Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained herein are “forward-looking” statements within the meaning of applicable securities laws and regulations. Generally, these statements can be identified by the use of words such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “feel,” “forecast,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. By their nature, forward-looking statements involve risks, uncertainties, and other factors (many beyond our control) that could cause our actual results to differ materially from our historical experience or from our current expectations or projections. Our forward-looking statements, and the risks and uncertainties related thereto, include, but are not limited to, those described under the “Risk Factors” and “Management ’ s Discussion and Analysis of Financial Condition and Results of Operations” sections of our most recently filed 10-K and 10-Q and in other reports we file with the SEC, as well as, among others:
• our ability to preserve, grow, and leverage our brands, including the risk of negative responses by consumers (such as boycotts or negative publicity campaigns), governmental actors (such as retaliatory or threatened legislative treatment or other actions), or other third parties who object to certain actions taken or not taken by the Company, whose responses could adversely affect our brand value;
• the impact of our marketing strategies, promotional and advertising plans, pricing strategies, platforms, reformulations, innovations, or customer experience initiatives or investments;
• the costs and risks associated with, and the successful execution and effects of, our existing and any future business opportunities, expansions, initiatives, strategies, investments, and plans, including our “ Back to Starbucks ” plan;
• our ability to align our investment efforts with our strategic goals;
• changes in consumer preferences, demand, consumption, or spending behavior, including due to shifts in demographic or health and wellness trends, reduction in discretionary spending and price increases, and our ability to anticipate or react to these changes;
• the ability of our business partners, suppliers, and third-party providers to fulfill their responsibilities and commitments;
• the potential negative effects of reported incidents involving food- or beverage-borne illnesses, tampering, adulteration, contamination, or mislabeling;
• our ability to open new stores and efficiently maintain the attractiveness of our existing stores;
• our dependence on the financial performance of our North America operating segment, and our increasing dependence on certain international markets;
• our anticipated cash requirements and operating expenses, including our anticipated total capital expenditures;
• inherent risks of operating a global business, including changing conditions in our markets, local factors affecting store openings, protectionist trade or foreign investment policies, such as tariffs and other trade controls, economic or trade sanctions, compliance with local laws and other regulations, and local labor policies and conditions, including labor strikes and work stoppages;
• higher costs, lower quality, or unavailability of coffee, dairy, cocoa, energy, water, raw materials, or product ingredients;
• the potential impact on our supply chain and operations of adverse weather conditions, natural disasters, or significant increases in logistics costs;
• the ability of our supply chain to meet current or future business needs and our ability to scale and improve our forecasting, planning, production, and logistics management;
• a worsening in the terms and conditions upon which we engage with our manufacturers and source suppliers, whether resulting from broader local or global conditions or dynamics specific to our relationships with such parties;
• the impact of 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, international trade disputes, government restrictions, geopolitical instability, higher inflation, or deflation;
• failure to meet our announced guidance or market expectations and the impact thereof;
• failure to attract or retain key executive or partner talent or successfully transition executives;
• the impacts of partner investments and changes in the availability and cost of labor, including any union organizing efforts and our responses to such efforts;
• the impact of foreign currency translation, particularly a stronger U.S. dollar;
• the impact of, and our ability to respond to, substantial competition from new entrants, consolidations by competitors, and other competitive activities, such as pricing actions (including price reductions, promotions, discounting, couponing, or free goods), marketing, category expansion, product introductions, or entry or expansion in our geographic markets;
• potential impacts of climate change;
• evolving corporate governance and public disclosure regulations and expectations;
• the potential impact of activist shareholder actions or tactics;
• failure to comply with applicable laws and changing legal and regulatory requirements;
• the impact or likelihood of significant legal disputes and proceedings or government investigations;
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• potential negative effects of, and our ability to respond to, a material failure, inadequacy, or interruption of our information technology systems or those of our third-party business partners or service providers, or failure to comply with data protection laws; and
• our ability to adequately protect our intellectual property or adequately ensure that we are not infringing the intellectual property of others.
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. We are under no obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise.
This information should be read in conjunction with the unaudited consolidated financial statements and the notes included in Item 1 of Part I of this 10-Q and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contained in the 10-K.
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Introduction and Overview
Starbucks is the premier roaster, marketer, and retailer of specialty coffee globally, with a presence in 88 markets worldwide. As of March 30, 2025, Starbucks had more than 40,700 company-operated and licensed stores, an increase of 5% 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.
We have three reportable operating segments: 1) North America, which is inclusive of the U.S. and Canada; 2) International, which is inclusive of China, Japan, Asia Pacific, Europe, Middle East, Africa, Latin America, and the Caribbean; and 3) Channel Development. Unallocated corporate expenses are reported within Corporate and Other.
We believe our financial results and long-term growth model will continue to be driven by new store openings, comparable store sales, and operating margin management, underpinned by disciplined capital allocation. We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies. Throughout this MD&A, we commonly discuss the following key operating metrics:
• New store openings and store count
• Comparable store sales
• Operating margin
Comparable store sales represents the percentage change in sales in one period from the same prior year period for company-operated stores open for 13 months or longer and excludes the impact of foreign currency translation. We analyze comparable store sales on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements. Stores that are temporarily closed or operating at reduced hours remain in comparable store sales while stores identified for permanent closure have been removed.
Our fiscal year ends on the Sunday closest to September 30. Fiscal 2025 and 2024 include 52 weeks. 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 2025 showed continued early progress on our “Back to Starbucks” strategy, as we focus on future growth and stronger returns on invested capital. During the second quarter of fiscal 2025, consolidated net revenues increased 2% to $8.8 billion compared to $8.6 billion in the second quarter of fiscal 2024, primarily driven by incremental revenues from net new company-operated store openings over the past 12 months, partially offset by unfavorable foreign currency translation impacts and a decrease in global comparable store sales. During the quarter ended March 30, 2025, our global comparable store sales declined 1%, primarily driven by a 2% decline in the U.S. market, partially offset by a 2% improvement internationally. Specific to the U.S. market, the decrease in comparable store sales was driven by a 4% decrease in comparable transactions, partially offset by a 3% increase in average ticket, primarily due to annualization of pricing and fewer discounts in the current year. Consolidated operating margin contracted 590 basis points from the prior year to 6.9%, primarily driven by deleverage, additional labor, largely in support of “Back to Starbucks,” and restructuring costs related to simplifying our global support organization.
We expect that the balance of this fiscal year will bring some challenges as we navigate a dynamic macroeconomic environment, including tariffs and volatile coffee prices. In each case, we are actively monitoring and taking actions where necessary to mitigate potential financial impacts, including further diversifying and redirecting coffee shipments to minimize tariffs, and, with respect to shifting coffee prices, opportunistically building our supply and securing pricing. We are also evaluating our global store portfolio, new store pipeline, and operations, which may result in additional restructuring charges in the near term. Going forward, we will focus on greater new store returns and enhancing the coffeehouse experience for both our partners and customers, while also reducing new store build costs. Despite the challenging macroeconomic environment, we continue to feel confident in our “Back to Starbucks” strategy and will continue making intentional investments to stabilize the business and return to long-term, profitable growth.
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Results of Operations (in millions)
Revenues
Quarter Ended Two Quarters Ended
Mar 30,
2025 Mar 31,
2024 $
Change %
Change
Mar 30,
2025 Mar 31,
2024 $
Change
%
Change
Company-operated stores $ 7,285.0 $ 7,052.6 $ 232.4 3.3 % $ 15,070.3 $ 14,807.9 $ 262.4 1.8 %
Licensed stores 1,016.0 1,054.5 (38.5) (3.7) 2,151.7 2,246.6 (94.9) (4.2)
Other 460.6 455.9 4.7 1.0 937.4 933.8 3.6 0.4
Total net revenues $ 8,761.6 $ 8,563.0 $ 198.6 2.3 % $ 18,159.4 $ 17,988.3 $ 171.1 1.0 %
For the quarter ended March 30, 2025 compared with the quarter ended March 31, 2024
Total net revenues for the second quarter of fiscal 2025 increased $199 million, primarily due to higher revenues from company-operated stores ($232 million), partially offset by a decrease in revenues from licensed stores ($39 million).
Company-operated store revenue increased $232 million, primarily driven by incremental revenues from 1,283 net new company-operated stores, or a 6% increase, over the past 12 months ($296 million), and incremental revenue from the conversion of 113 licensed stores to company-operated stores ($30 million) following the acquisition of 23.5 Degrees Topco Limited, a U.K. licensed business partner, during the first quarter of fiscal 2025. These increases in net revenue were partially offset by a 1% decrease in comparable store sales ($49 million), attributable to a 2% decrease in comparable transactions, partially offset by a 1% increase in average ticket, as well as unfavorable foreign currency translation impacts ($48 million).
Licensed stores revenue decreased $39 million, primarily driven by lower product and equipment sales to, and royalty revenues from, our licensees in our North America segment ($40 million), unfavorable foreign currency translation impacts ($11 million), and the impact of the acquisition of 23.5 Degrees Topco Limited ($8 million). These decreases in licensed stores revenue were partially offset by an increase in product sales to, and royalty revenues from, our licensees in our International segment ($25 million).
For the two quarters ended March 30, 2025 compared with the two quarters ended March 31, 2024
Total net revenues for the first two quarters of fiscal 2025 increased $171 million, primarily due to higher revenues from company-operated stores ($262 million), partially offset by a decrease in revenues from licensed stores ($95 million).
Company-operated store revenue increased $262 million, primarily driven by incremental revenues from 1,283 net new company-operated stores, or a 6% increase, over the past 12 months ($598 million) and incremental revenue from the conversion of 113 licensed stores to company-operated stores ($57 million) following the acquisition of 23.5 Degrees Topco Limited. These increases in net revenue were partially offset by a 2% decrease in comparable store sales ($331 million), attributable to a 4% decrease in comparable transactions, partially offset by a 2% increase in average ticket, as well as unfavorable foreign currency translation impacts ($66 million).
Licensed stores revenue decreased $95 million, primarily driven by lower product and equipment sales to, and royalty revenues from, our licensees in our North America segment ($74 million), unfavorable foreign currency translation impacts ($20 million), and the impact of the acquisition of 23.5 Degrees Topco Limited ($17 million). These decreases in licensed stores revenue were partially offset by an increase in product sales to, and royalty revenues from, our licensees in our International segment ($22 million).
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Operating Expenses
Quarter Ended Two Quarters Ended
Mar 30,
2025 Mar 31,
2024 $
Change
Mar 30,
2025 Mar 31,
2024 Mar 30,
2025 Mar 31,
2024 $
Change Mar 30,
2025 Mar 31,
2024
As a % of
Total Net Revenues As a % of
Total Net Revenues
Product and distribution costs $ 2,737.6 $ 2,648.7 $ 88.9 31.2 % 30.9 % $ 5,631.3 $ 5,629.2 $ 2.1 31.0 % 31.3 %
Store operating expenses 4,176.0 3,724.1 451.9 47.7 43.5 8,379.1 7,575.6 803.5 46.1 42.1
Other operating expenses 138.7 132.8 5.9 1.6 1.6 291.3 283.2 8.1 1.6 1.6
Depreciation and amortization expenses 418.9 371.9 47.0 4.8 4.3 826.2 737.2 89.0 4.5 4.1
General and administrative expenses 632.3 654.6 (22.3) 7.2 7.6 1,298.0 1,302.6 (4.6) 7.1 7.2
Restructuring 116.2 — 116.2 1.3 — 116.2 — 116.2 0.6 —
Total operating expenses 8,219.7 7,532.1 687.6 93.8 88.0 16,542.1 15,527.8 1,014.3 91.1 86.3
Income from equity investees 59.1 68.0 (8.9) 0.7 0.8 105.5 123.8 (18.3) 0.6 0.7
Operating income $ 601.0 $ 1,098.9 $ (497.9) 6.9 % 12.8 % $ 1,722.8 $ 2,584.3 $ (861.5) 9.5 % 14.4 %
Store operating expenses as a % of company-operated stores revenue 57.3 % 52.8 % 55.6 % 51.2 %
For the quarter ended March 30, 2025 compared with the quarter ended March 31, 2024
Product and distribution costs as a percentage of total net revenues increased 30 basis points for the second quarter of fiscal 2025, primarily due to inflation and rising coffee prices (approximately 60 basis points), partially offset by supply chain efficiencies (approximately 50 basis points).
Store operating expenses as a percentage of total net revenues increased 420 basis points for the second quarter of fiscal 2025. Store operating expenses as a percentage of company-operated stores revenue increased 450 basis points, primarily due to deleverage (approximately 200 basis points) and additional labor, largely in support of “Back to Starbucks” (approximately 180 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 decreased $22 million, primarily due to lapping certain proxy solicitation and advisory services costs ($30 million).
Restructuring was $116 million, largely due to costs associated with simplifying our support organization, primarily severance costs, in support of our “Back to Starbucks” strategy.
The combination of these changes resulted in an overall decrease in operating margin of 590 basis points for the second quarter of fiscal 2025.
For the two quarters ended March 30, 2025 compared with the two quarters ended March 31, 2024
Product and distribution costs as a percentage of total net revenues decreased 30 basis points for the first two quarters of fiscal 2025, primarily due to supply chain efficiencies (approximately 60 basis points), partially offset by inflation and rising coffee prices (approximately 50 basis points).
Store operating expenses as a percentage of total net revenues increased 400 basis points for the first two quarters of fiscal 2025. Store operating expenses as a percentage of company-operated stores revenue increased 440 basis points, primarily due to deleverage (approximately 230 basis points) and additional labor, largely in support of “Back to Starbucks” (approximately 160 basis points).
Depreciation and amortization expenses as a percentage of total net revenues increased 40 basis points, primarily due to deleverage.
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General and administrative expenses decreased $5 million, primarily due to lapping certain proxy solicitation and advisory services costs ($30 million), partially offset by increased costs to support leadership transitions ($22 million).
Restructuring was $116 million, largely due to costs associated with simplifying our support organization, primarily severance costs, in support of our “Back to Starbucks” strategy.
Income from equity investees decreased $18 million, primarily due to lower income from our North American Coffee Partnership joint venture.
The combination of these changes resulted in an overall decrease in operating margin of 490 basis points for the first two quarters of fiscal 2025.
Other Income and Expenses
Quarter Ended Two Quarters Ended
Mar 30,
2025 Mar 31,
2024 $
Change
Mar 30,
2025 Mar 31,
2024 Mar 30,
2025 Mar 31,
2024 $
Change Mar 30,
2025 Mar 31,
2024
As a % of Total
Net Revenues As a % of Total
Net Revenues
Operating income $ 601.0 $ 1,098.9 $ (497.9) 6.9 % 12.8 % $ 1,722.8 $ 2,584.3 $ (861.5) 9.5 % 14.4 %
Interest income and other, net 28.4 34.1 (5.7) 0.3 0.4 56.2 67.9 (11.7) 0.3 0.4
Interest expense (127.3) (140.6) 13.3 (1.5) (1.6) (254.5) (280.7) 26.2 (1.4) (1.6)
Earnings before income taxes 502.1 992.4 (490.3) 5.7 11.6 1,524.5 2,371.5 (847.0) 8.4 13.2
Income tax expense 118.0 219.9 (101.9) 1.3 2.6 359.4 574.6 (215.2) 2.0 3.2
Net earnings including noncontrolling interests 384.1 772.5 (388.4) 4.4 9.0 1,165.1 1,796.9 (631.8) 6.4 10.0
Net earnings/(loss) attributable to noncontrolling interests
(0.1) 0.1 (0.2) 0.0 0.0 0.1 0.1 — 0.0 0.0
Net earnings attributable to Starbucks $ 384.2 $ 772.4 $ (388.2) 4.4 % 9.0 % $ 1,165.0 $ 1,796.8 $ (631.8) 6.4 % 10.0 %
Effective tax rate including noncontrolling interests 23.5 % 22.2 % 23.6 % 24.2 %
For the quarter ended March 30, 2025 compared with the quarter ended March 31, 2024
Interest income and other, net, decreased $6 million, primarily due to lower interest rates in the current year.
Interest expense decreased $13 million, primarily due to savings from cross-currency interest rate hedging, partially offset by higher interest rates on refinanced long-term debt.
The effective tax rate for the quarter ended March 30, 2025 was 23.5% compared to 22.2% for the same period in fiscal 2024. The increase was primarily due to lapping the election of 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), partially offset by the effect of lower pre-tax earnings and the proportionate impacts from certain permanent differences and discrete items.
For the two quarters ended March 30, 2025 compared with the two quarters ended March 31, 2024
Interest income and other, net, decreased $12 million, primarily due to lower interest rates in the current year.
Interest expense decreased $26 million, primarily due to savings from cross-currency interest rate hedging, partially offset by higher interest rates on refinanced long-term debt.
The effective tax rate for the first two quarters ended March 30, 2025 was 23.6% compared to 24.2% for the same period in fiscal 2024. The decrease was primarily due to the discrete impact of a tax status change for a certain foreign entity
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(approximately 200 basis points), partially offset by lapping the election of 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).
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Segment Information
Results of operations by segment (in millions) :
North America
Quarter Ended Two Quarters Ended
Mar 30,
2025 Mar 31,
2024 $
Change
Mar 30,
2025 Mar 31,
2024 Mar 30,
2025 Mar 31,
2024 $
Change Mar 30,
2025 Mar 31,
2024
As a % of North America
Total Net Revenues As a % of North America
Total Net Revenues
Net revenues:
Company-operated stores $ 5,861.7 $ 5,724.5 $ 137.2 90.6 % 89.7 % $ 12,229.5 $ 12,105.7 $ 123.8 90.3 % 89.7 %
Licensed stores 610.3 654.8 (44.5) 9.4 10.3 1,313.0 1,392.7 (79.7) 9.7 10.3
Other 0.7 0.7 — 0.0 0.0 2.1 2.3 (0.2) 0.0 0.0
Total net revenues 6,472.7 6,380.0 92.7 100.0 100.0 13,544.6 13,500.7 43.9 100.0 100.0
Product and distribution costs 1,807.1 1,767.7 39.4 27.9 27.7 3,774.6 3,791.6 (17.0) 27.9 28.1
Store operating expenses 3,431.6 3,037.4 394.2 53.0 47.6 6,890.1 6,185.1 705.0 50.9 45.8
Other operating expenses 68.6 67.1 1.5 1.1 1.1 147.0 144.5 2.5 1.1 1.1
Depreciation and amortization expenses 299.2 257.1 42.1 4.6 4.0 588.1 507.5 80.6 4.3 3.8
General and administrative expenses 96.6 102.4 (5.8) 1.5 1.6 193.9 202.9 (9.0) 1.4 1.5
Restructuring 21.3 — 21.3 0.3 — 21.3 — 21.3 0.2 0.0
Total operating expenses 5,724.4 5,231.7 492.7 88.4 82.0 11,615.0 10,831.6 783.4 85.8 80.2
Operating income $ 748.3 $ 1,148.3 $ (400.0) 11.6 % 18.0 % $ 1,929.6 $ 2,669.1 $ (739.5) 14.2 % 19.8 %
Store operating expenses as a % of company-operated stores revenue 58.5 % 53.1 % 56.3 % 51.1 %
For the quarter ended March 30, 2025 compared with the quarter ended March 31, 2024
Revenues
North America total net revenues for the second quarter of fiscal 2025 increased $93 million, or 1%, primarily driven by net new company-operated store growth of 5%, or 504 stores, over the past 12 months ($226 million). This growth was partially offset by a net 1% decrease in comparable store sales ($70 million), driven by a 4% decrease in comparable transactions, partially offset by a 3% increase in average ticket, primarily due to annualization of prior year pricing and fewer discounts in the current year. Also contributing were lower product and equipment sales to, and royalty revenues from, our licensees ($40 million).
Operating Margin
North America operating income for the second quarter of fiscal 2025 decreased 35% to $748 million, compared to $1.1 billion in the second quarter of fiscal 2024. Operating margin contracted 640 basis points to 11.6%, primarily driven by deleverage (approximately 300 basis points) and additional labor, largely in support of “Back to Starbucks” (approximately 230 basis points).
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For the two quarters ended March 30, 2025 compared with the two quarters ended March 31, 2024
Revenues
North America total net revenues for the first two quarters of fiscal 2025 increased $44 million primarily driven by net new company-operated store growth 5%, or 504 stores, over the past 12 months ($456 million). This growth was partially offset by a a net 3% decrease in comparable store sales ($304 million) driven by a 6% decrease in comparable transactions, partially offset by a 3% increase in average ticket, primarily due to annualization of prior year pricing and fewer discounts in the current year. Also contributing were lower product and equipment sales to, and royalty revenues from, our licensees ($74 million).
Operating Margin
North America operating income for the first two quarters of fiscal 2025 decreased 28% to $1.9 billion, compared to $2.7 billion in the first two quarters of fiscal 2024. Operating margin contracted 560 basis points to 14.2%, primarily driven by deleverage (approximately 330 basis points) and additional labor, largely in support of “Back to Starbucks” (approximately 190 basis points).
International
Quarter Ended Two Quarters Ended
Mar 30,
2025 Mar 31,
2024 $
Change
Mar 30,
2025 Mar 31,
2024 Mar 30,
2025 Mar 31,
2024 $
Change
Mar 30,
2025 Mar 31,
2024
As a % of International
Total Net Revenues As a % of International
Total Net Revenues
Net revenues:
Company-operated stores $ 1,423.3 $ 1,328.1 $ 95.2 76.2 % 75.6 % $ 2,840.8 $ 2,702.2 $ 138.6 76.0 % 75.0 %
Licensed stores 405.7 399.7 6.0 21.7 22.7 838.7 853.9 (15.2) 22.4 23.7
Other 38.1 29.5 8.6 2.0 1.7 58.9 47.5 11.4 1.6 1.3
Total net revenues 1,867.1 1,757.3 109.8 100.0 100.0 3,738.4 3,603.6 134.8 100.0 100.0
Product and distribution costs 659.8 619.8 40.0 35.3 35.3 1,306.8 1,286.4 20.4 35.0 35.7
Store operating expenses 744.4 686.7 57.7 39.9 39.1 1,489.0 1,390.5 98.5 39.8 38.6
Other operating expenses 55.1 50.0 5.1 3.0 2.8 115.7 110.1 5.6 3.1 3.1
Depreciation and amortization expenses 89.0 84.3 4.7 4.8 4.8 178.1 168.3 9.8 4.8 4.7
General and administrative expenses 84.8 82.9 1.9 4.5 4.7 177.2 173.3 3.9 4.7 4.8
Restructuring 16.8 — 16.8 0.9 — 16.8 — 16.8 0.4 —
Total operating expenses 1,649.9 1,523.7 126.2 88.4 86.7 3,283.6 3,128.6 155.0 87.8 86.8
Income/(loss) from equity investees
(0.2) 0.2 (0.4) 0.0 0.0 (0.7) 0.3 (1.0) 0.0 0.0
Operating income $ 217.0 $ 233.8 $ (16.8) 11.6 % 13.3 % $ 454.1 $ 475.3 $ (21.2) 12.1 % 13.2 %
Store operating expenses as a % of company-operated stores revenue 52.3 % 51.7 % 52.4 % 51.5 %
For the quarter ended March 30, 2025 compared with the quarter ended March 31, 2024
Revenues
International total net revenues for the second quarter of fiscal 2025 increased $110 million, or 6%, primarily due to net new company-operated store growth of 8%, or 779 stores, over the past 12 months ($70 million) and higher product sales to, and royalty revenues from, our licensees ($25 million), primarily due to the opening of 497 net new licensed stores over the past 12 months. Also contributing to the increase in revenues was the incremental net revenue from the conversion of 113 licensed
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stores to company-operated stores ($22 million) following the acquisition of 23.5 Degrees Topco Limited, a U.K. licensed business partner, during the first quarter of fiscal 2025, in addition to a 2% increase in comparable stores sales ($21 million), driven by a 3% increase in comparable transactions, partially offset by a 1% decrease in average ticket. These increases were partially offset by unfavorable foreign currency translation impacts ($39 million).
Operating Margin
International operating income for the second quarter of fiscal 2025 decreased 7% to $217 million, compared to $234 million in the second quarter of fiscal 2024. Operating margin contracted 170 basis points to 11.6%, primarily due to increased promotional activity (approximately 200 basis points) and restructuring costs (approximately 90 basis points), partially offset by leverage (approximately 170 basis points).
For the two quarters ended March 30, 2025 compared with the two quarters ended March 31, 2024
Revenues
International total net revenues for the first two quarters of fiscal 2025 increased $135 million, or 4%, primarily due to net new company-operated store growth of 8%, or 779 stores, over the past 12 months ($142 million), and the incremental net revenue from the conversion of 113 licensed stores to company-operated stores ($41 million) following the acquisition of 23.5 Degrees Topco Limited during the first quarter of fiscal 2025. Also contributing to the increase in revenues were higher product sales to, and royalty revenues from, our licensees ($22 million), primarily due to the opening of 497 net new licensed stores over the past 12 months. These increases were partially offset by unfavorable foreign currency translation impacts ($55 million), as well as a 1% decrease in comparable store sales ($27 million), driven by a 2% decrease in average ticket, partially offset by a 1% increase in comparable transactions.
Operating Margin
International operating income for the first two quarters of fiscal 2025 decreased 4% to $454 million, compared to $475 million in the first two quarters of fiscal 2024. Operating margin contracted 110 basis points to 12.1%, primarily due to increased promotional activity (approximately 190 basis points), partially offset by leverage (approximately 80 basis points).
Channel Development
Quarter Ended Two Quarters Ended
Mar 30,
2025 Mar 31,
2024 $
Change
Mar 30,
2025 Mar 31,
2024 Mar 30,
2025 Mar 31,
2024 $
Change Mar 30,
2025 Mar 31,
2024
As a % of Channel Development
Total Net Revenues As a % of Channel Development
Total Net Revenues
Net revenues $ 409.0 $ 418.2 $ (9.2) $ 845.3 $ 866.2 $ (20.9)
Product and distribution costs 257.7 252.6 5.1 63.0 % 60.4 % 517.5 531.5 (14.0) 61.2 % 61.4 %
Other operating expenses 15.0 15.2 (0.2) 3.7 3.6 28.4 28.0 0.4 3.4 3.2
Depreciation and amortization expenses 0.0 — 0.0 0.0 — 0.0 — 0.0 — —
General and administrative expenses 1.2 1.9 (0.7) 0.3 0.5 3.1 4.2 (1.1) 0.4 0.5
Restructuring
0.9 — 0.9 0.2 — 0.9 — 0.9 0.1 —
Total operating expenses 274.8 269.7 5.1 67.2 64.5 549.9 563.7 (13.8) 65.1 65.1
Income from equity investees 59.3 67.8 (8.5) 14.5 16.2 106.2 123.5 (17.3) 12.6 14.3
Operating income $ 193.5 $ 216.3 $ (22.8) 47.3 % 51.7 % $ 401.6 $ 426.0 $ (24.4) 47.5 % 49.2 %
For the quarter ended March 30, 2025 compared with the quarter ended March 31, 2024
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Revenues
Channel Development total net revenues for the second quarter of fiscal 2025 decreased $9 million, or 2%, primarily due to a decline in revenue in the Global Coffee Alliance ($11 million), partially offset by higher revenue in our global ready-to-drink business ($5 million).
Operating Margin
Channel Development operating income for the second quarter of fiscal 2025 decreased 11% to $194 million, compared to $216 million in the second quarter of fiscal 2024. Operating margin contracted 440 basis points to 47.3%, primarily driven by higher product costs related to the Global Coffee Alliance (approximately 390 basis points) and a decline in our North American Coffee Partnership joint venture income (approximately 170 basis points), partially offset by mix shift (approximately 160 basis points).
For the two quarters ended March 30, 2025 compared with the two quarters ended March 31, 2024
Revenues
Channel Development total net revenues for the first two quarters of fiscal 2025 decreased $21 million, or 2%, primarily due to a decline in revenue in the Global Coffee Alliance ($18 million) and decreased ingredient sales to our North American Coffee Partnership joint venture ($10 million), partially offset by higher revenue in our global ready-to-drink business ($12 million).
Operating Margin
Channel Development operating income for the first two quarters of fiscal 2025 decreased 6% to $402 million, compared to $426 million in the first two quarters of fiscal 2024. Operating margin contracted 170 basis points to 47.5%, primarily driven by a decline in our North American Coffee Partnership joint venture income.
Corporate and Other
Quarter Ended Two Quarters Ended
Mar 30,
2025 Mar 31,
2024 $
Change
%
Change
Mar 30,
2025 Mar 31,
2024 $
Change
%
Change
Net revenues:
Other $ 12.8 $ 7.5 $ 5.3 70.7 % $ 31.1 $ 17.8 $ 13.3 74.7 %
Total net revenues 12.8 7.5 5.3 70.7 31.1 17.8 13.3 74.7
Product and distribution costs 13.0 8.6 4.4 51.2 32.4 19.7 12.7 64.5
Other operating expenses 0.0 0.5 (0.5) nm 0.2 0.6 (0.4) (66.7)
Depreciation and amortization expenses 30.7 30.5 0.2 0.7 60.0 61.4 (1.4) (2.3)
General and administrative expenses 449.7 467.4 (17.7) (3.8) 923.8 922.2 1.6 0.2
Restructuring 77.2 — 77.2 nm 77.2 — 77.2 nm
Total operating expenses 570.6 507.0 63.6 12.5 1,093.6 1,003.9 89.7 8.9
Operating loss $ (557.8) $ (499.5) $ (58.3) 11.7 % $ (1,062.5) $ (986.1) $ (76.4) 7.7 %
Corporate and Other primarily consists of our unallocated corporate expenses. 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 30, 2025 compared with the quarter ended March 31, 2024
Corporate and Other operating loss increased 12% to $558 million for the second quarter of fiscal 2025 compared to $500 million for the second quarter of fiscal 2024, largely due to costs associated with restructuring our support organization, primarily severance costs, in support of our “Back to Starbucks” strategy.
For the two quarters ended March 30, 2025 compared with the two quarters ended March 31, 2024
Corporate and Other operating loss increased 8% to $1.1 billion for the first two quarters of fiscal 2025 compared to $986 million for the first two quarters of fiscal 2024, largely due to costs associated with restructuring our support organization, primarily severance costs, in support of our “Back to Starbucks” strategy.
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Quarterly Store Data
Our store data for the periods presented is as follows:
Net stores opened/(closed) and transferred during the period
Quarter Ended Two Quarters Ended Stores open as of
Mar 30,
2025 Mar 31,
2024 Mar 30,
2025 Mar 31,
2024 Mar 30,
2025 Mar 31,
2024
North America
Company-operated stores 89 112 170 199 11,331 10,827
Licensed stores 1 22 33 56 7,296 7,238
Total North America 90 134 203 255 18,627 18,065
International
Company-operated stores (1)
91 132 317 318 10,174 9,282
Licensed stores (1)
32 98 70 340 11,988 11,604
Total International 123 230 387 658 22,162 20,886
Total Company 213 364 590 913 40,789 38,951
(1) Net stores opened/(closed) and transferred during the period, for the two quarters ended March 30, 2025, includes the conversion of 113 licensed stores to company-operated stores following the acquisition of 23.5 Degrees Topco Limited during the first quarter of fiscal 2025.
Financial Condition, Liquidity, and Capital Resources
Cash and Investment Overview
Our cash and investments were $3.2 billion as of March 30, 2025 and $3.8 billion as of September 29, 2024. 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 and government treasury securities (domestic and foreign), as well as principal-protected structured deposits. As of March 30, 2025, approximately $2.0 billion of cash and short-term investments were held in foreign subsidiaries.
Borrowing Capacity
Revolving Credit Facility
Our $3.0 billion unsecured five-year revolving credit facility (the “2021 credit facility”), of which $150.0 million may be used for issuances of letters of credit, is currently set to mature on September 16, 2026. The 2021 credit facility is available for working capital, capital expenditures, and other corporate purposes, including acquisitions and share repurchases. We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $1.0 billion.
Borrowings under the 2021 credit facility, which was most recently amended in April 2023, will bear interest at a variable rate based on Term SOFR, and, for U.S. dollar-denominated loans under certain circumstances, a Base Rate (as defined in the 2021 credit facility), in each case plus an applicable margin. The applicable margin is based on the Company’s long-term credit ratings assigned by the Moody’s and Standard & Poor’s rating agencies. The “Base Rate” is the highest of (i) the Federal Funds Rate (as defined in the 2021 credit facility) plus 0.500%, (ii) Bank of America’s prime rate, and (iii) Term SOFR plus 1.000%. Term SOFR means the forward-looking SOFR term rate administrated by the Chicago Mercantile Exchange plus a SOFR Adjustment of 0.100%.
The 2021 credit facility contains provisions requiring us to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio, which measures our ability to cover financing expenses. As of March 30, 2025, we were in compliance with all applicable covenants. No amounts were outstanding under our 2021 credit facility as of March 30, 2025 or September 29, 2024.
Commercial Paper
Under our commercial paper program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $3.0 billion, with individual maturities that may vary but not exceed 397 days from the date of issue. Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under our 2021 credit facility. 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
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dividends on our common stock, and share repurchases. We had no borrowings outstanding under our commercial paper program as of March 30, 2025 and September 29, 2024. Our total available contractual borrowing capacity for general corporate purposes was $3.0 billion as of the end of our second quarter of fiscal 2025.
Credit Facilities in Japan
Additionally, we hold the following Japanese yen-denominated credit facilities that are available for working capital needs and capital expenditures within our Japanese market.
• A ¥5.0 billion, or $33.1 million, credit facility is currently set to mature on December 30, 2025. 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 0.400%.
• A ¥10.0 billion, or $66.2 million, credit facility is currently set to mature on March 27, 2026. 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 30, 2025 and September 29, 2024, we had no borrowings outstanding under these credit facilities.
See Note 8, Debt, to the consolidated financial statements included in Item 1 of Part I of this 10-Q for details of the components of our long-term debt.
Our ability to incur new liens and conduct sale and leaseback transactions on certain material properties is subject to compliance with terms of the indentures under which the long-term notes were issued. As of March 30, 2025, we were in compliance with all applicable covenants.
Use of Cash
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. Furthermore, we may use our available cash resources to make proportionate capital contributions to our investees. We may also seek strategic acquisitions to leverage existing capabilities and further build our business. Acquisitions may include increasing our ownership interests in our investees. Any decisions to increase such ownership interests will be driven by valuation and fit with our ownership strategy.
We believe that net future cash flows generated from operations and existing cash and investments both domestically and internationally, combined with our ability to leverage our balance sheet through the issuance of debt, will be sufficient to finance capital requirements for our core businesses as well as shareholder distributions for at least the next 12 months. We are currently not aware of any trends or demands, commitments, events, or uncertainties that will result in, or that are reasonably likely to result in, our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months. We have borrowed funds and continue to believe we have the ability to do so at reasonable interest rates; however, additional borrowings would result in increased interest expense in the future. In this regard, we may incur additional debt, within targeted levels, as part of our plans to fund our capital programs, including cash returns to shareholders through future dividends and discretionary share repurchases, refinancing debt maturities, as well as investing in new business opportunities. If necessary, we may pursue additional sources of financing, including both short-term and long-term borrowings and debt issuances.
We regularly review our cash positions and our determination of partial indefinite reinvestment of foreign earnings. In the event we determine that all or another portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes, which could be material. Any foreign earnings that are not indefinitely reinvested may be repatriated at management’s discretion.
During the second quarter of fiscal 2025, our Board of Directors approved a quarterly cash dividend to shareholders of $0.61 per share to be paid on May 30, 2025 to shareholders of record as of the close of business on May 16, 2025.
During the two quarters ended March 30, 2025, we made no common stock share repurchases. As of March 30, 2025, 29.8 million shares remained available for repurchase under current authorizations.
Other than normal operating expenses, cash requirements for the remainder of fiscal 2025 are expected to consist primarily of capital expenditures for investments in our new and existing stores, our supply chain, and corporate facilities. Total capital expenditures for fiscal 2025 are expected to be reasonably consistent with fiscal 2024.
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In the MD&A included in the 10-K, we disclosed that we had $35.6 billion of current and long-term material cash requirements as of September 29, 2024. There have been no material changes to our material cash requirements during the period covered by this 10-Q outside of the normal course of our business.
Cash Flows
Net cash provided by operating activities was $2.4 billion for the first two quarters of fiscal 2025, compared to $2.9 billion for the same period in fiscal 2024. The change was primarily due to a decrease in net earnings of $632 million and a net increase of $346 million in inventories, which was primarily driven by green coffee, partially offset by a net decrease of $391 million in accounts payable, primarily due to payment timing.
Net cash used in investing activities totaled $1.5 billion for the first two quarters of fiscal 2025, compared to $1.3 billion for the same period in fiscal 2024. The change was primarily due to the acquisition of 23.5 Degrees Topco Limited and a net decrease of $56 million in cash provided by investment activity, primarily structured deposit investments.
Net cash used in financing activities for the first two quarters of fiscal 2025 totaled $1.4 billion, compared to $2.4 billion for the same period in fiscal 2024. The change was primarily due to no current year issuances or repayments of long-term debt and no current year share repurchases of our common stock compared to the prior year.
Commodity Prices, Availability and General Risk Conditions
Commodity price risk represents our primary market risk, generated by our purchases of green coffee and dairy products, among other items. We purchase, roast, and sell high-quality arabica coffee and related products, and risk arises from the price volatility of green coffee. In addition to coffee, we also purchase significant amounts of dairy products to support the needs of our company-operated stores. The price and availability of these commodities, including recent increases in green coffee prices, directly impact our results of operations, and we expect commodity prices, particularly coffee, to continue to impact future results of operations. 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
Our business is subject to moderate seasonal fluctuations, of which our fiscal second quarter typically experiences lower revenues and operating income. 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.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions, and estimates that affect the amounts reported. Note 1 , Summary of Significant Accounting Policies and Estimates, to the consolidated financial statements included in Item 1 of Part I of this 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 10-K describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 10-K.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 , Summary of Significant Accounting Policies and Estimates, to the consolidated financial statements included in Item 1 of Part I of this 10-Q, for a detailed description of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in the commodity price risk, foreign currency exchange risk, equity security price risk, or interest rate risk discussed in Item 7A of the 10-K.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.