Alliance, our unredeemed stored value card liability and unredeemed loyalty points (“Stars”) associated with our loyalty program.

As of July 3, 2022, the current and long-term deferred revenue related to Nestlé was $ 177.0 million and $ 6.2 billion, respectively.

As of January 1, 2023, the current and long-term deferred revenue related to Nestlé was $ 177.0 million and $ 6.1 billion, respectively.

As of October 2, 2022, the current and long-term deferred revenue related to the Nestlé up-front payment was $ 177.0 million and $ 6.2 billion, respectively.

During the quarter and three quarters ended July 3, 2022, we recognized $ 44.1 million and $ 132.5 million of prepaid royalty revenue related to Nestlé, respectively.

During the quarter and three quarters ended June 27, 2021, we recognized $ 44.2 million and $ 132.5 million of prepaid royalty revenue related to Nestlé, respectively.

During the quarter ended January 1, 2023, we recognized $ 44.1 million of prepaid royalty revenue related to Nestlé.

During the quarter ended January 2, 2022, we recognized $ 44.2 million of prepaid royalty revenue related to Nestlé.

Changes in our deferred revenue balance related to our stored value cards and loyalty program (in millions) :

Quarter Ended July 3, 2022

Stored value cards and loyalty program at April 3, 2022

Revenue deferred - card activations, card reloads and Stars earned 3,282.6

Revenue recognized - card and Stars redemptions and breakage ( 3,312.3 )

Stored value cards and loyalty program at July 3, 2022 (2)

Quarter Ended June 27, 2021

Stored value cards and loyalty program at March 28, 2021

Revenue deferred - card activations, card reloads and Stars earned 3,170.7

Revenue recognized - card and Stars redemptions and breakage ( 3,160.0 )

Stored value cards and loyalty program at June 27, 2021 (2)

Three Quarters Ended July 3, 2022

Quarter Ended January 1, 2023

Stored value cards and loyalty program at October 2, 2022

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Revenue recognized - card and Stars redemptions and breakage ( 3,714.1 )

Stored value cards and loyalty program at July 3, 2022 (2)

Three Quarters Ended June 27, 2021

Stored value cards and loyalty program at September 27, 2020

Stored value cards and loyalty program at January 1, 2023 (2)

Quarter Ended January 2, 2022

Stored value cards and loyalty program at October 3, 2021

Revenue deferred - card activations, card reloads and Stars earned 3,917.5

Revenue recognized - card and Stars redemptions and breakage ( 3,410.8 )

Stored value cards and loyalty program at June 27, 2021 (2)

Stored value cards and loyalty program at January 2, 2022 (2)

(1) “Other” primarily consists of changes in the stored value cards and loyalty program balances resulting from foreign currency translation.

(2) As of July 3, 2022 and June 27, 2021, approximately $ 1.5 billion and $ 1.4 billion of these amounts were current, respectively.

(2) As of January 1, 2023 and January 2, 2022, approximately $ 1.9 billion and $ 1.8 billion of these amounts were current, respectively.

Changes in AOCI by component, net of tax (in millions) :

Quarter Ended Available-for-Sale Debt Securities Cash Flow Hedges Net Investment Hedges Translation Adjustment and Other Total

Net gains/(losses) in AOCI, beginning of period $ ( 9.0 ) $ 251.7 $ 103.0 $ ( 85.4 ) $ 260.3

Net gains/(losses) recognized in OCI before reclassifications ( 1.6 ) 41.0 81.6 ( 396.9 ) ( 275.9 )

Net (gains)/losses reclassified from AOCI to earnings 0.1 ( 46.7 ) ( 2.8 ) — ( 49.4 )

Other comprehensive income/(loss) attributable to Starbucks ( 1.5 ) ( 5.7 ) 78.8 ( 396.9 ) ( 325.3 )

Net gains/(losses) in AOCI, end of period $ ( 10.5 ) $ 246.0 $ 181.8 $ ( 482.3 ) $ ( 65.0 )

June 27, 2021

Net gains/(losses) in AOCI, beginning of period $ 2.0 $ ( 5.7 ) $ 19.6 $ ( 142.2 ) $ ( 126.3 )

Net gains/(losses) recognized in OCI before reclassifications ( 0.1 ) 32.9 24.2 40.2 97.2

Net (gains)/losses reclassified from AOCI to earnings ( 0.2 ) 2.1 ( 2.5 ) — ( 0.6 )

Other comprehensive income/(loss) attributable to Starbucks ( 0.3 ) 35.0 21.7 40.2 96.6

Net gains/(losses) in AOCI, end of period $ 1.7 $ 29.3 $ 41.3 $ ( 102.0 ) $ ( 29.7 )

Three Quarters Ended Available-for-Sale Debt Securities Cash Flow Hedges Net Investment Hedges Translation Adjustment and Other Total

January 1, 2023

Net gains/(losses) in AOCI, beginning of period $ ( 15.5 ) $ 199.0 $ 209.1 $ ( 855.8 ) $ ( 463.2 )

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Net gains/(losses) in AOCI, end of period $ ( 13.9 ) $ ( 34.9 ) $ 156.8 $ ( 646.9 ) $ ( 538.9 )

June 27, 2021

January 2, 2022

Net gains/(losses) in AOCI, beginning of period $ 1.5 $ 158.3 $ 48.6 $ ( 61.2 ) $ 147.2

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the Statements of Earnings

Jul 3, 2022 Jun 27, 2021

Gains/(losses) on available-for-sale debt securities $ ( 0.2 ) $ 0.1 Interest income and other, net

Gains/(losses) on cash flow hedges 55.6 ( 1.8 ) Please refer to Note 2 , Derivative Financial Instruments for additional information.

Gains/(losses) on net investment hedges 3.8 3.3 Interest expense

59.2 1.6 Total before tax

( 9.8 ) ( 1.0 ) Tax expense

$ 49.4 $ 0.6 Net of tax

Three Quarters Ended

Components Amounts Reclassified from AOCI Affected Line Item in

the Statements of Earnings

Jul 3, 2022 Jun 27, 2021

Jan 1, 2023 Jan 2, 2022

Gains/(losses) on available-for-sale debt securities $ ( 0.2 ) $ 0.2 Interest income and other, net

4 unchanged sentences

$ 86.6 $ 13.2 Net of tax

In addition to 2.4 billion shares of authorized common stock with $ 0.001 par value per share, the Company has authorized 7.5 million shares of preferred stock, none of which was outstanding as of July 3, 2022.

During the three quarters ended July 3, 2022, we repurchased 36.3 million shares of common stock for $ 4.0 billion.

On March 15, 2022, we announced that our Board of Directors authorized the repurchase of up to an additional 40 million shares under our ongoing share repurchase program.

On April 4, 2022, we announced a temporary suspension of our share repurchase program to allow us to augment investments in our stores and partners.

Repurchases pursuant to this program were last made on April 1, 2022.

As of July 3, 2022, 52.6 million shares remained available for repurchase under current authorizations.

During the third quarter of fiscal 2022, our Board of Directors approved a quarterly cash dividend to shareholders of $ 0.49 per share to be paid on August 26, 2022 to shareholders of record as of the close of business on August 12, 2022.

During the quarters ended January 1, 2023 and January 2, 2022, we repurchased 1.9 million and 31.1 million shares of common stock for $ 191.4 million and $ 3.5 billion, respectively.

As of January 1, 2023, 50.6 million shares remained available for repurchase under current authorizations.

During the first quarter of fiscal 2023, our Board of Directors approved a quarterly cash dividend to shareholders of $ 0.53 per share to be paid on February 24, 2023 to shareholders of record as of the close of business on February 10, 2023 .

Employee Stock Plans

As of July 3, 2022, there were 99.6 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 10.9 million shares available for issuance under our employee stock purchase plan.

As of January 1, 2023, there were 91.8 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 10.7 million shares available for issuance under our employee stock purchase plan.

Stock-based compensation expense recognized in the consolidated statements of earnings (in millions) :

Quarter Ended Three Quarters Ended

Jul 3, 2022 Jun 27, 2021 Jul 3, 2022 Jun 27, 2021

Quarter Ended

Jan 1, 2023 Jan 2, 2022

Restricted Stock Units (“RSUs”) $ 85.0 $ 95.7

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Total stock-based compensation expense $ 85.1 $ 95.8

Stock option and RSU transactions from October 3, 2021 through July 3, 2022 ( in millions ):

Stock option and RSU transactions from October 2, 2022 through January 1, 2023 ( in millions ):

Stock Options RSUs

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Forfeited/expired — ( 0.2 )

Options outstanding/Nonvested RSUs, July 3, 2022

Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of July 3, 2022

$ 0.0 $ 196.3

The effective tax rate for the quarter ended July 3, 2022 was 23.4 % compared to 18.2 % for the same quarter in fiscal 2021.

The increase was primarily due to lapping a prior year remeasurement of deferred tax assets due to an enacted foreign corporate rate change (approximately 510 basis points).

The effective tax rate for the first three quarters ended July 3, 2022 was 23.2 % compared to 21.7 % for the same period in fiscal 2021.

The increase was primarily due to lapping a prior year remeasurement of deferred tax assets due to an enacted foreign corporate rate change (approximately 230 basis points).

Options outstanding/Nonvested RSUs, January 1, 2023

Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of January 1, 2023

Earnings per Share

Calculation of net earnings per common share (“EPS”) — basic and diluted ( in millions, except EPS ):

Quarter Ended Three Quarters Ended

Jul 3, 2022 Jun 27, 2021 Jul 3, 2022 Jun 27, 2021

Quarter Ended

Jan 1, 2023 Jan 2, 2022

Net earnings attributable to Starbucks $ 855.2 $ 815.9

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Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options (both vested and non-vested) and unvested RSUs, calculated using the treasury stock method.

The calculation of dilutive shares outstanding would exclude out-of-the-money stock options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would be anti-dilutive.

As of July 3, 2022, we had an immaterial amount of anti-dilutive stock options and anti-dilutive unvested RSUs.

As of June 27, 2021, we had no anti-dilutive stock options and an immaterial amount of anti-dilutive unvested RSUs .

The calculation of dilutive shares outstanding excludes anti-dilutive stock options or RSU's, which were immaterial in the periods presented.

Commitments and Contingencies

Legal Proceedings

On April 13, 2010, an organization named Council for Education and Research on Toxics (“Plaintiff”) filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, against the Company and certain other defendants who manufacture, package, distribute or sell brewed coffee.

The lawsuit is captioned Council for Education and Research on Toxics v.

Starbucks Corporation, et al .

On May 9, 2011, the Plaintiff filed an additional lawsuit in the Superior Court of the State of California, County of Los Angeles, against the Company and additional defendants who manufacture, package, distribute or sell packaged coffee.

The lawsuit is captioned Council for Education and Research on Toxics v.

Brad Barry LLC, et al .

Both cases have since been consolidated and now include nearly eighty defendants, which constitute the majority of the coffee industry in California.

Plaintiff alleges that the Company and the other defendants failed to provide warnings for their coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code Section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65.

Plaintiff seeks equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of two thousand five hundred dollars per day per alleged violation of Proposition 65.

The Plaintiff asserts that every consumed cup of coffee, absent a compliant warning, is equivalent to a violation under Proposition 65.

The Company, as part of a joint defense group organized to defend against the lawsuit, disputes the claims of the Plaintiff.

Acrylamide is not added to coffee but is present in all coffee in small amounts (parts per billion) as a byproduct of the coffee bean roasting process.

The Company has asserted multiple affirmative defenses.

Trial of the first phase of the case (“Phase 1”) commenced on September 8, 2014, and was limited to three affirmative defenses shared by all defendants.

On September 1, 2015, the trial court issued a final ruling adverse to defendants on all Phase 1 defenses.

Trial of the second phase of the case (“Phase 2”) commenced in the fall of 2017.

On May 7, 2018, the trial court issued a ruling adverse to defendants on the Phase 2 defense, the Company's last remaining defense to liability.

On June 22, 2018, the California Office of Environmental Health Hazard Assessment (OEHHA) proposed a new regulation clarifying that cancer warnings are not required for coffee under Proposition 65.

The case was set to proceed to a third phase trial (“Phase 3”) on damages, remedies and attorneys' fees on October 15, 2018.

However, on October 12, 2018, the California Court of Appeal granted the defendants’ request for a stay of the Phase 3 trial.

On June 3, 2019, the California Office of Administrative Law (OAL) approved the coffee exemption regulation.

The regulation became effective on October 1, 2019.

On June 24, 2019, the California Court of Appeal lifted the stay of the litigation.

At the status conference on August 25, 2020, the trial judge granted the defendants’ motion for summary judgment, ruling that the coffee exemption regulation is a complete defense to the Plaintiff’s complaint.

The Notice of Entry of Judgment from the court was served on October 6, 2020, and the Plaintiff filed a Notice of Appeal on November 20, 2020 and its opening brief in the appeals process on April 9, 2021 .

Defendants filed their response brief on August 27, 2021, and Plaintiff filed a reply on November 15, 2021.

In 2010 and 2011, an organization named Council for Education and Research on Toxics (“Plaintiff”) filed lawsuits in the Superior Court of the State of California, County of Los Angeles, against the Company and other companies who manufacture, package, distribute or sell brewed coffee.

The suits were later consolidated into a single action.

Plaintiff alleged that the Company and the other defendants failed to provide warnings for their coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65.

Plaintiff sought equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of two thousand five hundred dollars per day per alleged violation of Proposition 65, which the Plaintiff claimed was every day coffee is sold without a compliant warning.

The Company denied the claims.

During the pendency of the litigation, the California Office of Environmental Health Hazard Assessment (“OEHHA”) proposed a new regulation clarifying that cancer warnings are not required for coffee under Proposition 65.

The regulation was approved by the Office of Administrative Law and became effective on October 1, 2019.

In 2020, the trial court granted the defendants’ motion for summary judgment, ruling that the coffee exemption regulation is a complete defense to the Plaintiff’s complaint.

On October 26, 2022, the California Court of Appeal affirmed the trial court's dismissal of the case.

The Plaintiff’s subsequent request for a rehearing before the California Court of Appeals was denied.

On December 2, 2022 Plaintiff filed a petition for review in the California Supreme Court and Starbucks filed a response brief on December 22, 2022.

Starbucks believes that the likelihood that the Company will ultimately incur a material loss in connection with this litigation is less than reasonably possible.

Accordingly, as of July 3, 2022, no loss contingency has been recorded for this matter.

Starbucks is party to various other legal proceedings arising in the ordinary course of business, including certain employment litigation cases that have been certified as class or collective actions, but, except as noted above, is not currently a party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Accordingly, as of January 1, 2023, no loss contingency has been recorded for this matter.

Starbucks is involved in various other legal proceedings arising in the ordinary course of business, including certain employment litigation cases that have been certified as class or collective actions, but, except as noted above, is not currently a party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Segment Reporting

1 unchanged sentence

Consolidated revenue mix by product type ( in millions ):

Quarter Ended Three Quarters Ended

Jul 3, 2022 Jun 27, 2021 Jul 3, 2022 Jun 27, 2021

Quarter Ended

Jan 1, 2023 Jan 2, 2022

$ 5,173.0 59 % $ 4,898.4 61 %

7 unchanged sentences

Quarter Ended

North America (1)

International (1)

Channel Development Corporate and Other (1)

Total net revenues $ 6,058.4 $ 1,584.7 $ 479.7 $ 27.3 $ 8,150.1

Depreciation and amortization expenses 201.2 125.0 — 30.6 356.8

Income from equity investees — 0.4 53.7 — 54.1

Operating income/(loss) 1,330.1 135.3 191.7 ( 361.6 ) 1,295.5

June 27, 2021

Total net revenues $ 5,370.7 $ 1,688.0 $ 414.0 $ 23.8 $ 7,496.5

Depreciation and amortization expenses 188.9 129.7 0.2 35.5 354.3

Income from equity investees — 42.0 63.5 — 105.5

Operating income/(loss) 1,304.3 327.3 216.0 ( 358.9 ) 1,488.7

Three Quarters Ended

North America (1)

International (1)

Channel Development Corporate and Other (1)

North America International Channel Development Corporate and Other Total

January 1, 2023

Total net revenues $ 6,551.3 $ 1,680.1 $ 478.2 $ 4.3 $ 8,713.9

2 unchanged sentences

Operating income/(loss) 1,212.4 240.4 226.3 ( 426.0 ) 1,253.1

June 27, 2021

January 2, 2022

Total net revenues $ 5,732.3 $ 1,875.9 $ 417.1 $ 25.1 $ 8,050.4

2 unchanged sentences

Operating income/(loss) 1,083.1 299.6 183.2 ( 388.1 ) 1,177.8

(1) North America and International total net revenues and operating income and Corporate and Other operating loss for the quarter and three quarters ended June 27, 2021, have been restated to conform with current period presentation .

Subsequent Event

On January 13, 2023, Starbucks finalized the sale of the Seattle's Best Coffee brand to Nestlé and will recognize a pre-tax gain of approximately $ 90 million in the second quarter of fiscal 2023.

With the exception of recognizing the sale to Nestlé, we do not expect the transaction will have a material impact on our ongoing operations and future financial results.

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 1. Financial Statements