What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-30 compared with 2024-04-30 · 111 added, 118 removed, 246 unchanged (48% of the section changed)

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

• the impact of adverse weather conditions or natural disasters;

• the impact of significant increases in logistics costs;

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• unfavorable global or regional economic conditions and related economic slowdowns or recessions, low consumer confidence, high unemployment, weak credit or capital markets, budget deficits, burdensome government debt, austerity measures, higher interest rates, higher taxes, political instability, higher inflation, or deflation;

• inherent risks of operating a global business including geopolitical instability;

• inherent risks of operating a global business including geopolitical instability, local labor policies and conditions, including labor strikes and work stoppages, protectionist trade policies, or economic or trade sanctions, and compliance with local trade practices and other regulations;

• failure to attract or retain key executive or partner talent or successfully transition executives;

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• 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 data protection laws;

• 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;

• our environmental, community, and farmer promises and any reaction related thereto, such as the rise in opposition to “ ESG ” and inclusion and diversity efforts;

• risks associated with acquisitions, dispositions, business partnerships, or investments – such as acquisition integration, termination difficulties or costs, or impairment in recorded value;

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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.

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.

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

As of March 31, 2024, Starbucks had more than 38,900 company-operated and licensed stores, an increase of 6% from the prior year.

As of June 30, 2024, Starbucks had more than 39,400 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.

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

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.

Starbucks results for the third quarter of fiscal 2024 reflect progress against our action plans to drive traffic to our stores and realized in-store and out-of-store efficiencies, which helped partially offset the impact of continued broader headwinds in a challenging global operating environment, including softening consumer sentiment, a pervasive inflationary environment, and disruptions due to multiple international conflicts.

During the third quarter of fiscal 2024, consolidated net revenues decreased 1% to $9.1 billion compared to $9.2 billion in the third 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 June 30, 2024, our global comparable store sales declined 3%, primarily driven by a 2% decline in the U.S.

market and a 7% 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.

Consolidated operating margin decreased 60 basis points from the prior year to 16.7%, primarily driven by increased promotional activity, increased investments in store partner wages and benefits, and deleverage, partially offset by strategic pricing and in-store operational efficiencies.

Further, our efficiency focus extended beyond our stores, and we realized meaningful out-of-store efficiencies during the quarter, largely within our supply chain.

Despite continued complex macroeconomic challenges across multiple markets and regions, we are encouraged by our progress.

In the balance of the fiscal year, we anticipate continued progress on our action plans to increase demand across dayparts by introducing innovative and exciting beverage and food offerings to reach customers more broadly, while expanding our efficiency efforts and disciplined operational execution.

Results of Operations (in millions)

Quarter Ended Two Quarters Ended

Quarter Ended Three Quarters Ended

Company-operated stores $ 7,516.0 $ 7,556.7 $ (40.7) (0.5) % $ 22,323.8 $ 21,782.4 $ 541.4 2.5 %

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Total net revenues $ 9,113.9 $ 9,168.3 $ (54.4) (0.6) % $ 27,102.3 $ 26,602.0 $ 500.3 1.9 %

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).

For the quarter ended June 30, 2024 compared with the quarter ended July 2, 2023

Total net revenues for the third quarter of fiscal 2024 decreased $54 million, primarily due to lower revenues from company-operated stores ($41 million).

The decrease in revenues from company-operated stores was driven by a 3% decrease in

comparable store sales ($227 million), attributable to a 5% decrease in comparable transactions, partially offset by a 2% increase in average ticket.

Also contributing to the decrease in company-operated stores revenue were unfavorable foreign currency translation impacts ($101 million).

Partially offsetting these decreases were incremental revenues from 1,434 net new company-operated stores, or an 8% increase, over the past 12 months ($290 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 decreased $7 million, primarily driven by lower product and equipment sales to, and royalty revenues from, our licensees in our International segment ($23 million) and unfavorable foreign currency translation impacts ($10 million), partially offset by higher product and equipment sales to, and royalty revenues from, our licensees in North America ($19 million).

Other revenues decreased $7 million, primarily due to a decline in revenue in the Global Coffee Alliance ($21 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, partially offset by growth in our global ready-to-drink business ($9 million).

For the three quarters ended June 30, 2024 compared with the three quarters ended July 2, 2023

Total net revenues for the first three quarters of fiscal 2024 increased $500 million, primarily due to higher revenues from company-operated stores ($541 million), which were driven by incremental revenues from 1,434 net new company-operated stores, or an 8% increase, over the past 12 months ($871 million).

Partially offsetting this increase were unfavorable foreign currency translation impacts ($222 million) and a 1% decrease in comparable store sales ($110 million), attributable to a 3% decrease in comparable transactions, partially offset by a 2% increase in average ticket.

Licensed stores revenue increased $51 million, driven by higher product and equipment sales to, and royalty revenues from, our licensees ($48 million), primarily driven by revenues from 821 net new licensed store openings, or a 5% increase, over the past 12 months.

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Operating Expenses

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Total Net Revenues As a % of

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Store operating expenses as a % of company-operated stores revenue 50.9 % 48.9 % 51.1 % 50.5 %

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.

For the quarter ended June 30, 2024 compared with the quarter ended July 2, 2023

Product and distribution costs as a percentage of total net revenues decreased 110 basis points for the third quarter of fiscal 2024, primarily due to a reduction in supply chain costs (approximately 80 basis points).

Store operating expenses as a percentage of total net revenues increased 170 basis points for the third quarter of fiscal 2024.

Store operating expenses as a percentage of company-operated stores revenue increased 200 basis points, primarily due to increased investments in store partner wages and benefits (approximately 200 basis points) and increased promotional activity (approximately 100 basis points), partially offset by in-store operational efficiencies (approximately 140 basis points).

Depreciation and amortization expenses as a percentage of total net revenues increased 50 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).

General and administrative expenses decreased $28 million, primarily due to lower performance-based compensation ($46 million) and the lapping of a donation to the Starbucks Foundation made in the third quarter of fiscal 2023 ($15 million).

These decreases were partially offset by increased investments in partner wages and benefits ($23 million) and incremental investments in technology in support of Reinvention ($23 million).

The combination of these changes resulted in an overall decrease in operating margin of 60 basis points for the third quarter of fiscal 2024.

For the three quarters ended June 30, 2024 compared with the three quarters ended July 2, 2023

Product and distribution costs as a percentage of total net revenues decreased 100 basis points for the first three quarters 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 60 basis points).

Store operating expenses as a percentage of total net revenues increased 80 basis points for the first three quarters of fiscal 2024.

Store operating expenses as a percentage of company-operated stores revenue increased 60 basis points, primarily due to increased investments in store partner wages and benefits (approximately 170 basis points) and increased promotional activity (approximately 80 basis points), partially offset by in-store operational efficiencies (approximately 190 basis points).

Other operating expenses increased $33 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).

General and administrative expenses increased $73 million, primarily due to incremental investments in technology in support of Reinvention ($75 million), increased investments in partner wages and benefits ($71 million), and certain proxy solicitation and advisory services costs ($28 million).

These increases were partially offset by lower performance-based compensation ($54 million) and the lapping of donations to the Starbucks Foundation made in fiscal 2023 ($30 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 $19 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.

The combination of these changes resulted in an overall decrease in operating margin of 60 basis points for the first three quarters of fiscal 2024.

Other Income and Expenses

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Effective tax rate including noncontrolling interests 24.8 % 22.0 % 24.4 % 23.7 %

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 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

For the quarter ended June 30, 2024 compared with the quarter ended July 2, 2023

The effective tax rate for the quarter ended June 30, 2024 was 24.8% compared to 22.0% for the same period in fiscal 2023.

The increase was primarily due to lapping the release of valuation allowances recorded against certain deferred tax assets of an international jurisdiction in the prior year (approximately 300 basis points).

For the three quarters ended June 30, 2024 compared with the three quarters ended July 2, 2023

Interest income and other, net increased $45 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).

The effective tax rate for the first three quarters ended June 30, 2024 was 24.4% compared to 23.7% for the same period in fiscal 2023.

The increase was due to lapping the release of valuation allowances recorded against certain deferred tax assets of an international jurisdiction in the prior year (approximately 120 basis points) and the accrual of foreign withholding taxes related to the current year earnings of certain foreign subsidiaries (approximately 60 basis points), partially offset by electing an alternative tax approach in a certain foreign jurisdiction that resulted in a tax benefit in the second quarter of fiscal 2024 (approximately 80 basis points).

Segment Information

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North America

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As a % of North America

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Store operating expenses as a % of company-operated stores revenue 51.0 % 49.2 % 51.1 % 50.7 %

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).

For the quarter ended June 30, 2024 compared with the quarter ended July 2, 2023

North America total net revenues for the third quarter of fiscal 2024 increased $79 million, or 1%, primarily driven by net new company-operated store growth of 5%, or 488 stores, over the past 12 months ($202 million), as well as higher product and equipment sales to, and royalty revenues from, our licensees ($19 million).

This growth was partially offset by a 2% decrease in comparable store sales ($139 million) driven by a 6% decrease in comparable transactions, partially offset by a 3% increase in average ticket, primarily due to annualization of pricing and increased beverage attach.

Operating Margin

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).

North America operating income for the third quarter of fiscal 2024 decreased 2% to $1.4 billion, compared to $1.5 billion in the third quarter of fiscal 2023.

Operating margin decreased 70 basis points to 21.0%, primarily due to increased investments in store partner wages and benefits (approximately 170 basis points), increased promotional activity (approximately 160 basis points), and deleverage (approximately 130 basis points), partially offset by strategic pricing (approximately 260 basis points) and in-store operational efficiencies (approximately 120 basis points).

For the three quarters ended June 30, 2024 compared with the three quarters ended July 2, 2023

North America total net revenues for the first three quarters of fiscal 2024 increased $648 million, or 3%, primarily driven by net new company-operated store growth of 5%, or 488 stores, over the past 12 months ($584 million) and higher product and equipment sales to, and royalty revenues from, our licensees ($82 million).

This growth was partially offset by a decline in comparable store sales ($29 million) driven by a 4% decrease in comparable transactions, partially offset by a 4% increase in average ticket, primarily due to annualization of pricing.

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).

North America operating income for the first three quarters of fiscal 2024 increased 5% to $4.1 billion, compared to $3.9 billion in the first three quarters of fiscal 2023.

Operating margin increased 40 basis points to 20.2%, primarily driven by strategic pricing (approximately 200 basis points) and in-store operational efficiencies (approximately 190 basis points), partially offset by increased investments in store partner wages and benefits (approximately 140 basis points), increased promotional activity (approximately 100 basis points), and deleverage (approximately 70 basis points).

International

Quarter Ended Two Quarters Ended

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As a % of International

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Store operating expenses as a % of company-operated stores revenue 50.5 % 47.9 % 51.1 % 49.5 %

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).

For the quarter ended June 30, 2024 compared with the quarter ended July 2, 2023

International total net revenues for the third quarter of fiscal 2024 decreased $131 million, or 7%, primarily due to unfavorable foreign currency translation impacts ($105 million), as well as a 7% decline in comparable store sales ($88 million), driven by a 4% decline in average ticket and a 3% decline in comparable transactions.

Also contributing to the decline in international total net revenues were lower product and equipment sales to, and royalty revenues from, our licensees ($23 million), largely driven by disruptions due to multiple international conflicts, partially offset by the performance of 703 net new licensed store openings

over the past 12 months.

In addition, these decreases were partially offset by net new company-operated store growth of 11%, or 946 stores, over the past 12 months ($88 million).

Operating Margin

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).

International operating income for the third quarter of fiscal 2024 decreased 23% to $288 million, compared to $375 million in the third quarter of fiscal 2023.

Operating margin decreased 340 basis points to 15.6%, primarily due to increased promotional activity (approximately 210 basis points), increased investments in store partner wages and benefits (approximately 160 basis points), and strategic investments (approximately 70 basis points), partially offset by in-store operational efficiencies (approximately 130 basis points).

For the three quarters ended June 30, 2024 compared with the three quarters ended July 2, 2023

International total net revenues for the first three quarters of fiscal 2024 decreased $62 million, or 1%, primarily due to unfavorable foreign currency translation impacts ($235 million), as well as a 2% decline in comparable store sales ($81 million) driven by a 3% decline in average ticket, partially offset by a 1% increase in comparable transactions.

Also contributing to the decline in international total net revenues were lower product and equipment sales to, and royalty revenues from, our licensees ($34 million), largely driven by disruptions due to multiple international conflicts, partially offset by the performance of 703 net new licensed store openings over the past 12 months.

In addition, these decreases were partially offset by net new company-operated store growth of 11%, or 946 stores, over the past 12 months ($287 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.

International operating income for the first three quarters of fiscal 2024 decreased 18% to $763 million, compared to $930 million for the same period in fiscal 2023.

Operating margin decreased 290 basis points to 14.0%, primarily due to increased promotional activity (approximately 200 basis points), increased investments in store partner wages and benefits (approximately 130 basis points), and sales mix shift (approximately 70 basis points).

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

These decreases were partially offset by in-store operational efficiencies (approximately 100 basis points).

Channel Development

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Operating income $ 235.2 $ 208.0 $ 27.2 53.7 % 46.3 % $ 661.2 $ 696.4 $ (35.2) 50.7 % 49.5 %

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.

For the quarter ended June 30, 2024 compared with the quarter ended July 2, 2023

Channel Development total net revenues for the third quarter of fiscal 2024 decreased $11 million, or 2%, primarily due to a decline in revenue in the Global Coffee Alliance ($21 million) from product SKU optimization as well as the sale of our Seattle’s Best Coffee brand to Nestlé in the second quarter of fiscal 2023, partially offset by higher revenue in our global ready-to-drink business ($9 million).

Operating Margin

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).

Channel Development operating income for the third quarter of fiscal 2024 increased 13% to $235 million, compared to $208 million in the third quarter of fiscal 2023.

Operating margin increased 740 basis points to 53.7%, primarily driven by mix shift (approximately 350 basis points), lower product costs related to the Global Coffee Alliance (approximately 270 basis points), and strength in our North American Coffee Partnership joint venture income (approximately 90 basis points).

For the three quarters ended June 30, 2024 compared with the three quarters ended July 2, 2023

Channel Development total net revenues for the first three quarters of fiscal 2024 decreased $103 million, or 7%, primarily due to a decline in revenue in the Global Coffee Alliance ($99 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, and lower revenue in our global ready-to-drink business ($12 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).

Channel Development operating income for the first three quarters of fiscal 2024 decreased 5% to $661 million, compared to $696 million for the same period in fiscal 2023.

Operating margin increased 120 basis points to 50.7%, primarily due to mix shift (approximately 410 basis points), strength in our North American Coffee Partnership joint venture income (approximately 240 basis points), and lapping impairment charges against certain manufacturing assets in the second quarter of fiscal 2023 (approximately 120 basis points), partially offset by lapping the gain from the sale of our Seattle’s Best Coffee brand in the second quarter of fiscal 2023 (approximately 650 basis points).

Corporate and Other

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Net revenues:

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

For the quarter ended March 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).

For the quarter ended June 30, 2024 compared with the quarter ended July 2, 2023

Corporate and Other operating loss decreased 5% to $438 million for the third quarter of fiscal 2024 compared to $463 million for the third quarter of fiscal 2023.

This decrease was primarily due to lower performance-based compensation ($35 million) and the lapping of a donation to the Starbucks Foundation made in the third quarter of fiscal 2023 ($15 million).

These decreases were partially offset by incremental investments in technology in support of Reinvention ($23 million) and increased investments in partner wages and benefits ($15 million).

For the three quarters ended June 30, 2024 compared with the three quarters ended July 2, 2023

Corporate and Other operating loss increased to $1.4 billion for the first three quarters of fiscal 2024, or 5%, compared to the same period in fiscal 2023.

This increase was primarily driven by incremental investments in technology in support of

Reinvention ($75 million), increased investments in partner wages and benefits ($43 million), and certain proxy solicitation and advisory services costs ($28 million).

These increases were partially offset by lower performance-based compensation ($46 million) and the lapping of donations to the Starbucks Foundation made in fiscal 2023 ($30 million).

Quarterly Store Data

1 unchanged sentence

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

Quarter Ended Two Quarters Ended Stores open as of

Quarter Ended Three Quarters Ended Stores open as of

North America

9 unchanged sentences

Cash and Investment Overview

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

Our cash and investments were $3.7 billion as of June 30, 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 March 31, 2024, approximately $2.0 billion of cash and short-term investments were held in foreign subsidiaries.

As of June 30, 2024, approximately $2.0 billion of cash and short-term investments were held in foreign subsidiaries.

Borrowing Capacity

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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 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.

As of June 30, 2024, we were in compliance with all applicable covenants.

No amounts were outstanding under our 2021 credit facility as of June 30, 2024 or October 1, 2023.

Commercial Paper

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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.

of June 30, 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 third quarter of fiscal 2024.

Credit Facilities in Japan

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

As of June 30, 2024, we had ¥2.0 billion, or $12.4 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 March 31, 2024, we were in compliance with all applicable covenants.

As of June 30, 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 $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.

In anticipation of repatriation of current year earnings of certain foreign subsidiaries, we accrued approximately $16 million for foreign withholding taxes during the first three quarters of fiscal year 2024.

During the third quarter of fiscal 2024, our Board of Directors approved a quarterly cash dividend to shareholders of $0.57 per share to be paid on August 30, 2024 to shareholders of record as of the close of business on August 16, 2024.

During the three quarters ended June 30, 2024, we repurchased 12.8 million shares of common stock for $1,250.1 million on the open market.

As of June 30, 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.

2 unchanged sentences

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 $2.9 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.

Net cash provided by operating activities was $4.6 billion for the first three quarters of fiscal 2024, compared to $4.1 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 depreciation and amortization, lapping the gain on sale of assets from the prior year sale of Seattle’s Best Coffee brand to Nestlé, and an increase in non-cash lease costs.

Net cash used in investing activities totaled $1.8 billion for the first three quarters of fiscal 2024, compared to $1.4 billion 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.

Net cash used in financing activities for the first three quarters of fiscal 2024 totaled $3.1 billion, compared to $2.1 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.

4 unchanged sentences

The price and availability of these commodities directly impact our results of operations, and we expect commodity prices, particularly coffee, to impact future results of operations.

For additional details, see Product Supply in Item 1 of the 10-K, as well as Risk Factors in Part I, Item 1A of the 10-K.

For additional details, see Product Supply in Part 1, Item 1 of the 10-K, as well as Risk Factors in Part I, Item 1A of the 10-K.

Seasonality and Quarterly Results

13 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