What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-02 compared with 2023-02-02 · 144 added, 89 removed, 251 unchanged (48% of the section changed)

21 unchanged sentences

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 and future availability of governmental subsidies for COVID-19 or other public health events;

the continuing impact of the COVID-19 pandemic or other public health events on our financial results;

our ceo transition;

35 unchanged sentences

Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 84 markets.

As of January 1, 2023, Starbucks had more than 36,100 company-operated and licensed stores, an increase of 5% from the prior year.

As of April 2, 2023, Starbucks had more than 36,600 company-operated and licensed stores, an increase of 6% 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 1, 2023, our global comparable store sales

grew 5%, primarily driven by 10% growth in the U.S.

market, partially offset by COVID-19 pandemic-related business conditions in China, leading to a 29% decrease in China comparable store sales.

We have three reportable operating segments:

15 unchanged sentences

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

Starbucks results for the first quarter of fiscal 2023 demonstrate the overall strength and resilience of our brand, despite continued COVID-19 pandemic related disruptions in our China market and continued inflationary pressures.

Consolidated net revenues increased 8% to $8.7 billion in the first quarter of fiscal 2023 compared to $8.1 billion in the first quarter of fiscal 2022, primarily driven by strength in our U.S.

business and growth in our International segment excluding China, partially offset by COVID-19 pandemic related disruptions in China and unfavorable foreign currency translation.

Consolidated operating margin decreased 20 basis points from the prior year to 14.4%, primarily driven by previously committed investments in labor including enhanced store partner wages and benefits, inflationary pressures and sales deleverage in China, partially offset by strategic pricing in North America and sales leverage across markets outside of China.

For both the North America segment and our U.S.

market, comparable store sales increased 10% for the first quarter of fiscal 2023 compared to an increase of 18% in the first quarter of fiscal 2022.

Average ticket for both the North America segment and the U.S.

market grew 9%, primarily driven by strategic pricing.

The segment also experienced higher costs, primarily related to enhancements in retail store partner wages and benefits, as well as increased supply chain costs due to inflationary pressures.

For the International segment, comparable store sales declined 13% for the first quarter of fiscal 2023, driven by comparable store sales decline of 29% in our China market, which experienced suppressed customer mobility and store closures due to pandemic-related restrictions and a spike in infections.

These contributed to a decline in both revenue and operating margin for the segment.

The unfavorable impacts were partially offset by strong growth in our major international markets outside of China.

Net revenues for our Channel Development segment increased $61 million, or 15%, when compared with the first quarter of fiscal 2022.

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

Despite COVID-19 induced business interruptions in our China market, we have seen the strength and resilience of our brand as well as strong customer demand across our portfolio.

While we anticipate continued inflationary pressure, albeit to a lesser extent than in fiscal 2022, and COVID-related interruptions in the China market, we expect improved financial performance in the second half of fiscal 2023, driven by sales leverage, pricing, productivity gains from Reinvention, as well as recovery in China.

Starbucks results for the second quarter of fiscal 2023 demonstrate the overall strength of our brand.

Consolidated net revenues increased 14% to $8.7 billion in the second quarter of fiscal 2023 compared to $7.6 billion in the second quarter of fiscal 2022, primarily driven by strength in our U.S.

business and growth in our international licensed markets and the beginning of a recovery from COVID-19 pandemic-related business interruptions in China.

During the quarter ended April 2, 2023, our global comparable store sales grew 11%, primarily driven by 12% growth in the U.S.

market and 7% growth internationally, as evidenced by the strength of the Starbucks brand in global markets.

Consolidated operating margin increased 280 basis points from the prior year to 15.2%, primarily driven by sales leverage, pricing, productivity improvement and the gain from sale of our Seattle's Best Coffee brand.

These were partially offset by previously-committed investments in labor, including enhancements in retail store partner wages and benefits, increased general and administrative costs related to our Reinvention Plan and higher supply chain costs driven by inflationary pressures.

We anticipate continued recovery in China, coupled with sales leverage, pricing and productivity gains from the Reinvention Plan, will position us to meet our expected financial results in the remainder of the fiscal year.

Absent significant and prolonged COVID-19 relapses or global economic disruptions, we believe our strategy will result in sustainable and profitable growth over the long-term.

Results of Operations (in millions)

Quarter Ended

Quarter Ended Two Quarters Ended

Company-operated stores $ 7,142.3 $ 6,276.7 $ 865.6 13.8 % $ 14,225.7 $ 12,999.1 $ 1,226.6 9.4 %

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Total net revenues $ 8,719.8 $ 7,635.6 $ 1,084.2 14.2 % $ 17,433.8 $ 15,686.0 $ 1,747.8 11.1 %

For the quarter ended January 1, 2023 compared with the quarter ended January 2, 2022

Total net revenues for the first quarter of fiscal 2023 increased $664 million, primarily due to higher revenues from company-operated stores ($361 million).

The growth of company-operated stores revenue was driven by a 5% increase in comparable store sales ($328 million), attributable to a 7% increase in average ticket offset by a 2% decrease in comparable transactions.

For the quarter ended April 2, 2023 compared with the quarter ended April 3, 2022

Total net revenues for the second quarter of fiscal 2023 increased $1.1 billion, primarily due to higher revenues from company-operated stores ($866 million).

The growth of company-operated stores revenue was driven by an 11% increase in comparable store sales ($669 million), attributable to a 6% increase in comparable transactions and a 4% increase in average ticket.

Also contributing was incremental revenues from 1,114 net new Starbucks ® company-operated stores, or a 6% increase, over the past 12 months ($312 million).

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Partially offsetting this increase was unfavorable foreign currency translation ($21 million).

Other revenues increased $34 million, primarily due to higher product sales and royalty revenue in the Global Coffee Alliance.

For the two quarters ended April 2, 2023 compared with the two quarters ended April 3, 2022

Total net revenues for the first two quarters of fiscal 2023 increased $1.7 billion, primarily due to higher revenues from company-operated stores ($1.2 billion).

The growth of company-operated stores revenue was driven by a 8% increase in comparable store sales ($1.0 billion) attributed to a 6% increase in average ticket and a 2% increase in transactions.

Also contributing to the increase were incremental revenues from 1,114 net new Starbucks company-operated stores, or a 6% increase, over the past 12 months ($571 million).

Partially offsetting these increases was unfavorable foreign currency translation ($388 million).

Licensed stores revenue increased $489 million contributing to the increase in total net revenues, driven by higher product and equipment sales to and royalty revenues from our licensees ($532 million).

Partially offsetting this increase was unfavorable foreign currency translation ($57 million).

Other revenues increased $33 million, primarily due to higher product sales and royalty revenue in the Global Coffee Alliance ($63 million), partially offset by the absence of revenues from the Evolution Fresh business following its sale in the fourth quarter of fiscal 2022 ($37 million).

Operating Expenses

Quarter Ended

As a % of Total

Quarter Ended Two Quarters Ended

Change Apr 2,

Total Net Revenues As a % of

Total Net Revenues

Product and distribution costs $ 2,801.7 $ 2,465.8 $ 335.9 32.1 % 32.3 % $ 5,611.9 $ 4,992.7 $ 619.2 32.2 % 31.8 %

6 unchanged sentences

Income from equity investees 51.4 49.1 2.3 0.6 0.6 109.2 89.4 19.8 0.6 0.6

Gain from sale of assets 91.3 — 91.3 1.0 nm 91.3 — 91.3 0.5 nm

Operating income 1,327.5 948.9 378.6 15.2 12.4 % 2,580.7 2,126.7 454.0 14.8 13.6

Store operating expenses as a % of company-operated stores revenue 50.9 % 52.8 % 51.3 % 51.7 %

For the quarter ended January 1, 2023 compared with the quarter ended January 2, 2022

Product and distribution costs as a percentage of total net revenues increased 80 basis points for the first quarter of fiscal 2023, primarily due to higher supply chain costs driven by inflationary pressures.

Store operating expenses as a percentage of total net revenues decreased 10 basis points for the first quarter of fiscal 2023.

Store operating expenses as a percentage of company-operated stores revenue increased 110 basis points, primarily due to enhancements in retail store partner wages and benefits (approximately 350 basis points) and increased spend on new partner training (approximately 60 basis points), partially offset by sales leverage.

Other operating expenses increased $28 million for the first quarter of fiscal 2023, primarily due to higher support costs for our growing licensed markets ($8 million) and strategic investments in technology and other initiatives ($8 million).

Depreciation and amortization expenses as a percentage of total net revenues decreased 70 basis points, primarily due to lapping amortization expenses of acquisition-related intangibles assets.

General and administrative expenses increased $55 million, primarily due to incremental investments in technology ($28 million) and increased support costs to address labor market conditions and leadership training ($17 million).

For the quarter ended April 2, 2023 compared with the quarter ended April 3, 2022

Product and distribution costs as a percentage of total net revenues decreased 20 basis points for the second quarter of fiscal 2023, primarily due to pricing (approximately 120 basis points), partially offset by higher supply chain costs driven by inflationary pressures (approximately 100 basis points).

Store operating expenses as a percentage of total net revenues decreased 170 basis points for the second quarter of fiscal 2023.

Store operating expenses as a percentage of company-operated stores revenue decreased 190 basis points, primarily due to sales leverage (approximately 260 basis points), pricing (approximately 160 basis points) and productivity improvement (approximately 160 basis points).

These were partially offset by previously-committed investments in labor, including enhancements in retail store partner wages and benefits (approximately 340 basis points).

Other operating expenses increased $25 million for the second quarter of fiscal 2023, primarily due to higher support costs for our growing licensed markets ($9 million) and strategic investments in technology and other initiatives ($6 million).

Depreciation and amortization expenses as a percentage of total net revenues decreased 90 basis points, primarily due to lapping amortization expenses of acquisition-related intangibles assets that are now fully amortized.

General and administrative expenses increased $139 million, primarily due to incremental investments in technology ($36 million), higher performance-based compensation ($30 million), increased support costs of strategic initiatives including the Reinvention Plan ($18 million), a donation to the Starbucks Foundation ($15 million) and higher partner wages and benefits ($13 million).

Gain from sale of assets includes the sale of our Seattle's Best Coffee brand to Nestlé in the second quarter of fiscal 2023.

The combination of these changes resulted in an overall increase in operating margin of 280 basis points for the second quarter of fiscal 2023.

For the two quarters ended April 2, 2023 compared with the two quarters ended April 3, 2022

Product and distribution costs as a percentage of total net revenues increased 40 basis points for the first two quarters of fiscal 2023, primarily due to higher supply chain costs driven by inflationary pressures (approximately 130 basis points) and business mix shift (approximately 60 basis points), partially offset by pricing (approximately 160 basis points).

Store operating expenses as a percentage of total net revenues decreased 90 basis points for the first two quarters of fiscal 2023.

Store operating expenses as a percentage of company-operated stores revenue decreased 40 basis points, primarily due to pricing (approximately 210 basis points), sales leverage (approximately 120 basis points) and productivity improvement (approximately 110 basis points).

These were partially offset by previously-committed investments in labor, including enhancements in retail store partner wages and benefits (approximately 340 basis points).

Other operating expenses increased $52 million for the first two quarters of fiscal 2023, primarily due to higher support costs for our growing licensed markets ($17 million) and strategic investments in technology and other initiatives ($13 million).

General and administrative expenses increased $194 million, primarily due to incremental investments in technology ($64 million), increased support costs to address labor market conditions and leadership training ($28 million), higher performance-based compensation ($24 million), increased support costs of strategic initiatives including the Reinvention Plan ($24 million) and higher partner wages and benefits ($20 million).

Income from equity investees increased $20 million, primarily due to higher income from our North American Coffee Partnership joint venture.

The combination of these changes resulted in an overall decrease in operating margin of 20 basis points for the first quarter of fiscal 2023.

Gain from sale of assets includes the sale of our Seattle's Best Coffee brand to Nestlé in the second quarter of fiscal 2023 .

The combination of these changes resulted in an overall increase in operating margin of 120 basis points for the first two quarters of fiscal 2023.

Other Income and Expenses

Quarter Ended

Quarter Ended Two Quarters Ended

Change Apr 2,

As a % of Total

Net Revenues As a % of Total

Operating income $ 1,327.5 $ 948.9 $ 378.6 15.2 % 12.4 % $ 2,580.7 $ 2,126.7 $ 454.0 14.8 % 13.6 %

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Effective tax rate including noncontrolling interests 24.9 % 23.0 % 24.8 % 23.1 %

For the quarter ended January 1, 2023 compared with the quarter ended January 2, 2022

Interest income and other, net increased $12 million, primarily due to lower net losses from certain investments.

Interest expense increased $14 million, primarily due to rising interest rates on floating rate debt and additional interest incurred on long-term debt issued in February 2022.

The effective tax rate for the quarter ended January 1, 2023 was 24.6% compared to 23.2% for the same period in fiscal 2022.

The increase was primarily due to a decrease in stock-based compensation excess tax benefits (approximately 150 basis points).

For the quarter ended April 2, 2023 compared with the quarter ended April 3, 2022

Interest income and other, net decreased $28 million, primarily due to lapping higher investment gains in the prior year.

Interest expense increased $17 million, primarily due to additional interest incurred on floating rate debt.

The effective tax rate for the quarter ended April 2, 2023 was 24.9% compared to 23.0% for the same period in fiscal 2022.

The increase was primarily due to lapping a beneficial return-to-provision adjustment recorded related to the divestiture of certain joint venture operations (approximately 260 basis points).

For the two quarters ended April 2, 2023 compared with the two quarters ended April 3, 2022

Interest income and other, net decreased $16 million, primarily due to lapping higher investment gains in the prior year.

Interest expense increased $32 million, primarily due to additional interest incurred on floating rate debt.

The effective tax rate for the first two quarters ended April 2, 2023 was 24.8% compared to 23.1% for the same period in fiscal 2022.

The increase was primarily due to lapping a beneficial return-to-provision adjustment recorded related to the divestiture of certain joint venture operations (approximately 120 basis points) and a decrease in stock-based compensation excess tax benefits (approximately 80 basis points).

Segment Information

1 unchanged sentence

North America

Quarter Ended

North America

Quarter Ended Two Quarters Ended

Change Apr 2,

As a % of North America

Total Net Revenues As a % of North America

Total Net Revenues

13 unchanged sentences

Store operating expenses as a % of company-operated stores revenue 51.4 % 53.2 % 51.5 % 52.5 %

For the quarter ended January 1, 2023 compared with the quarter ended January 2, 2022

North America total net revenues for the first quarter of fiscal 2023 increased $819 million, or 14%, primarily due to a 10% increase in comparable store sales ($498 million) driven by a 9% increase in average ticket and a 1% increase in transactions.

For the quarter ended April 2, 2023 compared with the quarter ended April 3, 2022

North America total net revenues for the second quarter of fiscal 2023 increased $935 million, or 17%, primarily due to a 12% increase in comparable store sales ($584 million) driven by a 6% increase in transactions and a 5% increase in average ticket.

Also contributing to these increases were the performance of net new company-operated store openings over the past 12 months ($205 million) and higher product and equipment sales to and royalty revenues from our licensees ($122 million).

Operating Margin

North America operating income for the first quarter of fiscal 2023 increased 12% to $1.2 billion, compared to $1.1 billion in the first quarter of fiscal 2022.

Operating margin decreased 40 basis points to 18.5%, primarily due to investments in labor, including enhancements in retail store partner wages and benefits (approximately 390 basis points), inflationary pressures on commodities and our supply chain (approximately 210 basis points), as well as increased spend on new partner training (approximately 70 basis points).

These were partially offset by strategic pricing (approximately 510 basis points) and sales leverage.

North America operating income for the second quarter of fiscal 2023 increased 31% to $1.2 billion, compared to $0.9 billion in the second quarter of fiscal 2022.

Operating margin increased 200 basis points to 19.1%, primarily due to pricing (approximately 320 basis points) and sales leverage (approximately 270 basis points).

Also contributing were productivity improvement (approximately 170 basis points) and lower COVID-19 pandemic related catastrophe pay for store partners (approximately 120 basis points).

These increases were partially offset by previously-committed investments in labor, including enhancements in retail store partner wages and benefits (approximately 360 basis points) and inflationary pressures on commodities and our supply chain (approximately 120 basis points).

For the two quarters ended April 2, 2023 compared with the two quarters ended April 3, 2022

North America total net revenues for the first two quarters of fiscal 2023 increased $1.8 billion, or 16%, primarily due to a 11% increase in comparable store sales ($1.1 billion) driven by a 7% increase in average ticket and a 4% increase in transactions.

Also contributing to these increases were net new company-operated store openings over the past 12 months ($388 million) and higher product and equipment sales to and royalty revenues from our licensees ($282 million).

Operating Margin

North America operating income for the first two quarters of fiscal 2023 increased 21% to $2.4 billion, compared to $2.0 billion for the same period in fiscal 2022.

Operating margin increased 80 basis points to 18.8%, primarily due to pricing (approximately 420 basis points) and sales leverage (approximately 230 basis points).

Also contributing was productivity improvement (approximately 120 basis points).

These increases were partially offset by previously-committed investments in labor, including enhancements in retail store partner wages and benefits (approximately 380 basis points) and inflationary pressures on commodities and our supply chain (approximately 170 basis points).

International

Quarter Ended

Quarter Ended Two Quarters Ended

As a % of International

Total Net Revenues As a % of International

Total Net Revenues

13 unchanged sentences

Store operating expenses as a % of company-operated stores revenue 48.9 % 51.4 % 50.5 % 48.7 %

For the quarter ended January 1, 2023 compared with the quarter ended January 2, 2022

International total net revenues for the first quarter of fiscal 2023 decreased $196 million, or 10%, primarily due to unfavorable foreign currency translation ($236 million), as well as a 13% decline in comparable store sales ($170 million), driven by a 12% decrease in customer transactions and a 1% decrease in average ticket, primarily attributable to COVID-19 pandemic related disruptions in China.

These decreases were partially offset by higher product and equipment sales to and royalty revenues from our licensees ($139 million), as well as 649 net new company-operated store openings, or 9% increase, over the past 12 months ($76 million).

For the quarter ended April 2, 2023 compared with the quarter ended April 3, 2022

International total net revenues for the second quarter of fiscal 2023 increased $152 million, or 9%, primarily due to higher product and equipment sales to and royalty revenues from our licensees ($111 million), 721 net new company-operated store openings, or a 10% increase, over the past 12 months ($107 million).

Also contributing was a 7% increase in comparable store sales ($85 million), driven by a 7% increase in customer transactions, primarily attributable to business recovery from COVID-19 pandemic related disruptions in China.

These increases were partially offset by unfavorable foreign currency translation ($163 million).

Operating Margin

International operating income for the first quarter of fiscal 2023 decreased 20% to $240 million, compared to $300 million in the first quarter of fiscal 2022.

Operating margin decreased 170 basis points to 14.3%, primarily due to sales deleverage related to COVID-19 pandemic related impacts in our China market (approximately 650 basis points) and higher commodity and supply chain costs due to inflationary pressures (approximately 70 basis points).

These decreases were partially offset by sales leverage across markets outside of China (approximately 240 basis points) the resulting business mix (approximately 140 basis points), as well as lapping amortization expenses of acquisition-related intangibles assets that are now fully amortized (approximately 230 basis points).

International operating income for the second quarter of fiscal 2023 increased 74% to $315 million, compared to $181 million in the second quarter of fiscal 2022.

Operating margin increased 640 basis points to 17.0%, primarily due to sales leverage (approximately 470 basis points) and lapping amortization expenses of acquisition-related intangibles assets that are now fully amortized (approximately 250 basis points).

These decreases were partially offset by higher partner wages and benefits (approximately 100 basis points).

For the two quarters ended April 2, 2023 compared with the two quarters ended April 3, 2022

International total net revenues for the first two quarters of fiscal 2023 decreased $44 million, or 1%, primarily due to unfavorable foreign currency translation ($399 million), as well as a 3% decline in comparable store sales ($85 million), driven by a 3% decrease in customer transactions primarily due to COVID-19 pandemic related disruptions in China during the first quarter of fiscal 2023.

These were partially offset by higher product and equipment sales to and royalty revenues from our licensees ($250 million), as well as 721 net new company-operated store openings, or a 10% increase, over the past 12 months ($183 million).

Operating Margin

International operating income for the first two quarters of fiscal 2023 increased 16% to $555 million, compared to $480 million for the same period in fiscal 2022.

Operating margin increased 230 basis points to 15.7%, primarily due to lapping amortization expenses of acquisition-related intangibles assets that are now fully amortized (approximately 240 basis points) and sales leverage across markets outside of China (approximately 190 basis points).

These increases were partially offset by sales deleverage related to COVID-19 pandemic related impacts in our China market during the first quarter of fiscal 2023 (approximately 160 basis points) and higher partner wages and benefits (approximately 100 basis points).

Channel Development

Quarter Ended

Quarter Ended Two Quarters Ended

Change Apr 2,

As a % of Channel Development

Total Net Revenues As a % of Channel Development

Total Net Revenues

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Income from equity investees 50.6 48.5 2.1 10.5 10.5 108.0 88.1 19.9 11.3 10.0

Gain from sale of assets 91.3 — 91.3 19.0 nm 91.3 — 91.3 9.5 % nm

Operating income $ 262.1 $ 197.9 $ 64.2 54.5 % 42.7 % $ 488.4 $ 381.1 $ 107.3 50.9 % 43.3 %

For the quarter ended January 1, 2023 compared with the quarter ended January 2, 2022

Channel Development total net revenues for the first quarter of fiscal 2023 increased $61 million, or 15%, primarily due to higher Global Coffee Alliance product sales and royalty revenue ($43 million) and growth in our ready-to-drink business ($26 million).

For the quarter ended April 2, 2023 compared with the quarter ended April 3, 2022

Channel Development total net revenues for the second quarter of fiscal 2023 increased $18 million, or 4%, primarily due to higher Global Coffee Alliance product sales and royalty revenue ($20 million).

Operating Margin

Channel Development operating income for the first quarter of fiscal 2023 increased 24% to $226 million, compared to $183 million in the first quarter of fiscal 2022.

Operating margin increased 340 basis points to 47.3%, primarily due to growth in our North American Coffee Partnership joint venture income.

Channel Development operating income for the second quarter of fiscal 2023 increased 32% to $262 million, compared to $198 million in the second quarter of fiscal 2022.

Operating margin increased 1,180 basis points to 54.5%, primarily due to the gain from sale of our Seattle's Best Coffee brand (approximately 1,900 basis points), partially offset by impairment charges against certain manufacturing assets (approximately 360 basis points) .

For the two quarters ended April 2, 2023 compared with the two quarters ended April 3, 2022

Channel Development total net revenues for the first two quarters of fiscal 2023 increased $79 million, or 9%, primarily due to higher Global Coffee Alliance product sales and royalty revenue ($63 million) and growth in our global ready-to-drink business ($27 million).

Operating Margin

Channel Development operating income for the first two quarters of fiscal 2023 increased 28% to $488 million, compared to $381 million for the same period in fiscal 2022.

Operating margin increased 760 basis points to 50.9%, primarily due to the gain from sale of our Seattle's Best Coffee brand (approximately 950 basis points) and growth in our North American Coffee Partnership joint venture income (approximately 110 basis points), partially offset by impairment charges against certain manufacturing assets (approximately 190 basis points) and business mix shift (approximately 160 basis points).

Corporate and Other

Quarter Ended

Quarter Ended Two Quarters Ended

Net revenues:

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Product and distribution costs 1.5 20.8 (19.3) (92.8) 6.3 43.6 (37.3) (85.6)

Other operating expenses — 2.9 (2.9) nm

Other operating expenses 0.1 4.4 (4.3) (97.7) 0.1 7.4 (7.3) (98.6)

Depreciation and amortization expenses 29.3 32.3 (3.0) (9.3) 58.1 65.2 (7.1) (10.9)

General and administrative expenses 439.7 328.1 111.6 34.0 835.8 682.6 153.2 22.4

Restructuring and impairments 0.7 — 0.7 nm

Restructuring and impairments 0.3 — 0.3 nm 1.1 — 1.1 nm

Total operating expenses 470.9 385.6 85.3 22.1 901.4 798.8 102.6 12.8

2 unchanged sentences

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 January 1, 2023 compared with the quarter ended January 2, 2022

Corporate and Other operating loss increased to $426 million for the first quarter of fiscal 2023, or 10%, compared to $388 million for the first quarter of fiscal 2022.

This increase was primarily driven by incremental investments in technology ($28 million) and increased support costs to address labor market conditions ($9 million).

These increases were partially offset by lower performance based compensation ($12 million).

For the quarter ended April 2, 2023 compared with the quarter ended April 3, 2022

Corporate and Other operating loss increased by 29% to $467 million for the second quarter of fiscal 2023 compared to $361 million for the second quarter of fiscal 2022.

This increase was primarily driven by incremental investments in technology ($34 million), higher performance-based compensation ($25 million), increased support costs of strategic initiatives including the Reinvention Plan ($18 million) and a donation to the Starbucks Foundation ($15 million).

For the two quarters ended April 2, 2023 compared with the two quarters ended April 3, 2022

Corporate and Other operating loss increased by 19% to $893 million for the first two quarters of fiscal 2023 compared to $749 million for the same period in fiscal 2022.

This increase was primarily driven by incremental investments in technology ($62 million), increased support costs of strategic initiatives including the Reinvention Plan ($24 million), increased support costs to address labor market conditions ($16 million), higher performance-based compensation ($16 million) and a donation to the Starbucks Foundation ($15 million).

Quarterly Store Data

1 unchanged sentence

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

Quarter Ended Stores open as of

Quarter Ended Two Quarters Ended Stores open as of

North America

9 unchanged sentences

Cash and Investment Overview

Our cash and investments totaled $3.6 billion as of January 1, 2023 and $3.5 billion as of October 2, 2022.

Our cash and investments totaled $3.7 billion as of April 2, 2023 and $3.5 billion as of October 2, 2022.

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 well as principal-protected structured deposits.

As of January 1, 2023, approximately $2.7 billion of cash and short-term investment were held in foreign subsidiaries.

As of April 2, 2023, approximately $2.6 billion of cash and short-term investment were held in foreign subsidiaries.

Borrowing Capacity

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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.

Borrowings under the 2021 credit facility 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.

2 unchanged sentences

The “Base Rate” is the highest of (i) the Federal Funds Rate (as defined in the 2021 credit facility) plus 0.500%, (ii) Bank of America’s prime rate and (iii) the Eurocurrency Rate (as defined in the 2021 credit facility) plus 1.000%.

On April 17, 2023, Starbucks amended the 2021 credit facility to replace LIBOR with Term SOFR (Secured Overnight Financing Rate) as a successor rate.

All other material terms and conditions of the 2021 credit facility were unchanged.

Borrowings under the amended 2021 credit facility will bear interest at a variable rate based on Term SOFR, 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 “Base Rate” is the highest of (i) the Federal Funds Rate (as defined in the 2021 credit facility) plus 0.500%, (ii) Bank of America’s prime rate, and (iii) Term SOFR plus 1.000%.

Term SOFR means the forward-looking SOFR term rate administrated by the Chicago Mercantile Exchange plus a SOFR Adjustment of 0.100%.

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 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.

As of April 2, 2023, we were in compliance with all applicable covenants.

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

Commercial Paper

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 January 1, 2023, we had no borrowings outstanding under our commercial paper program.

As of October 2, 2022, we had $175.0 million in borrowings outstanding

under this program.

Our total contractual borrowing capacity for general corporate purposes was $3.0 billion as of the end of our first quarter of fiscal 2023.

As of April 2, 2023, we had no borrowings outstanding under our commercial paper program.

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

Our total contractual borrowing capacity for general corporate purposes was $3.0 billion as of the end of our second quarter of fiscal 2023.

Credit facilities in Japan

5 unchanged sentences

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 0.300%.

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

As of April 2, 2023, we had ¥7 billion, or $52.8 million, of borrowings outstanding under these credit facilities.

As of October 2, 2022, we had no borrowings outstanding under these credit facilities.

See Note 8, 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 long-term notes were issued.

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

As of April 2, 2023, we were in compliance with all applicable covenants.

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

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to satisfy domestic liquidity requirements, any foreign earnings which are not indefinitely reinvested may be repatriated at management’s discretion.

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.

During the second quarter of fiscal 2023, our Board of Directors approved a quarterly cash dividend to shareholders of $0.53 per share to be paid on May 26, 2023 to shareholders of record as of the close of business on May 12, 2023.

During the first quarter of fiscal 2023, we resumed our share repurchase program which was temporarily suspended in April 2022.

During the quarter ended January 1, 2023, we repurchased 1.9 million shares of common stock for $191.4 million.

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

During the two quarters ended April 2, 2023, we repurchased 4.9 million shares of common stock for $495.3 million.

As of April 2, 2023, 47.7 million shares remained available for repurchase under current authorizations.

Other than normal operating expenses, cash requirements for the remainder of fiscal 2023 are expected to consist primarily of capital expenditures for investments in our new and existing stores, our supply chain and corporate facilities.

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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 $1.6 billion for the first quarter of fiscal 2023, compared to $1.9 billion for the same period in fiscal 2022.

The change was primarily due to the timing of payments, lower non-cash depreciation and amortization expenses in current year, and net cash used by changes in other operating assets and liabilities.

Cash used in investing activities for the first quarter of fiscal 2023 totaled $279 million, compared to cash used in investing activities of $401 million for the same period in fiscal 2022.

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

Cash used in financing activities for the first quarter of fiscal 2023 totaled $1.0 billion compared to cash used in financing activities of $4.0 billion for the same period in fiscal 2022.

The change is primarily due to a decrease in share repurchase activities.

Cash provided by operating activities was $2.4 billion for the first two quarters of fiscal 2023, compared to $2.0 billion for the same period in fiscal 2022.

The change was primarily due to higher net earnings during the period and a decrease in net cash used by changes in other operating assets and liabilities.

Cash used in investing activities for the first two quarters of fiscal 2023 totaled $907 million, compared to cash used in investing activities of $881 million for the same period in fiscal 2022.

The change was primarily due to an increase in purchases of investments and higher spend on capital expenditures, partially offset by an increase in maturities and calls of investments and proceeds from the sale of assets.

Cash used in financing activities for the first two quarters of fiscal 2023 totaled $1.3 billion compared to cash used in financing activities of $3.7 billion for the same period in fiscal 2022.

The change is primarily due to a decrease in share repurchase activities, partially offset by higher repayments of long-term debt.

Commodity Prices, Availability and General Risk Conditions

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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