What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-29 compared with 2025-04-29 · 150 added, 131 removed, 234 unchanged (55% of the section changed)

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• 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;

• the costs and risks associated with, and the successful and timely execution and effects of, our existing and any future business opportunities, expansions, initiatives, strategies, investments, and plans, including our “ Back to Starbucks ” plan;

• the costs and risks associated with, and the successful execution and effects of, strategic changes to our ownership and operating structure, including as a result of acquisitions, divestitures, or entry into joint ventures;

• our ability to align our investment efforts with our strategic goals;

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• 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;

• 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 imposed or threatened to be imposed 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;

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• 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;

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

• the impacts of partner investments, business transformation initiatives, including those related to our workforce, 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.

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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.

As of June 29, 2025, Starbucks had more than 41,000 company-operated and licensed stores, an increase of 4% 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 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.

Starbucks results for the third quarter of fiscal 2025 showed continued progress on key “Back to Starbucks” initiatives, specifically investments in coffeehouse partners, including the Leadership Experience 2025, a conference designed to empower and motivate our retail leaders to accelerate our “Back to Starbucks” strategy, as we work to rebuild a stronger Starbucks.

During the third quarter of fiscal 2025, consolidated net revenues increased 4% to $9.5 billion compared to $9.1 billion in the third quarter of fiscal 2024, primarily driven by incremental revenues from net new company-operated store openings over the past 12 months, partially offset by a decrease in global comparable store sales.

During the quarter ended June 29, 2025, our global comparable store sales declined 2%, primarily driven by a 2% decline in the U.S.

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.

market, the decrease in comparable store sales was driven by a 4% decrease in comparable transactions, partially offset by a 2% increase in average ticket, primarily due to fewer discounts in the current year.

Consolidated operating margin contracted 680 basis points from the prior year to 9.9%, primarily driven by deleverage, investments in support of “Back to Starbucks,” including additional labor and the Leadership Experience 2025, and inflation, primarily driven by elevated coffee pricing.

For the balance of this fiscal year, we expect that the macroeconomic challenges we have been experiencing, including impacts from new tariffs and volatile coffee prices, will continue;

however we are encouraged by the results we have seen from our “Back to Starbucks” initiatives and early results from our pilots.

For example, as a result of compelling early insights, we have decided to accelerate the rollout of the Green Apron Service model, a new foundational operating model that establishes repeatable, consistent, and scalable standards, across U.S.

company-operated stores in the next few months.

We will continue to prioritize disciplined capital investments in our stores, and we are conducting a comprehensive evaluation of our store portfolio, which we expect will be complete by the end of the fiscal year and result in additional material restructuring charges.

Additionally, we will continue our efforts to identify a strategic partner with a similar vision and values to help us capture future growth opportunities in China.

Our focus will continue to be on the long-term, sustainable growth of the company.

We believe the actions we are taking now and in the future, specifically through our investments in store partners, uplifting the coffeehouse experience, introducing new food and beverage platforms, and reimagining the Starbucks rewards program, paired with disciplined prioritization, while driving more efficiency, accountability, and agility as a company, will lay the foundation for the future of Starbucks.

Results of Operations (in millions)

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Company-operated stores $ 7,812.5 $ 7,516.0 $ 296.5 3.9 % $ 22,882.9 $ 22,323.8 $ 559.1 2.5 %

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Total net revenues $ 9,456.0 $ 9,113.9 $ 342.1 3.8 % $ 27,615.4 $ 27,102.3 $ 513.1 1.9 %

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.

For the quarter ended June 29, 2025 compared with the quarter ended June 30, 2024

Total net revenues for the third quarter of fiscal 2025 increased $342 million, primarily due to higher revenues from company-operated stores ($297 million) and other revenues ($69 million), partially offset by a decrease in revenues from licensed stores ($23 million).

Company-operated store revenue increased $297 million, primarily driven by incremental revenues from 1,151 net new company-operated stores, or a 6% increase, over the past 12 months ($330 million).

Also contributing to the overall increase in company-operated store revenue were favorable foreign currency translation impacts ($45 million) and incremental revenue from the conversion of 113 licensed stores to company-operated stores ($36 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).

These increases in net revenue were partially offset by a 2% decrease in comparable store sales ($122 million), attributable to a 2% decrease in comparable transactions, partially offset by a 1% increase in average ticket.

Licensed stores revenue decreased $23 million, primarily driven by lower product and equipment sales to, and royalty revenues from, our licensees in our North America segment ($37 million) and the impact of the acquisition of 23.5 Degrees Topco Limited ($9 million).

These decreases in licensed stores revenue were partially offset by an increase in product and equipment sales to, and royalty revenues from, our licensees in our International segment ($28 million).

Other revenues increased $69 million, primarily due to an increase in revenue in the Global Coffee Alliance ($45 million) and increased sales of cocoa butter to third parties ($20 million).

For the three quarters ended June 29, 2025 compared with the three quarters ended June 30, 2024

Total net revenues for the first three quarters of fiscal 2025 increased $513 million, primarily due to higher revenues from company-operated stores ($559 million) and other revenues ($72 million), partially offset by a decrease in revenues from licensed stores ($118 million).

Company-operated store revenue increased $559 million, primarily driven by incremental revenues from 1,151 net new company-operated stores, or a 6% increase, over the past 12 months ($927 million) and incremental revenue from the conversion of 113 licensed stores to company-operated stores ($93 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).

These increases in net revenue were partially offset by a 2% decrease in comparable store sales ($453 million), attributable to a 4% decrease in comparable transactions, partially offset by a 2% increase in average ticket.

Licensed stores revenue decreased $118 million, primarily driven by lower product and equipment sales to, and royalty revenues from, our licensees in our North America segment ($112 million), the impact of the acquisition of 23.5 Degrees Topco Limited ($26 million), and by unfavorable foreign currency translation impacts ($22 million).

These decreases were partially offset by an increase in product and equipment sales to, and royalty revenues from, our licensees in our International segment ($49 million).

Other revenues increased $72 million, primarily due to increased sales of cocoa butter to third parties ($34 million) and an increase in revenue in the Global Coffee Alliance ($27 million).

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 55.6 % 50.9 % 55.6 % 51.1 %

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).

For the quarter ended June 29, 2025 compared with the quarter ended June 30, 2024

Product and distribution costs as a percentage of total net revenues increased 120 basis points for the third quarter of fiscal 2025, largely due to inflation (approximately 100 basis points), primarily driven by elevated coffee pricing.

Store operating expenses as a percentage of total net revenues increased 390 basis points for the third quarter of fiscal 2025.

Store operating expenses as a percentage of company-operated stores revenue increased 470 basis points, primarily due to additional labor (approximately 160 basis points), deleverage (approximately 150 basis points), and increased marketing (approximately 90 basis points).

Other operating expenses increased $8 million, primarily due to support costs for our 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 decreased $22 million, primarily due to lapping certain proxy solicitation and advisory services costs ($30 million).

General and administrative expenses increased $101 million, primarily due to the Leadership Experience 2025 ($81 million).

Restructuring was $21 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).

Income from equity investees decreased $17 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 680 basis points for the third quarter of fiscal 2025.

For the three quarters ended June 29, 2025 compared with the three quarters ended June 30, 2024

Product and distribution costs as a percentage of total net revenues increased 20 basis points for the first three quarters of fiscal 2025, primarily due to inflation (approximately 70 basis points), partially offset by supply chain efficiencies (approximately 50 basis points).

Store operating expenses as a percentage of total net revenues increased 400 basis points for the first three quarters 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), additional labor (approximately 160 basis points), and increased marketing (approximately 90 basis points).

Other operating expenses increased $16 million, primarily due to support costs for our licensed markets.

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

General and administrative expenses 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).

General and administrative expenses increased $97 million, primarily due to the Leadership Experience 2025 ($81 million).

Restructuring was $137 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 $35 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.

The combination of these changes resulted in an overall decrease in operating margin of 550 basis points for the first three quarters of fiscal 2025.

Other Income and Expenses

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As a % of Total

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Effective tax rate including noncontrolling interests 31.8 % 24.8 % 26.5 % 24.4 %

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.

For the quarter ended June 29, 2025 compared with the quarter ended June 30, 2024

The effective tax rate for the quarter ended June 29, 2025 was 31.8% compared to 24.8% for the same period in fiscal 2024.

For the three quarters ended June 29, 2025 compared with the three quarters ended June 30, 2024

Interest income and other, net, decreased $14 million, primarily due to lower cash balances and lower interest rates in the current year.

Interest expense decreased $25 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

(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).

The effective tax rate for the first three quarters ended June 29, 2025 was 26.5% compared to 24.4% for the same period in fiscal 2024.

The increase was primarily due to the discrete impact of changes in indefinite reinvestment assertions for certain foreign entities in the third quarter of fiscal 2025 (approximately 300 basis points), partially offset by the discrete impact of a tax status change for a certain foreign entity (approximately 130 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 56.5 % 51.0 % 56.4 % 51.1 %

For the quarter ended March 30, 2025 compared with the quarter ended March 31, 2024

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.

For the quarter ended June 29, 2025 compared with the quarter ended June 30, 2024

North America total net revenues for the third quarter of fiscal 2025 increased $110 million, or 2%, primarily driven by net new company-operated store growth of 5%, or 513 stores, over the past 12 months ($266 million).

This growth was partially offset by a net 2% decrease in comparable store sales ($116 million), driven by a 3% decrease in comparable transactions, partially offset by a 1% increase in average ticket, primarily due to fewer discounts in the current year.

Also contributing were lower product and equipment sales to, and royalty revenues from, our licensees ($37 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).

For the two quarters ended March 30, 2025 compared with the two quarters ended March 31, 2024

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.

North America operating income for the third quarter of fiscal 2025 decreased 36% to $919 million, compared to $1.4 billion in the third quarter of fiscal 2024.

Operating margin contracted 770 basis points to 13.3%, primarily driven by deleverage (approximately 250 basis points), investments in support of “Back to Starbucks,” including additional labor (approximately 170 basis points) and the Leadership Experience 2025 (approximately 120 basis points), and inflation (approximately 110 basis points), primarily driven by elevated coffee pricing.

For the three quarters ended June 29, 2025 compared with the three quarters ended June 30, 2024

North America total net revenues for the first three quarters of fiscal 2025 increased $154 million, or 1%, primarily driven by net new company-operated store growth 5%, or 513 stores, over the past 12 months ($722 million).

This growth was partially offset by a net 2% decrease in comparable store sales ($420 million) driven by a 5% 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 ($112 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).

North America operating income for the first three quarters of fiscal 2025 decreased 31% to $2.8 billion, compared to $4.1 billion in the first three quarters of fiscal 2024.

Operating margin contracted 630 basis points to 13.9%, primarily driven by deleverage (approximately 320 basis points), additional labor (approximately 180 basis points), and inflation (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 51.9 % 50.5 % 52.2 % 51.1 %

For the quarter ended March 30, 2025 compared with the quarter ended March 31, 2024

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

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).

For the quarter ended June 29, 2025 compared with the quarter ended June 30, 2024

International total net revenues for the third quarter of fiscal 2025 increased $169 million, or 9%, primarily due to net new company-operated store growth of 7%, or 638 stores, over the past 12 months ($63 million), favorable foreign currency translation impacts ($48 million), and higher product and equipment sales to, and royalty revenues from, our licensees ($28 million), primarily due to the opening of 446 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 stores to company-operated stores ($27 million) following the acquisition of 23.5 Degrees Topco Limited, a U.K.

licensed business partner, during the first quarter of fiscal 2025.

International comparable store sales were flat, driven by a 1% increase in comparable transactions, offset by a 1% decrease in average ticket.

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

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.

International operating income for the third quarter of fiscal 2025 decreased 5% to $273 million, compared to $288 million in the third quarter of fiscal 2024.

Operating margin contracted 200 basis points to 13.6%, primarily due to increased promotional activity (approximately 160 basis points).

For the three quarters ended June 29, 2025 compared with the three quarters ended June 30, 2024

International total net revenues for the first three quarters of fiscal 2025 increased $304 million, or 6%, primarily due to net new company-operated store growth of 7%, or 638 stores, over the past 12 months ($205 million), and the incremental net revenue from the conversion of 113 licensed stores to company-operated stores ($67 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 and equipment sales to, and royalty revenues from, our licensees ($49 million), primarily due to the opening of 446 net new licensed stores over the past 12 months.

These increases were partially offset by a 1% decrease in comparable store sales ($33 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).

International operating income for the first three quarters of fiscal 2025 decreased 5% to $727 million, compared to $763 million in the first three quarters of fiscal 2024.

Operating margin contracted 140 basis points to 12.6%, primarily due to increased promotional activity (approximately 180 basis points).

Channel Development

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Other operating expenses 15.1 15.2 (0.1) 3.1 3.5 43.7 43.2 0.5 3.3 3.3

Depreciation and amortization expenses 0.0 — 0.0 0.0 — 0.0 — 0.0 — —

General and administrative expenses 1.7 1.6 0.1 0.4 0.4 4.8 5.7 (0.9) 0.4 0.4

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Operating income $ 218.4 $ 235.2 $ (16.8) 45.1 % 53.7 % $ 619.8 $ 661.2 $ (41.4) 46.6 % 50.7 %

For the quarter ended March 30, 2025 compared with the quarter ended March 31, 2024

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).

For the quarter ended June 29, 2025 compared with the quarter ended June 30, 2024

Channel Development total net revenues for the third quarter of fiscal 2025 increased $46 million, or 10%, primarily due to an increase in revenue in the Global Coffee Alliance ($45 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

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).

Channel Development operating income for the third quarter of fiscal 2025 decreased 7% to $218 million, compared to $235 million in the third quarter of fiscal 2024.

Operating margin contracted 860 basis points to 45.1%, primarily driven by a decline

in our North American Coffee Partnership joint venture income (approximately 420 basis points), mix shift (approximately 270 basis points), and higher global product costs (approximately 250 basis points).

For the three quarters ended June 29, 2025 compared with the three quarters ended June 30, 2024

Channel Development total net revenues for the first three quarters of fiscal 2025 increased $25 million, or 2%, primarily due to an increase in revenue in the Global Coffee Alliance ($27 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.

Channel Development operating income for the first three quarters of fiscal 2025 decreased 6% to $620 million, compared to $661 million in the first three quarters of fiscal 2024.

Operating margin contracted 410 basis points to 46.6%, primarily driven by a decline in our North American Coffee Partnership joint venture income (approximately 250 basis points) and higher global product costs (approximately 180 basis points).

Corporate and Other

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Net revenues:

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Product and distribution costs 37.4 14.2 23.2 163.4 69.7 33.9 35.8 105.6

Other operating expenses 0.0 0.5 (0.5) nm 0.2 0.6 (0.4) (66.7)

Other operating expenses 0.6 0.4 0.2 50.0 0.7 1.1 (0.4) (36.4)

Depreciation and amortization expenses 32.7 31.1 1.6 5.1 92.9 92.4 0.5 0.5

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Operating loss $ (474.2) $ (437.9) $ (36.3) 8.3 % $ (1,536.6) $ (1,423.9) $ (112.7) 7.9 %

Corporate and Other primarily consists of our unallocated corporate expenses.

Corporate and Other primarily consists of our unallocated corporate expenses and sales of cocoa butter to third parties.

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.

For the quarter ended June 29, 2025 compared with the quarter ended June 30, 2024

Corporate and Other operating loss increased 8% to $474 million for the third quarter of fiscal 2025 compared to $438 million for the third 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 three quarters ended June 29, 2025 compared with the three quarters ended June 30, 2024

Corporate and Other operating loss increased 8% to $1.5 billion for the first three quarters of fiscal 2025 compared to $1.4 billion for the first three 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.

Quarterly Store Data

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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

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Total Company 308 526 898 1,439 41,097 39,477

(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.

(1) Net stores opened/(closed) and transferred during the period, for the three quarters ended June 29, 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.

Our cash and investments were $4.7 billion as of June 29, 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.

Our investment portfolio primarily includes highly liquid available-for-sale securities, including corporate debt securities and U.S.

government treasury securities, as well as principal-protected structured deposits.

As of June 29, 2025, approximately $2.1 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.

During the third quarter of fiscal 2025, we replaced our $3.0 billion unsecured five-year revolving credit facility (the “2021 credit facility”) with a new $3.0 billion unsecured five-year revolving credit facility (the “2025 credit facility”).

Our 2025 credit facility, of which $150.0 million may be used for issuances of letters of credit, is currently set to mature on June 13, 2030.

The 2025 credit facility is available for working capital, capital expenditures, and other general 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%.

Borrowings under the 2025 credit facility will bear interest at a fluctuating rate based on the Term Secured Overnight Financing Rate (“Term SOFR”), and, for U.S.

dollar-denominated loans under certain circumstances, a Base Rate (as defined in the 2025 credit facility), in each case plus an applicable rate.

The applicable rate is based on the Company’s long-term credit ratings assigned by Moody’s and Standard & Poor’s rating agencies.

The 2025 credit facility contains alternative interest rate provisions specifying rate calculations to be used at such time Term SOFR ceases to be available as a benchmark due to reference rate reform.

The “Base Rate” of interest is the highest of (i) the Federal Funds Rate plus 0.50%, (ii) Bank of America’s prime rate, (iii) Term SOFR plus 1.00%, and (iv) 1.00%.

Upon the occurrence of any event of default under the

2025 credit facility, interest on the outstanding amount of the indebtedness under the 2025 credit facility will bear interest at a rate per annum equal to 2% in excess of the interest then borne by such borrowings.

The 2025 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.

As of June 29, 2025, we were in compliance with all applicable covenants.

No amounts were outstanding under our 2025 credit facility as of June 29, 2025, or our 2021 credit facility as of 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.

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 2025 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

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.

We had no borrowings outstanding under our commercial paper program as of June 29, 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 third quarter of fiscal 2025.

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 30, 2025 and September 29, 2024, we had no borrowings outstanding under these credit facilities.

As of June 29, 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.

As of June 29, 2025, 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.

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.

During the third quarter of fiscal 2025, we revised our indefinite reinvestment assertions from prior years' cumulative earnings from certain foreign subsidiaries;

as a result, and in anticipation of repatriating earnings from those subsidiaries, we accrued approximately $70 million of discrete tax expense related to foreign withholding taxes during the third quarter of fiscal year 2025.

We continue to be indefinitely reinvested in the remainder of our foreign earnings, for which no tax accrual has been recorded.

On July 4, 2025, the President of the United States signed and enacted tax legislation into law through a reconciliation bill titled “An Act to provide for reconciliation pursuant to title II of H.

14,” commonly referred to as the “One Big Beautiful Bill Act.” This legislation was enacted during the fourth quarter of fiscal 2025;

therefore, the fiscal 2025 accounting impacts

from this tax law change will be included in our fourth quarter of fiscal 2025 results.

We are evaluating the impacts of this tax law change;

however, it is not expected to result in a material impact to our consolidated financial statements.

During the third quarter of fiscal 2025, our Board of Directors approved a quarterly cash dividend to shareholders of $0.61 per share to be paid on August 29, 2025 to shareholders of record as of the close of business on August 15, 2025.

During the three quarters ended June 29, 2025, we made no common stock share repurchases.

As of June 29, 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.

Total capital expenditures for fiscal 2025 are expected to be moderately lower than fiscal 2024.

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.

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.

Net cash provided by operating activities was $3.4 billion for the first three quarters of fiscal 2025, compared to $4.6 billion for the same period in fiscal 2024.

The change was primarily due to a decrease in net earnings of $1.1 billion and a net increase of $424 million in inventories, which was primarily driven by green and roasted coffee, largely due to elevated coffee prices, partially offset by a net increase of $229 million in accounts payable, primarily due to payment timing.

Net cash used in investing activities totaled $2.1 billion for the first three quarters of fiscal 2025, compared to $1.8 billion for the same period in fiscal 2024.

The change was primarily due to a net decrease of $207 million in cash provided by investment activity, primarily structured deposit investments, and the acquisition of 23.5 Degrees Topco Limited.

Net cash used in financing activities for the first three quarters of fiscal 2025 totaled $365 million, compared to $3.1 billion for the same period in fiscal 2024.

The change was primarily due to no current year 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

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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.

The price and availability of these commodities, including recent volatility 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis