What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-30 compared with 2024-01-30 · 147 added, 86 removed, 217 unchanged (52% of the section changed)

13 unchanged sentences

• the ability of our business partners, suppliers, and third-party providers to fulfill their responsibilities and commitments;

• higher costs, lower quality, or unavailability of coffee, dairy, energy, water, raw materials, or product ingredients;

• higher costs, lower quality, or unavailability of coffee, dairy, cocoa, energy, water, raw materials, or product ingredients;

• the impact of significant increases in logistics costs;

4 unchanged sentences

• the potential negative effects of incidents involving food or beverage-borne illnesses, tampering, adulteration, contamination, or mislabeling;

• negative publicity related to our Company, products, brands, marketing, executive leadership, partners, Board of Directors, founder, operations, business performance, or prospects;

• potential negative effects of a material breach, failure, or corruption of our information technology systems or those of our direct and indirect business partners, suppliers, or third-party providers, or failure to comply with personal data protection laws;

• negative publicity related to our Company, products, brands, marketing, executive leadership, partners, Board of Directors, founder, operations, business performance, expansions, initiatives, strategies, investments, plans, or prospects;

• our environmental, social, and governance (“ESG”) efforts and any reaction related thereto, such as the rise in opposition to ESG and inclusion and diversity efforts;

8 unchanged sentences

In addition, many of the foregoing risks and uncertainties are, or could be, exacerbated by any worsening of the global business and economic environment.

A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur.

You should not place undue reliance on the forward-

looking statements, which speak only as of the date of this report.

A forward-looking statement is neither a prediction nor a guarantee of future events or

circumstances, and those future events or circumstances may not occur.

You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report.

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

2 unchanged sentences

Starbucks is the premier roaster, marketer, and retailer of specialty coffee in the world, operating in 86 markets.

As of December 31, 2023, Starbucks had more than 38,500 company-operated and licensed stores, an increase of 7% from the prior year.

As of March 31, 2024, Starbucks had more than 38,900 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.

16 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 2024 continue to demonstrate the overall strength of our brand and efficiencies realized from Reinvention, despite certain headwinds.

Consolidated net revenues increased 8% to $9.4 billion in the first quarter of fiscal 2024 compared to $8.7 billion in the first quarter of fiscal 2023, primarily driven by growth in our North America business and our International segment, largely related to lapping prior year COVID-19 pandemic-related business disruptions in China.

During the quarter ended December 31, 2023, our global comparable store sales grew 5%, primarily driven by 5% growth in the U.S.

market and 7% growth internationally, demonstrating the endurance of the Starbucks brand globally.

Consolidated operating margin increased 140 basis points from the prior year to 15.8%, primarily driven by sales leverage and in-store operational efficiencies.

These increases were partially offset by increased investments in store partner wages and benefits, as well as higher general and administrative expenses, primarily in support of Reinvention.

We anticipate these headwinds experienced in the first quarter of fiscal 2024, although transitory, may continue to impact the balance of our fiscal year.

Despite these transitory headwinds, we remain confident in our long-term growth and durable business model, as our Triple Shot Reinvention is unlocking multiple levers to drive balanced earnings growth, as evidenced in our first quarter of fiscal 2024 results.

Starbucks results for the second quarter of fiscal 2024 reflect a complex operating environment globally, including softening consumer sentiment, a pervasive inflationary environment, and disruptions due to multiple international conflicts.

However, efficiencies continue to be realized from the strategies underpinning Reinvention, leading to tangible financial benefits, which counterbalance broader headwinds.

During the second quarter of fiscal 2024, consolidated net revenues decreased 2% to $8.6 billion compared to $8.7 billion in the second quarter of fiscal 2023, primarily driven by a decline in global comparable store sales and unfavorable foreign currency fluctuations, partially offset by incremental revenues from net new company-operated store openings over the past 12 months.

During the quarter ended March 31, 2024, our global comparable store sales declined 4%, primarily driven by a 3% decline in the U.S.

market and a 6% decline internationally.

Consolidated operating margin decreased 240 basis points from the prior year to 12.8%, primarily driven by deleverage, increased investments in store partner wages and benefits, increased promotional activity, lapping the gain from the sale of our Seattle’s Best Coffee brand in the second quarter of fiscal 2023, and higher general and administrative expenses, primarily in support of Reinvention.

These decreases were partially offset by strategic pricing and in-store operational efficiencies.

We anticipate the complex global operating environment and the related headwinds we experienced in the first half of fiscal 2024 may continue to impact the balance of our fiscal year.

Despite these challenges, we have many strengths to build upon, including our global brand, our loyal global customer base, strong new store performance, an innovative pipeline of products, and our continued execution against Reinvention-related operational efficiencies.

Our Triple Shot Reinvention strategy is progressing, enhancing our capabilities and giving us continued confidence in our long-term growth and durable business model.

Results of Operations (in millions)

Quarter Ended

Quarter Ended Two Quarters Ended

Company-operated stores $ 7,052.6 $ 7,142.3 $ (89.7) (1.3) % $ 14,807.9 $ 14,225.7 $ 582.2 4.1 %

2 unchanged sentences

Total net revenues $ 8,563.0 $ 8,719.8 $ (156.8) (1.8) % $ 17,988.3 $ 17,433.8 $ 554.5 3.2 %

For the quarter ended December 31, 2023 compared with the quarter ended January 1, 2023

Total net revenues for the first quarter of fiscal 2024 increased $711 million, primarily due to higher revenues from company-operated stores ($672 million).

The growth of company-operated stores revenue was driven by a 5% increase in comparable store sales ($369 million), attributable to a 3% increase in comparable transactions and a 2% increase in average ticket.

Also contributing to company-operated stores revenue were incremental revenues from 1,475 net new Starbucks company-operated

stores, or an 8% increase, over the past 12 months ($326 million).

Partially offsetting these increases was unfavorable foreign currency translation ($30 million).

Licensed stores revenue increased $73 million contributing to the increase in total net revenues, driven by higher product and equipment sales to and royalty revenues from our licensees ($64 million), primarily driven by revenues from 942 net new licensed store openings, or a 5% increase, over the past 12 months.

Other revenues decreased $33 million, primarily due to a decline in revenue in the Global Coffee Alliance following the sale of our Seattle’s Best Coffee brand to Nestlé in the second quarter of fiscal 2023 ($19 million) and lower revenue in our global ready-to-drink business ($11 million).

For the quarter ended March 31, 2024 compared with the quarter ended April 2, 2023

Total net revenues for the second quarter of fiscal 2024 decreased $157 million, primarily due to lower revenues from company-operated stores ($90 million).

The decrease in revenues from company-operated stores was driven by a 4% decrease in comparable store sales ($253 million), attributable to a 6% decrease in comparable transactions and a 2% increase in average ticket.

Also contributing to company-operated stores revenue were unfavorable foreign currency translation impacts ($91 million).

Partially offsetting these decreases were incremental revenues from 1,454 net new company-operated stores, or an 8% increase, over the past 12 months ($255 million).

Licensed stores revenue decreased $15 million, primarily driven by lower product and equipment sales to and royalty revenues from our licensees ($11 million) and unfavorable foreign currency translation impacts ($7 million).

Other revenues decreased $52 million, primarily due to a decline in revenue in the Global Coffee Alliance ($59 million) following the sale of our Seattle’s Best Coffee brand to Nestlé in the second quarter of fiscal 2023 as well as product SKU optimization.

For the two quarters ended March 31, 2024 compared with the two quarters ended April 2, 2023

Total net revenues for the first two quarters of fiscal 2024 increased $555 million, primarily due to higher revenues from company-operated stores ($582 million).

The growth of company-operated stores revenue was driven by incremental revenues from 1,454 net new company-operated stores, or an 8% increase, over the past 12 months ($582 million).

Also contributing to the growth of company-operated stores revenue was a 1% increase in comparable store sales ($117 million), attributable to a 2% increase in average ticket, partially offset by a 1% decrease in comparable transactions.

Partially offsetting these increases to company-operated stores revenue were unfavorable foreign currency translation impacts ($121 million).

Licensed stores revenue increased $58 million, driven by higher product and equipment sales to, and royalty revenues from, our licensees ($51 million), primarily driven by revenues from 863 net new licensed store openings, or a 5% increase, over the past 12 months.

Other revenues decreased $85 million, primarily due to a decline in revenue in the Global Coffee Alliance ($78 million) following the sale of our Seattle’s Best Coffee brand to Nestlé in the second quarter of fiscal 2023 as well as product SKU optimization.

Operating Expenses

Quarter Ended

Quarter Ended Two Quarters Ended

Change Mar 31,

Total Net Revenues As a % of

Total Net Revenues

7 unchanged sentences

Income from equity investees 68.0 51.4 16.6 0.8 0.6 123.8 109.2 14.6 0.7 0.6

Gain from sale of assets — 91.3 (91.3) — 1.0 — 91.3 (91.3) — 0.5

Operating income $ 1,098.9 $ 1,327.5 $ (228.6) 12.8 % 15.2 % $ 2,584.3 $ 2,580.7 $ 3.6 14.4 % 14.8 %

Store operating expenses as a % of company-operated stores revenue 52.8 % 50.9 % 51.2 % 51.3 %

For the quarter ended December 31, 2023 compared with the quarter ended January 1, 2023

Product and distribution costs as a percentage of total net revenues decreased 60 basis points for the first quarter of fiscal 2024, primarily due to the impact of increased sales from pricing.

Store operating expenses as a percentage of total net revenues decreased 120 basis points for the first quarter of fiscal 2024.

Store operating expenses as a percentage of company-operated stores revenue decreased 200 basis points, primarily due to in-store operational efficiencies (approximately 210 basis points), and sales leverage (approximately 160 basis points).

These were partially offset by increased investments in store partner wages and benefits (approximately 130 basis points).

Other operating expenses increased $21 million, primarily due to support costs in wages and benefits and marketing for our growing licensed markets.

Depreciation and amortization expenses as a percentage of total net revenues increased 10 basis points, primarily due to higher capital investments in support of our retail stores.

General and administrative expenses increased $67 million, primarily due to investments in partner wages and benefits ($33 million) and incremental investments in technology in support of our Reinvention ($32 million).

The combination of these changes resulted in an overall increase in operating margin of 140 basis points for the first quarter of fiscal 2024.

For the quarter ended March 31, 2024 compared with the quarter ended April 2, 2023

Product and distribution costs as a percentage of total net revenues decreased 120 basis points for the second quarter of fiscal 2024, primarily due to the impact of increased sales from pricing (approximately 60 basis points) and a reduction in supply chain costs (approximately 50 basis points).

Store operating expenses as a percentage of total net revenues increased 180 basis points for the second quarter of fiscal 2024.

Store operating expenses as a percentage of company-operated stores revenue increased 190 basis points, primarily due to increased investments in store partner wages and benefits (approximately 160 basis points), deleverage (approximately 110 basis points), and increased promotional activity (approximately 60 basis points).

These increases were partially offset by in-store operational efficiencies (approximately 180 basis points).

Other operating expenses increased $7 million, primarily due to support costs for our growing licensed markets.

Depreciation and amortization expenses as a percentage of total net revenues increased 40 basis points, primarily due to deleverage.

General and administrative expenses increased $34 million, primarily due to certain proxy solicitation and advisory services costs ($30 million) and incremental investments in technology ($22 million).

These increases were partially offset by the lapping of a donation to the Starbucks Foundation made in the second quarter of fiscal 2023 ($15 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.

Income from equity investees increased $17 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 240 basis points for the second quarter of fiscal 2024.

For the two quarters ended March 31, 2024 compared with the two quarters ended April 2, 2023

Product and distribution costs as a percentage of total net revenues decreased 90 basis points for the first two quarters of fiscal 2024, primarily due to the impact of increased sales from pricing (approximately 60 basis points).

Store operating expenses as a percentage of total net revenues increased 20 basis points for the first two quarters of fiscal 2024.

Store operating expenses as a percentage of company-operated stores revenue decreased 10 basis points, primarily due to in-store operational efficiencies (approximately 210 basis points), partially offset by increased investments in store partner wages and benefits (approximately 150 basis points), and increased promotional activity (approximately 50 basis points).

Other operating expenses increased $28 million, primarily due to support costs for our growing licensed markets.

Depreciation and amortization expenses as a percentage of total net revenues increased 30 basis points, primarily due to deleverage.

General and administrative expenses increased $101 million, primarily due to incremental investments in technology ($52 million), investments in partner wages and benefits ($48 million), and certain proxy solicitation and advisory services costs ($30 million).

These increases were partially offset by the lapping of a donation to the Starbucks Foundation made in the second quarter of fiscal 2023 ($15 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.

Income from equity investees increased $15 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 40 basis points for the first two quarters of fiscal 2024.

Other Income and Expenses

Quarter Ended

Quarter Ended Two Quarters Ended

Change Mar 31,

As a % of Total

Net Revenues As a % of Total

Operating income $ 1,098.9 $ 1,327.5 $ (228.6) 12.8 % 15.2 % $ 2,584.3 $ 2,580.7 $ 3.6 14.4 % 14.8 %

7 unchanged sentences

Effective tax rate including noncontrolling interests 22.2 % 24.9 % 24.2 % 24.8 %

For the quarter ended December 31, 2023 compared with the quarter ended January 1, 2023

For the quarter ended March 31, 2024 compared with the quarter ended April 2, 2023

Interest income and other, net increased $16 million and interest expense increased $4 million, both primarily due to higher interest rates in the current year.

The effective tax rate for the quarter ended December 31, 2023 was 25.7% compared to 24.6% for the same period in fiscal 2023.

The increase was primarily due to the accrual of foreign withholding taxes related to the current-year earnings of certain foreign subsidiaries (approximately 80 basis points).

The effective tax rate for the quarter ended March 31, 2024 was 22.2% compared to 24.9% for the same period in fiscal 2023.

The decrease was primarily due to electing an alternative tax approach in a certain foreign jurisdiction that resulted in a tax benefit in the second quarter of fiscal 2024 (approximately 300 basis points).

For the two quarters ended March 31, 2024 compared with the two quarters ended April 2, 2023

Interest income and other, net increased $38 million and interest expense increased $15 million, both primarily due to higher interest rates in the current year.

The effective tax rate for the first two quarters ended March 31, 2024 was 24.2% compared to 24.8% for the same period in fiscal 2023.

The decrease was due to electing an alternative tax approach in a certain foreign jurisdiction that resulted in a tax benefit in the second quarter of fiscal 2024 (approximately 130 basis points), partially offset by the accrual of foreign withholding taxes related to the current year earnings of certain foreign subsidiaries (approximately 60 basis points).

Segment Information

1 unchanged sentence

North America

Quarter Ended

Quarter Ended Two Quarters Ended

Change Mar 31,

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 53.1 % 51.4 % 51.1 % 51.5 %

For the quarter ended December 31, 2023 compared with the quarter ended January 1, 2023

North America total net revenues for the first quarter of fiscal 2024 increased $569 million, or 9%, primarily due to a 5% increase in comparable store sales ($288 million) driven by a 4% increase in average ticket, primarily due to annualization of pricing, and a 1% increase in comparable transactions.

Also contributing to revenue growth were the performance of net new company-operated store openings over the past 12 months ($222 million) and higher product and equipment sales to and royalty revenues from our licensees ($49 million).

For the quarter ended March 31, 2024 compared with the quarter ended April 2, 2023

North America total net revenues for the second quarter of fiscal 2024 were nearly flat when compared to the prior year period, primarily due to a 3% decrease in comparable store sales ($178 million) driven by a 7% decrease in comparable transactions, partially offset by a 4% increase in average ticket, primarily due to annualization of pricing and a mix shift to cold beverages.

This comparable store sales decrease was partially offset by performance of net new company-operated store openings over the past 12 months ($160 million), as well as higher product and equipment sales to, and royalty revenues from, our licensees ($14 million).

Operating Margin

North America operating income for the first quarter of fiscal 2024 increased 25% to $1.5 billion, compared to $1.2 billion in the first quarter of fiscal 2023.

Operating margin increased 290 basis points to 21.4%, primarily due to in-store operational efficiencies (approximately 240 basis points) and sales leverage (approximately 180 basis points), partially offset by increased investments in store partner wages and benefits (approximately 120 basis points).

North America operating income for the second quarter of fiscal 2024 decreased 6% to $1.1 billion, compared to $1.2 billion in the second quarter of fiscal 2023.

Operating margin decreased 110 basis points to 18.0%, primarily due to deleverage (approximately 190 basis points), increased investments in store partner wages and benefits (approximately 140 basis points), and increased promotional activity (approximately 90 basis points), partially offset by strategic pricing (approximately 200 basis points) and in-store operational efficiencies (approximately 180 basis points).

For the two quarters ended March 31, 2024 compared with the two quarters ended April 2, 2023

North America total net revenues for the first two quarters of fiscal 2024 increased $569 million, or 4%, primarily due to net new company-operated store openings over the past 12 months ($382 million) and a 1% increase in comparable store sales ($110 million) driven by a 4% increase in average ticket, primarily due to annualization of pricing.

This was partially offset by a 3% decrease in comparable transactions.

Also contributing to these increases were higher product and equipment sales to, and royalty revenues from, our licensees ($63 million).

Operating Margin

North America operating income for the first two quarters of fiscal 2024 increased 10% to $2.7 billion, compared to $2.4 billion in the first two quarters of fiscal 2023.

Operating margin increased 100 basis points to 19.8%, primarily driven by in-store operational efficiencies (approximately 220 basis points) and strategic pricing (approximately 180 basis points), partially offset by increased investments in store partner wages and benefits (approximately 130 basis points) and increased promotional activity (approximately 70 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 51.7 % 48.9 % 51.5 % 50.5 %

For the quarter ended December 31, 2023 compared with the quarter ended January 1, 2023

International total net revenues for the first quarter of fiscal 2024 increased $166 million, or 10%, primarily due to 1,016 net new Starbucks company-operated stores, or a 12% increase over the past 12 months ($104 million), as well as a 7% increase in comparable store sales ($81 million) driven by an 11% increase in customer transactions, primarily attributable to lapping prior-year impacts from COVID-19 pandemic related disruptions in China.

These increases were partially offset by unfavorable foreign currency translation ($30 million).

Also contributing to the increase in revenue was growth related to 851 net new licensed store openings, an 8% increase over the past 12 months, partially offset by unfavorable impacts related to certain headwinds.

For the quarter ended March 31, 2024 compared with the quarter ended April 2, 2023

International total net revenues for the second quarter of fiscal 2024 decreased $98 million, or 5%, primarily due to unfavorable foreign currency translation impacts ($102 million), as well as a 6% decline in comparable store sales ($75 million), driven by a 3% decline in comparable transactions and a 3% decline in average ticket.

Also contributing to the decline in international total net revenues were lower product and equipment sales to, and royalty revenues from, our licensees ($25 million), largely driven

by disruptions due to multiple international conflicts.

These decreases were partially offset by 974 net new company-operated store openings, or a 12% increase, over the past 12 months ($95 million).

Operating Margin

International operating income for the first quarter of fiscal 2024 increased to $242 million, compared to $240 million in the first quarter of fiscal 2023.

Operating margin decreased 120 basis points to 13.1%, primarily due to investments in store partner wages and benefits (approximately 130 basis points), business mix shift toward company-operated stores (approximately 120 basis points), and strategic investments (approximately 100 basis points).

These decreases were partially offset by sales leverage (approximately 300 basis points).

International operating income for the second quarter of fiscal 2024 decreased to $234 million, compared to $315 million in the second quarter of fiscal 2023.

Operating margin decreased 370 basis points to 13.3%, primarily due to increased promotional activity (approximately 220 basis points), increased investments in store partner wages and benefits (approximately 130 basis points), and sales mix shift (approximately 90 basis points), partially offset by pricing in certain markets (approximately 100 basis points).

For the two quarters ended March 31, 2024 compared with the two quarters ended April 2, 2023

International total net revenues for the first two quarters of fiscal 2024 increased $69 million, or 2%, primarily due to 974 net new company-operated store openings, or a 12% increase, over the past 12 months ($199 million).

This increase was partially offset by unfavorable foreign currency translation impacts ($130 million).

Operating Margin

International operating income for the first two quarters of fiscal 2024 decreased to $475 million, compared to $555 million for the same period in fiscal 2023.

Operating margin decreased 250 basis points to 13.2%, primarily due to increased promotional activity (approximately 190 basis points), increased investments in store partner wages and benefits (approximately 120 basis points), and sales mix shift (approximately 80 basis points).

These decreases were partially offset by leverage (approximately 120 basis points) and pricing in certain markets (approximately 70 basis points).

Channel Development

Quarter Ended

Quarter Ended Two Quarters Ended

Change Mar 31,

As a % of Channel Development

Total Net Revenues As a % of Channel Development

Total Net Revenues

2 unchanged sentences

Other operating expenses 15.2 12.8 2.4 3.6 2.7 28.0 25.8 2.2 3.2 2.7

Depreciation and amortization expenses — — — — — — 0.1 (0.1) — 0.0

General and administrative expenses 1.9 2.1 (0.2) 0.5 0.4 4.2 4.1 0.1 0.5 0.4

1 unchanged sentence

Income from equity investees 67.8 50.6 17.2 16.2 10.5 123.5 108.0 15.5 14.3 11.3

Gain from sale of assets — 91.3 (91.3) — 19.0 — 91.3 (91.3) — 9.5

Operating income $ 216.3 $ 262.1 $ (45.8) 51.7 % 54.5 % $ 426.0 $ 488.4 $ (62.4) 49.2 % 50.9 %

For the quarter ended December 31, 2023 compared with the quarter ended January 1, 2023

Channel Development total net revenues for the first quarter of fiscal 2024 decreased $30 million, or 6%, primarily due to a decline in revenue in the Global Coffee Alliance following the sale of our Seattle’s Best Coffee brand to Nestlé in the second quarter of fiscal 2023 ($19 million) and lower revenue in our global ready-to-drink business ($11 million).

For the quarter ended March 31, 2024 compared with the quarter ended April 2, 2023

Channel Development total net revenues for the second quarter of fiscal 2024 decreased $63 million, or 13%, primarily due to a decline in revenue in the Global Coffee Alliance ($59 million), following the sale of our Seattle’s Best Coffee brand to Nestlé in the second quarter of fiscal 2023 as well as product SKU optimization.

Operating Margin

Channel Development operating income for the first quarter of fiscal 2024 decreased 7% to $210 million, compared to $226 million in the first quarter of fiscal 2023.

Operating margin decreased 50 basis points to 46.8%, primarily driven by product costs related to the Global Coffee Alliance (approximately 430 basis points), partially offset by business mix shift (approximately 370 basis points).

Channel Development operating income for the second quarter of fiscal 2024 decreased 17% to $216 million, compared to $262 million in the second quarter of fiscal 2023.

Operating margin decreased 280 basis points to 51.7%, primarily driven by lapping the gain from the sale of our Seattle’s Best Coffee brand in the second quarter of fiscal 2023 (approximately 1,900 basis points), partially offset by growth in our North American Coffee Partnership joint venture income (approximately 570 basis points), mix shift (approximately 510 basis points), lapping impairment charges against certain manufacturing assets in the second quarter of fiscal 2023 (approximately 350 basis points), and lower product costs related to the Global Coffee Alliance (approximately 240 basis points).

For the two quarters ended March 31, 2024 compared with the two quarters ended April 2, 2023

Channel Development total net revenues for the first two quarters of fiscal 2024 decreased $93 million, or 10%, primarily due to a decline in revenue in the Global Coffee Alliance ($78 million), primarily following the sale of our Seattle’s Best Coffee brand to Nestlé in the second quarter of fiscal 2023 as well as product SKU optimization, and lower revenue in our global ready-to-drink business ($21 million).

Operating Margin

Channel Development operating income for the first two quarters of fiscal 2024 decreased 13% to $426 million, compared to $488 million for the same period in fiscal 2023.

Operating margin decreased 170 basis points to 49.2%, primarily due to lapping the gain from the sale of our Seattle’s Best Coffee brand in the second quarter of fiscal 2023 (approximately 950 basis points), partially offset by mix shift (approximately 440 basis points) and growth in our North American Coffee Partnership joint venture income (approximately 300 basis points).

Corporate and Other

Quarter Ended

Quarter Ended Two Quarters Ended

Net revenues:

2 unchanged sentences

Product and distribution costs 8.6 1.5 7.1 473.3 19.7 6.3 13.4 212.7

Other operating expenses 0.1 — 0.1 nm

Other operating expenses 0.5 0.1 0.4 400.0 0.6 0.1 0.5 500.0

Depreciation and amortization expenses 30.5 29.3 1.2 4.1 61.4 58.1 3.3 5.7

General and administrative expenses 467.4 439.7 27.7 6.3 922.2 835.8 86.4 10.3

Restructuring and impairments — 0.7 (0.7) nm

Restructuring and impairments — 0.3 (0.3) nm — 1.1 (1.1) nm

Total operating expenses 507.0 470.9 36.1 7.7 1,003.9 901.4 102.5 11.4

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 December 31, 2023 compared with the quarter ended January 1, 2023

Corporate and Other operating loss increased by 14% to $487 million for the first quarter of fiscal 2024 compared to $426 million for the first quarter of fiscal 2023.

This increase was primarily driven by incremental investments in technology in support of our Reinvention ($30 million) and higher partner wages and benefits ($17 million).

For the quarter ended March 31, 2024 compared with the quarter ended April 2, 2023

Corporate and Other operating loss increased by 7% to $500 million for the second quarter of fiscal 2024 compared to $467 million for the second quarter of fiscal 2023.

This increase was primarily driven by certain proxy solicitation and advisory services costs ($30 million) and incremental investments in technology in support of Reinvention ($22 million).

These increases were partially offset by the lapping of a donation to the Starbucks Foundation made in the second quarter of fiscal 2023 ($15 million).

For the two quarters ended March 31, 2024 compared with the two quarters ended April 2, 2023

Corporate and Other operating loss increased to $986 million for the first two quarters of fiscal 2024, or 10%, compared to $893 million for the same period in fiscal 2023.

This increase was primarily driven by incremental investments in technology in support of Reinvention ($52 million), certain proxy solicitation and advisory services costs ($30 million), and investments in partner wages and benefits ($28 million).

These increases were partially offset by the lapping of a donation to the Starbucks Foundation made in the second quarter of fiscal 2023 ($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 were $3.6 billion as of December 31, 2023 and $4.2 billion as of October 1, 2023.

Our cash and investments were $3.4 billion as of March 31, 2024 and $4.2 billion as of October 1, 2023.

We actively manage our cash and investments in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, fund 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 (domestic and foreign), and commercial paper, as well as principal-protected structured deposits.

As of December 31, 2023, approximately $2.4 billion of cash and short-term investments were held in foreign subsidiaries.

As of March 31, 2024, approximately $2.0 billion of cash and short-term investments were held in foreign subsidiaries.

Borrowing Capacity

9 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 December 31, 2023, we were in compliance with all applicable covenants.

No amounts were outstanding under our 2021 credit facility as of December 31, 2023 or October 1, 2023.

As of March 31, 2024, we were in compliance with all applicable covenants.

No amounts were outstanding under our 2021 credit facility as of March 31, 2024 or October 1, 2023.

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 December 31, 2023, we had $300.0 million in borrowings

outstanding under our commercial paper program.

As of October 1, 2023, we had no borrowings outstanding under this program.

Our total available contractual borrowing capacity for general corporate purposes was $2.7 billion as of the end of our first quarter of fiscal 2024.

No amounts were outstanding under our commercial paper program as

of March 31, 2024 and October 1, 2023.

Our total available contractual borrowing capacity for general corporate purposes was $3.0 billion as of the end of our second quarter of fiscal 2024.

Credit Facilities in Japan

4 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 December 31, 2023, we had ¥7.0 billion, or $49.5 million, of borrowings outstanding under these credit facilities.

As of March 31, 2024, we had ¥5.0 billion, or $33.0 million, of borrowings outstanding under these credit facilities.

As of October 1, 2023, we had ¥5.0 billion, or $33.5 million, of borrowings outstanding under these credit facilities.

1 unchanged sentence

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 December 31, 2023, we were in compliance with all applicable covenants.

As of March 31, 2024, 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, 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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Any foreign earnings that are not indefinitely reinvested may be repatriated at management’s discretion.

In anticipation of repatriation of current-year earnings of certain foreign subsidiaries, we accrued approximately $10 million for foreign withholding taxes during the first quarter of fiscal year 2024.

During the first quarter of fiscal 2024, our Board of Directors approved a quarterly cash dividend to shareholders of $0.57 per share to be paid on February 23, 2024 to shareholders of record as of the close of business on February 9, 2024.

During the quarter ended December 31, 2023, we repurchased 12.8 million shares of common stock for $1,250.1 million on the open market.

As of December 31, 2023, 29.8 million shares remained available for repurchase under current authorizations.

In anticipation of repatriation of current year earnings of certain foreign subsidiaries, we accrued approximately $11 million for foreign withholding taxes during the first two quarters of fiscal year 2024.

During the second quarter of fiscal 2024, our Board of Directors approved a quarterly cash dividend to shareholders of $0.57 per share to be paid on May 31, 2024 to shareholders of record as of the close of business on May 17, 2024.

During the two quarters ended March 31, 2024, we repurchased 12.8 million shares of common stock for $1,250.1 million on the open market.

As of March 31, 2024, 29.8 million shares remained available for repurchase under current authorizations.

Other than normal operating expenses, cash requirements for the remainder of fiscal 2024 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.

Net cash provided by operating activities was $2.4 billion for the first quarter of fiscal 2024, compared to $1.6 billion for the same period in fiscal 2023.

The change was primarily due to an increase in net cash provided by changes in operating assets and liabilities and higher net earnings during the period.

Net cash used in investing activities totaled $568.8 million for the first quarter of fiscal 2024, compared to $279.3 million for the same period in fiscal 2023.

The change was primarily due to an increase in purchases of investments and higher capital expenditures.

Net cash used in financing activities for the first quarter of fiscal 2024 totaled $2.4 billion, compared to $1.0 billion for the same period in fiscal 2023.

The change was primarily due to an increase in share repurchase activities and repayments of debt, partially offset by proceeds from issuance of commercial paper.

Net cash provided by operating activities was $2.9 billion for the first two quarters of fiscal 2024, compared to $2.4 billion for the same period in fiscal 2023.

The change was primarily due to an increase in net cash provided by changes in operating assets and liabilities, an increase in non-cash lease costs, and lapping the gain on sale of assets from the prior year sale of Seattle’s Best Coffee brand to Nestlé.

Net cash used in investing activities totaled $1.3 billion for the first two quarters of fiscal 2024, compared to $907.0 million for the same period in fiscal 2023.

The change was primarily due to an increase in capital expenditures, purchases of investments, and lapping the proceeds from sale of assets from the prior year sale of Seattle’s Best Coffee brand to Nestlé, partially offset by an increase in maturities and calls of investments.

Net cash used in financing activities for the first two quarters of fiscal 2024 totaled $2.4 billion, compared to $1.3 billion for the same period in fiscal 2023.

The change was primarily due to an increase in repayments of debt and an increase in share repurchase activities, partially offset by net proceeds from issuances of debt.

Commodity Prices, Availability and General Risk Conditions

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

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

However, since revenues from Starbucks Cards are recognized upon redemption and not when cash is loaded onto the Starbucks Card, the impact of seasonal fluctuations on the consolidated statements of earnings is much less pronounced.

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

However, since revenues from Starbucks Cards are recognized upon redemption and not when cash is loaded onto the Starbucks Cards, the impact of seasonal fluctuations on the consolidated statements of earnings is much less pronounced.

As a result of moderate seasonal fluctuations, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

9 unchanged sentences

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