What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-11-14 compared with 2024-11-20 · 116 added, 99 removed, 321 unchanged (40% of the section changed)

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The discussion of our financial condition and results of operations for the fiscal year ended October 1, 2023, included in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) can be found in the Annual Report on Form 10-K for the fiscal year ended October 1, 2023.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) can be found in the Annual Report on Form 10-K for the fiscal year ended September 29, 2024.

We have three reportable operating segments:

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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.

Comparable store sales includes company-operated stores open 13 months or longer, and exclude the effects of foreign currency exchange rates.

Stores that are temporarily closed remain in comparable store sales while permanent store closures are removed in the month following closure.

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.

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• Operating margin

Starbucks results for fiscal 2024 reflect a challenging operating environment, notably driven by reduced customer traffic compared to fiscal 2023, that pressured our financial results.

Consolidated net revenues increased 1% to $36.2 billion in fiscal 2024 compared to $36.0 billion in fiscal 2023, primarily driven by incremental revenues from net new company-operated stores over the past 12 months, partially offset by a decrease in comparable store sales and the impact of unfavorable foreign currency translation.

Starbucks results for fiscal 2025 showed continued progress on key “Back to Starbucks” initiatives, specifically investments in coffeehouse partners, as we work to rebuild a stronger Starbucks.

These investments include the Green Apron Service model, additional investments in staffing and hours at the right times to deliver enhanced customer service, and the Leadership Experience 2025, a conference designed to empower and motivate our retail leaders to accelerate our “Back to Starbucks” strategy.

Consolidated net revenues increased 3% to $37.2 billion in fiscal 2025 compared to $36.2 billion in fiscal 2024, primarily driven by incremental revenues from net new company-operated stores over the past 12 months, an increase in revenue in the Global Coffee Alliance, and incremental revenue from the acquisition of 23.5 Degrees Topco Limited, a U.K.

licensed business partner, partially offset by a decrease in comparable store sales and a decline in our licensed store business.

For both the North America segment and U.S.

market, revenue increased 2% in fiscal 2024 compared to fiscal 2023, primarily driven by net new company-operated store growth over the past 12 months and higher product and equipment sales to, and royalty revenues from, our licensees.

market, revenue increased 1% in fiscal 2025 compared to fiscal 2024, primarily driven by net new company-operated store growth of 4% , or 441 stores, over the past 12 months, prior to the 584 North America restructuring closures late in the fourth quarter of fiscal 2025.

This growth was partially offset by a 2% decline in comparable store sales.

Comparable transactions for both the North America segment and the U.S.

market declined 5%, partially offset by average ticket growth for both the North America segment and the U.S.

market of 4%, primarily driven by annualization of pricing.

For the International segment, revenue declined 2% in fiscal 2024 compared to fiscal 2023, primarily driven by the impact of unfavorable foreign currency translation, a 4% decline in comparable store sales driven by a decline in average ticket of 4%, and lower product and equipment sales to, and royalty revenues from, our licensees.

These decreases were partially offset by net new company-operated and licensed store openings over the past 12 months.

Revenue for our Channel Development segment decreased 7% in fiscal 2024 compared with fiscal 2023, primarily driven by a decline in revenue in the Global Coffee Alliance following the sale of our Seattle’s Best Coffee brand to Nestlé in the second quarter of fiscal 2023 as well as product SKU optimization.

Our performance was lower-than-expected as a result of a pronounced customer traffic decline, reflecting our targeted and accelerated investments not improving customer behaviors as intended, as well as the macroeconomic and competitive environment in China that further pressured our results.

Given these challenges, under the direction of our new chief executive officer, Brian Niccol, we are changing our business strategy to bring customers back to our stores and return to growth.

Our “Back to Starbucks” strategy includes supporting our green apron partners, enhancing the customer experience, reestablishing ourselves as the community coffee house, and innovating the coffee tasting experience through product development, marketing, and in-store experience.

This strategic reset will provide us with the opportunity to assess the business and refocus

our efforts, including capital allocation priorities, efficiency efforts, and store growth initiatives.

We remain confident in the strength of our brand and believe that the new action plans will position the Company for sustainable long-term growth.

Comparable transactions declined 4% , partially offset by average ticket growth of 2% , primarily driven by annualization of pricing in the current year.

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

For the International segment, revenue increased 7% in fiscal 2025 compared to fiscal 2024, primarily driven by net new company-operated and licensed store openings over the past 12 months, incremental net revenue from 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, and higher product and equipment sales to, and royalty revenues from, our licensees.

Revenue for our Channel Development segment increased 6% in fiscal 2025 compared with fiscal 2024, primarily driven by an increase in revenue in the Global Coffee Alliance.

In support of our “Back to Starbucks” strategy, we completed our assessment of our coffeehouse portfolio late in the fourth quarter and made decisions to close stores that did not demonstrate a viable path to profitability, or meet our standards of delivering a warm, welcoming space for our customers and partners.

Our store closures in North America were substantially

completed in fiscal 2025 and the International store closures are expected to be completed in the first half of fiscal 2026.

As a result of these closures, we expect a fiscal 2026 reduction in our baseline North America company-operated revenues, partially offset by sales transfer to nearby coffeehouses that remain open.

We also expect the future impact to operating margins to be slightly accretive.

With a healthier base of coffeehouses, we see meaningful opportunity for disciplined growth.

We anticipate that these actions, along with simplifying our broader support organization, will allow us to restructure, redeploy, and refocus our resources on priorities that we believe will deliver long-term sustainable business growth.

We expect that the macroeconomic challenges we have been experiencing, including impacts from new tariffs and dynamic coffee prices, will continue;

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

Following our Green Apron Service model going live across our full U.S company-operated store portfolio in the fourth quarter of fiscal 2025, we are focused on empowering coffeehouse leaders to take ownership of sustaining the model as our permanent way of working, which we expect to enhance the customer experience and drive future transaction growth.

Further, as announced in early November 2025, we look forward to working with our new strategic joint venture partner, Boyu Capital, to accelerate long-term growth in China.

We believe, through strategic prioritization, that we are taking the right actions now and in the future, specifically through our investments in store partners, uplifting the coffeehouse experience through disciplined capital deployment, introducing new food and beverage platforms, reimagining the Starbucks rewards program, and enhancing support for our licensee partners.

These actions, while driving more efficiency, accountability, and agility as a company, will lay the foundation for the future of Starbucks.

Financial Highlights

• Total net revenues increased 3% to $37.2 billion in fiscal 2025 compared to $36.2 billion in fiscal 2024.

• Consolidated operating income decreased to $5.4 billion in fiscal 2024 compared to $5.9 billion in fiscal 2023.

• Consolidated operating inco me decreased to $2.9 billion in fiscal 2025 compared to $5.4 billion in fiscal 2024.

Fiscal 2025 operating margin was 7.9% compared to 15.0% in fiscal 2024.

Operating margin contraction of 130 basis points was primarily due to investments in store partner wages and benefits (approximately 140 basis points), deleverage (approximately 130 basis points), and increased promotional activity (approximately 100 basis points).

These decreases were partially offset by pricing (approximately 180 basis points) and in-store operational efficiencies (approximately 130 basis points).

• Diluted earnings per share (“EPS”) for fiscal 2024 decreased to $3.31, compared to EPS of $3.58 in fiscal 2023.

The decrease was primarily driven by contraction in operating margin as compared to the prior year.

Operating margin contraction of 710 basis points was primarily due to restructuring costs ass ociated with the closure of coffeehouses and simplification of our support organization (approximately 240 basis points) , deleverage (approximately 210 basis points), investments in support of “Back to Starbucks,” which were largely in labor hours (approximately 130 basis points), and inflation (approximately 80 basis points).

• Diluted earnings per share (“EPS”) for fiscal 2025 declined to $1.63, compared to EPS of $3.31 in fiscal 2024.

The decrease was primarily driven by contraction in operating margin, including restructuring and impairment costs in support of our “Back to Starbucks” strategy, as compared to the prior year.

• Capital expenditures were $2.3 billion in fiscal 2025 and $2.8 billion in fiscal 2024.

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Acquisitions and Divestitures

See Note 2 , Acquisitions, Divestitures and Strategic Alliance, to the consolidated financial statements included in Item 8 of Part II of this 10-K for information regarding acquisitions and divestitures.

See Note 2 , Acquisitions and Divestitures, to the consolidated financial statements included in Item 8 of Part II of this 10-K for information regarding acquisitions and divestitures.

RESULTS OF OPERATIONS — FISCAL 2025 COMPARED TO FISCAL 2024

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Total net revenues $ 37,184.4 $ 36,176.2 2.8 %

Total net revenues increased $201 million, or 1%, over fiscal 2023, primarily due to higher revenues from company-operated stores ($304 million).

The growth in company-operated store revenue was driven by incremental revenues from 1,426 net new company-operated stores, or a 7% increase, over the past 12 months ($1.2 billion).

Partially offsetting this increase were a 2% decrease in comparable store sales ($629 million), attributable to a 4% decrease in comparable transactions, partially offset by a 2% increase in average ticket, primarily due to annualization of pricing, and unfavorable foreign currency translation impacts ($235 million).

Licensed stores revenue decreased $8 million, primarily driven by lower product and equipment sales to, and royalty revenues from, our licensees in our International segment ($69 million) and unfavorable foreign currency translation impacts ($27 million), partially offset by higher product and equipment sales to, and royalty revenues from, our licensees in our North America segment ($80 million).

Other revenues decreased $95 million, primarily due to a decline in revenue in the Global Coffee Alliance ($125 million) following the sale of our Seattle’s Best Coffee brand to Nestlé in the second quarter of fiscal 2023 as well as product SKU optimization.

Total net revenues increased $1 billion, or 3%, over fiscal 2024, primarily due to higher revenues from company-operated stores ($979 million) and other revenues ($184 million), partially offset by a decline in revenues from licensed stores ($155 million).

Company-operated store revenue increased $979 million, primarily driven by net new company-operated store growth of 5%, or 1,010 stores, over the past 12 months ($1.2 billion), prior to the 627 restructuring closures late in the fourth quarter of fiscal 2025, and incremental revenue from the conversion of 113 licensed stores to company-operated stores ($131 million) following the acquisition of 23.5 Degrees Topco Limited.

Partially offsetting this increase was a 1% decline in comparable store sales ($408 million), attributable to a 2% decline in comparable transactions, partially offset by a 1% increase in average ticket, primarily due to annualization of prior year pricing.

Licensed stores revenue decreased $155 million, primarily driven by lower product and equipment sales to, and royalty revenues from, our licensees in our North America segment ($143 million), the impact of the acquisition of 23.5 Degrees Topco Limited ($36 million), and by unfavorable foreign currency translation impacts ($22 million).

These decreases were partially offset by higher product sales to, and royalty revenues from, our licensees in our International segment ($79 million).

Other reven ues increased $184 million, primarily due to an increase in revenue in the Global Coffee Alliance ($99 million) and increased sales of cocoa butter to third parties ($66 million).

Operating Expenses

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Store operating expenses

17,058.9 15,286.5 45.9 42.3

Other operating expenses 584.6 565.6 1.6 1.6

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Income from equity investees 247.8 301.2 0.7 0.8

Gain from sale of assets — 91.3 — 0.3

Operating income $ 2,936.6 $ 5,408.8 7.9 % 15.0 %

Store operating expenses as a % of related revenues 55.5 % 51.4 %

Product and distribution costs as a percentage of total net revenues decreased 80 basis points, primarily due to the impact of increased sales from pricing (approximately 70 basis points) and a reduction in supply chain costs (approximately 60 basis points).

Store operating expenses as a percentage of total net revenues increased 140 basis points.

Store operating expenses as a percentage of company-operated store revenues increased 140 basis points, primarily due to investments in store partner wages and benefits (approximately 170 basis points), deleverage (approximately 80 basis points), and increased promotional activity (approximately 70 basis points), partially offset by in-store operational efficiencies (approximately 170 basis points).

Other operating expenses increased $26 million, primarily due to support costs for our growing licensed markets.

Product and distribution costs as a percentage of total net revenues increased 50 basis points , primarily due to inflation (approximately 80 basis points).

Store operating expenses as a percentage of total net revenu es increased 360 basis points .

Store operating expenses as a percentage of company-operated store revenues increased 410 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 $19 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 increased $82 million, primarily due to incremental investments in technology ($93 million), investments in partner wages and benefits ($90 million), and certain proxy solicitation and advisory services costs incurred in the second quarter of fiscal 2024 ($28 million).

These increases were partially offset by lower performance-based compensation ($86 million) and the lapping of donations to The Starbucks Foundation made in fiscal 2023 ($30 million).

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

The combination of these changes resulted in an overall decrease in operating margin of 130 basis points in fiscal 2024 when compared to fiscal 2023.

General and administrative expenses increased $94 million , primarily due to the Leadership Experience 2025 ($81 million).

Restructuring and impairments were $892 million, largely due to costs associated with the closure of coffeehouses and simplification of our support organization.

See Note 1 8 , Restructuring, to the consolidated financial statements included i n Item 8 of Part II of this 10-K, for further discussion.

Income from equity investees decreased $53.4 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 710 basis points i n fiscal 2025 when compared to fiscal 2024.

Other Income and Expenses

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Effective tax rate including noncontrolling interests 25.9 % 24.3 %

Interest income and other, net increased $42 million, and i nterest expens e increased $12 million, both primarily due to higher interest rates in the current year.

The effective tax rate for fiscal 2024 was 24.3% compared to 23.6% for fiscal 2023.The increase was due to lapping the release of valuation allowances recorded against certain deferred tax assets of an international jurisdiction in the prior year (approximately 80 basis points) and the accrual of foreign withholding taxes related to the current year earnings of certain foreign subsidiaries (approximately 60 basis points), partially offset by electing an alternative tax approach in a certain foreign jurisdiction that resulted in a tax benefit in the second quarter of fiscal 2024 (approximately 60 basis points).

See Note 14 , Income Taxes, to the consolidated financial statements included in Item 8 of Part II of this 10-K, for further discussion.

Interest income and other, net decreased $10 million, primarily due to lower cash balances and lower interest rates in the current year.

Interest expens e decreased $19 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 fiscal 2025 was 25.9% compared to 24.3% for 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 290 basis points), partially offset by the discrete impact of a tax status change for a certain foreign entity in the first quarter of fiscal 2025 (approximately 120 basis points).

See Note 14 , Income Taxes, to the consolidated financial statements included i n Item 8 of Part II of this 10-K, for further discussion.

Segment Information

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Store operating expenses

13,973.3 12,467.1 51.0 46.2

Other operating expenses 281.6 280.9 1.0 1.0

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Store operating expenses as a % of related revenues 56.4 % 51.4 %

North America total net revenues for fiscal 2024 increased $440 million, or 2%, primarily driven by net new company-operated store growth of 5%, or 533 stores, over the past 12 months ($788 million) and higher product and equipment sales to, and royalty revenues from, our licensees ($80 million).

This growth was partially offset by a 2% decline in comparable store sales ($420 million) driven by a 5% decrease in comparable transactions, partially offset by a 4% increase in average ticket, primarily due to annualization of pricing.

North America total net revenues for fiscal 2025 increased $364 million, or 1%, primarily driven by net new company-operated store growth of 4%, or 441 stores over the past 12 months ($980 million), prior to the 584 restructuring closures late in the fourth quarter of fiscal 2025.

This growth was partially offset by a 2% decline in comparable store sales ( $419 million ) driven by a 4% decline in comparable transactions, partially offset by a 2% increase in average ticket, primarily due to annualization of prior year pricing.

Also contributing were lower product and equipment sales to, and royalty revenues from, our licensees ($143 million) and the impact of unfavorable foreign currency translation ($42 million).

Operating Margin

North America operating income for fiscal 2024 decreased 3% to $5.4 billion, compared to $5.5 billion in fiscal 2023.

Operating margin contracted 90 basis points to 19.8%, primarily due to investments in store partner wages and benefits (approximately 150 basis points), deleverage (approximately 150 basis points), and increased promotional activity (approximately 100 basis points), partially offset by pricing (approximately 220 basis points) and in-store operational efficiencies (approximately 150 basis points).

North America operating income for fiscal 2025 decr eased 41% to $3.2 billion, compared to $5.4 billion in fiscal 2024.

Operating margi n contracted 830 basis points to 11.5%, primarily driven by deleverage (approximately 310 basis points) restructuring costs ass ociated with the closure of coffeehouses and simplification of our support organization (approximately 240 basis points) and investments in support of “Back to Starbucks,” which were largely in labor hours (approximately 180 basis points).

International

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General and administrative expenses 344.3 338.8 4.4 4.6

Restructuring and impairments

Total operating expenses 6,868.1 6,296.8 87.8 85.8

Income from equity investees 3.6 2.7 0.0 0.0

Income/ (loss) from equity investees

(1.8) 3.6 0.0 0.0

Operating income $ 950.0 $ 1,045.7 12.1 % 14.2 %

Store operating expenses as a % of related revenues 51.8 % 51.2 %

International total net revenues for fiscal 2024 decreased $149 million, or 2%, primarily due to unfavorable foreign currency translation impacts ($252 million), as well as a 4% decline in comparable store sales ($210 million), driven by a 4% decline in average ticket.

Also contributing to the decline in international total net revenues were lower product and equipment sales to, and royalty revenues from, our licensees ($69 million), largely driven by continued disruptions due to multiple international conflicts, partially offset by the performance of 654 net new licensed store openings over the past 12 months.

These decreases were partially offset by net new company-operated store growth of 10%, or 893 stores, over the past 12 months ($378 million).

International total net revenues for fiscal 2025 increased $481 million, or 7%, primarily due to net new company-operated store growth of 5%, or 526 stores, over the past 12 months ($264 million) and the incremental net revenue from the conversion of 113 licensed stores to company-operated stores ($95 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 ($79 million), primarily due to the opening of 378 net new licensed store over the past 12 months.

Operating Margin

International operating income for fiscal 2024 decreased 15% to $1.0 billion, compared to $1.2 billion in fiscal 2023.

Operating margin contracted 220 basis points to 14.2%, primarily due to increased promotional activity (approximately 170 basis points) and investments in store partner wages and benefits (approximately 120 basis points), partially offset by in-store operational efficiencies (approximately 100 basis points).

International operating income for fiscal 2025 decrease d 9% to $950 million, compared to $1.0 billion in fiscal 2024.

Operating margin contracted 210 basis points, to 12.1% , primarily due to increased promotional activity (approximately 170 basis points) and restructuring and impairment costs associated with the closure of coffeehouses and simplification of our support organization (approximately 110 basis points).

Channel Development

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Other operating expenses 60.2 58.4 3.2 3.3

Depreciation and amortization expenses — 0.1 0.0 0.0

General and administrative expenses 5.8 7.7 0.3 0.4

Restructuring and impairments

Total operating expenses 1,236.2 1,141.5 66.0 64.5

Income from equity investees 249.6 297.6 13.3 16.8

Gain from sale of assets — 91.3 — 4.8

Operating income $ 885.1 $ 925.9 47.3 % 52.3 %

Channel Development total net revenues for fiscal 2024 decreased $124 million, or 7%, compared to fiscal 2023, primarily due to a decline in revenue in the Global Coffee Alliance ($125 million) following the sale of our Seattle’s Best Coffee brand to Nestlé in the second quarter of fiscal 2023 as well as product SKU optimization.

Channel Development total net revenues for fiscal 2025 increased $102 million, or 6%, compared to fiscal 2024, primarily due to an increase in revenue in the Global Coffee Alliance ($99 million).

Operating Margin

Channel Development operating income for fiscal 2024 decreased 4% to $926 million, compared to $968 million in fiscal 2023.

Operating margin expanded 120 basis points to 52.3%, primarily due to mix shift (approximately 350 basis points), strength in our North American Coffee Partnership joint venture income (approximately 120 basis points), and lapping impairment charges against certain manufacturing assets in the second quarter of fiscal 2023 (approximately 90 basis points).

These increases were partially offset by lapping the gain from the sale of our Seattle’s Best Coffee brand in the second quarter of fiscal 2023 (approximately 480 basis points).

Channel Development operating income for fiscal 2025 decreas ed 4% to $885 million, compared to $926 million in fiscal 2024.

Operating margin contracted 500 basis points to 47.3% , primarily driven by a decline in our North American Coffee Partnership joint venture income (approximately 350 basis points) and higher global product costs (approximately 90 basis points).

Corporate and Other

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Operating loss $ (2,055.2) $ (1,918.1) 7.1 %

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.

Corporate and Other operating loss increased to $1.9 billion for fiscal 2024, or 5%, compared to $1.8 billion in fiscal 2023.

This increase was primarily driven by incremental investments in technology ($93 million), investments in partner wages and benefits ($57 million), and certain proxy solicitation and advisory services costs incurred in the second quarter of fiscal 2024 ($28 million).

These increases were partially offset by lower performance-based compensation ($61 million) and the lapping of donations to The Starbucks Foundation made in fiscal 2023 ($30 million).

Corporate and Other operating los s increased 7% to $2.1 billion for fiscal 2025 compared to $1.9 billion for fiscal 2024, largely due to costs associated with the restructuring of our support organization, primarily severance costs.

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

Cash and Investment Overview

Our cash and investments were $3.8 billion and $4.2 billion as of September 29, 2024, and October 1, 2023, respectively.

Our cash and investments were $3.7 billion and $3.8 billion as of September 28, 2025, and September 29, 2024, respectively.

We actively manage our cash and investments in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, fund acquisitions, and return cash to shareholders through common stock cash dividend payments and share repurchases.

Our investment portfolio primarily includes highly liquid available-for-sale securities, including corporate debt securities, government treasury securities (domestic and foreign), and commercial paper as well as principal-protected structured deposits.

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 September 28, 2025, approximately $1.6 billion of cash and short-term investments were held in foreign subsidiaries.

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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 September 28, 2025, we were in compliance with all applicable covenants.

No amounts were outstanding under our 2021 credit facility as of September 29, 2024, or October 1, 2023.

No amounts were outstanding under our 2025 credit facility as of September 28, 2025, or our 2021 credit facility as of September 29, 2024.

Our total available contractual borrowing capacity for general corporate purposes was $3.0 billion as of the end of fiscal 2025.

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The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures, and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock and share repurchases.

As of September 29, 2024, and October 1, 2023, we had no amounts outstanding under our commercial paper program.

As of September 28, 2025, and September 29, 2024, we had no borrowings outstanding under our commercial paper program.

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

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

As of September 28, 2025 and September 29, 2024, we had no borrowings outstanding under these credit facilities.

See Note 9 , Debt, to the consolidated financial statements included in Item 8 of Part II of this 10-K for details of the components of our long-term debt.

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Any foreign earnings that are not indefinitely reinvested may be repatriated at management’s discretion.

During fiscal 2024, we paid approximately $18 million for foreign withholding taxes related to repatriating the earnings of certain foreign subsidiaries.

During fiscal 2025, we revised our indefinite reinvestment assertions from prior years' cumulative earnings from certain foreign subsidiaries, and in the fourth quarter of fiscal 2025, we repatriated approximately $900 million of cash from foreign subsidiaries, upon which approximately $90 million in related withholding taxes were recorded and paid.

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 are included in our fourth quarter of fiscal 2025 results.

This tax law change did not result in a material impact to our consolidated financial statements.

See Note 14 , Income Taxes, to the consolidated financial statements included in Item 8 of Part II of this 10-K, for further discussion.

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Cash returned to shareholders through dividends in fiscal 2025 and 2024 totaled $2.8 billion and $2.6 billion , respectively.

During the fiscal year ended October 1, 2023, we repurchased 10.0 million shares of common stock for $1.0 billion on the open market.

During the fiscal year ended September 29, 2024, we repurchased 12.8 million shares of common stock for $1.3 billion on the open market.

During the fiscal year ended September 28, 2025, we made no common stock share repurchases.

As of September 28, 2025, 29.8 million shares remained available for repurchase under current authorizations.

Other than normal operating expenses, cash requirements for 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.

Other than normal operating expenses, cash requirements for fiscal 2026 are expected to consist primarily of capital expenditures in our new and existing stores, our supply chain, and corporate facilities.

Total capital expenditures for fiscal 2026 ar e expected to be moderately lower than fiscal 2025.

The following table summarizes current and long-term material cash requirements as of September 28, 2025, which we expect to fund primarily with operating cash flows ( in millions ):

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Cash provided by operating activities was $4.7 billion for fiscal 2025, compared to $6.1 billion for fiscal 2024.

The change was primarily due to an increase in net cash provided by changes in other operating assets and liabilities, primarily driven by net hedging activity, largely related to our coffee hedging program.

See Note 3 , Derivative Financial Instruments, to the consolidated financial statements included in Item 8 of Part II of this 10-K for further discussion.

Also contributing were the change in operating lease liability driven by the timing of cash payment for rent, an increase in depreciation and amortization driven by capital additions, and higher distributions received from our North America Coffee Partnership.

These increases were partially offset by lower net earnings during the period and higher inventory purchase costs, primarily driven by increased coffee commodity prices.

The change was primarily due to the decrease in net earnings of $1.9 billion and a net increase of $451.2 million in inventories, which was primarily driven by green and roasted coffee, largely due to elevated coffee prices.

These impacts were partially offset by a net increase of $713.2 million in loss on disposal, impairment, and accelerated amortization of assets primarily driven by restructuring costs as part of the “Back to Starbucks” strategy and a net increase in accounts payable, primarily due to payment timing.

Cash used in investing activities was $2.5 billion for fiscal 2025, compared to $2.7 billion for fiscal 2024.

The change was primarily due to increased capital expenditures, driven by higher existing and new store investments in North America, and lapping the proceeds from the prior year sale of Seattle’s Best Coffee brand to Nestlé.

These increases were partially offset by higher maturities and calls of investments, driven by maturities of structured deposits.

The change was primarily due to a net decrease in capital expenditures of $472.0 million driven by a reduction in retail store investments and renovations in North America.

These increases were partially offset by the acquisition of 23.5 Degrees Topco Limited.

Cash used in financing activities was $2.3 billion for fiscal 2025, compared to $3.7 billion for fiscal 2024.

The change was primarily due to an increase in repayments of debt and an increase in cash returned to shareholders through dividends and share repurchases, partially offset by an increase in net proceeds from issuances of debt.

The change was primarily due to 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 directly impact our results of operations, and we expect commodity prices, particularly coffee, to impact future results of operations.

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

The price and availability of these commodities, including impacts from volatility in green coffee prices and new tariffs, 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 Item 1 of Part I of this 10-K, as well as Risk Factors in Item 1A of Part I of this 10-K.

FINANCIAL RISK MANAGEMENT

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The following table summarizes the potential impact as of September 28, 2025, to Starbucks future net earnings and other comprehensive income (“OCI”) from changes in commodity prices.

The information provided below relates only to the hedging instruments and does not represent the corresponding changes in the underlying hedged items (in millions) :

The information provided below relates only to the derivative hedging instruments and does not represent the corresponding changes in the underlying hedged items (in millions) :

Increase/(Decrease) to Net Earnings Increase/(Decrease) to OCI

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However, because a portion of our operations consists of activities outside of the U.S., we have transactions in other currencies, primarily the Chinese renminbi, Japanese yen, Canadian dollar, British pound, South Korean won, and euro.

To reduce cash flow volatility from foreign currency fluctuations, we enter into derivative instruments to hedge portions of cash flows of anticipated intercompany royalty payments, inventory purchases, intercompany borrowing, and lending activities, and certain other transactions in currencies other than the functional currency of the entity that enters into the arrangements, as well as the translation risk of certain balance sheet items.

To reduce cash flow volatility from foreign currency fluctuations, we enter into derivative instruments to hedge portions of cash flows of anticipated intercompany royalty payments, inventory purchases, intercompany borrowing, and lending activities, and certain other transactions in currencies other than the functional currency of the entity that is party to the arrangements, as well as the translation risk of certain balance sheet items and net investments in foreign operations.

The volatility in the foreign exchange market may lead to significant fluctuation in foreign currency exchange rates and adversely impact our financial results in the case of weakening foreign currencies relative to the U.S.

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dollar as compared to foreign exchange rates.

The information provided below relates only to the hedging instruments and does not represent the corresponding changes in the underlying hedged items ( in millions ):

The information provided below relates only to the derivative hedging instruments and does not represent the corresponding changes in the underlying hedged items ( in millions ):

Increase/(Decrease) to Net Earnings Increase/(Decrease) to OCI

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We regularly review our plans for reinvestment or repatriation of unremitted foreign earnings.

The possibility exists that foreign earnings declared as indefinitely reinvested may be repatriated as our plans are based on our estimated working and other capital needs in jurisdictions where our earnings are generated.

While we do not expect to repatriate cash to the U.S.

to satisfy domestic liquidity needs, if these amounts were distributed to the U.S., in the form of dividends or otherwise, we may be subject to additional foreign withholding taxes and U.S.

Foreign earnings declared as indefinitely reinvested may be repatriated as our plans are based on our estimated working and other capital needs in jurisdictions where our earnings are generated.

If these amounts are distributed to the U.S., in the form of dividends or otherwise, we may be subject to additional foreign withholding taxes and U.S.

state income taxes, which could be material.

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These estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as ongoing maintenance and improvement of the assets, changes in economic conditions, and changes in operating performance.

In fiscal 2022, we announced our Reinvention Plan in the U.S.

market to increase efficiency while elevating the partner and customer experience.

As a result of the restructuring efforts in connection with the Reinvention Plan, we recorded immaterial impairment charges in our consolidated statements of earnings during the fiscal years ended October 1, 2023, and October 2, 2022.

No restructuring and impairment costs attributable to the Reinvention Plan were recorded in our consolidated statements of earnings during the fiscal year ended September 29, 2024.

In the fourth quarter of fiscal 2025 , as part of the “Back to Starbucks” strategy, the Company assessed its existing store portfolio with respect to both whether coffeehouses had a viable path to offering the physical environment consistent with the brand and a clear path to financial performance, and we closed, or plan to close, coffeehouses that did not meet these criteria.

As a result, we recorded $892 million in restructuring and impairments in our consolidated statements of earnings during the fiscal year ended September 28, 2025.

This total included $352.8 million related to impairment and disposition of company-operated store assets and $239.3 million primarily associated with accelerated amortization of ROU lease assets and other lease exit costs due to store closures prior to the end of contractual lease terms.

Refer to Note 18 , Restructuring, included in Item 8 of Part II of this 10-K, for further discussion.

Asset impairment charges are discussed in Note 1 , Summary of Significant Accounting Policies and Estimates, to the consolidated financial statements included in Item 8 of Part II of this 10-K.

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The discount rate is selected based on the estimated cost of capital for a market participant to operate the reporting unit in the region.

These estimates, as well as the selection of comparable companies and valuation multiples used in the market approaches, are highly subjective, and our ability to realize the future cash flows used in our fair value calculations is affected by factors such as the success of strategic initiatives, changes in economic conditions, changes in our operating performance, and changes in our business strategies, including retail initiatives and international expansion.

is affected by factors such as the success of strategic initiatives, changes in economic conditions, changes in our operating performance, and changes in our business strategies, including retail initiatives and international expansion.

We continue to believe the fair value of each of our reporting units is significantly in excess of its carrying value, and absent a sustained multi-year global decline in our business in key markets such as the U.S.

and China, we do not anticipate incurring significant

goodwill impairment in the next 12 months.

and China, we do not anticipate incurring significant goodwill impairment in the next 12 months.

We note that the goodwill impairment assessment of the China reporting unit was deemed a critical audit matter because of the significant estimates and assumptions made to determine the fair value.

Considerations and procedures performed to address the critical audit matter are discussed in Item 9A, Controls and Procedures.

Our fiscal 2025 annual goodwill impairment testing was completed in the third fiscal quarter.

Where a quantitative assessment was performed, the estimated fair value of our reporting units exceeded carrying value by approximately $124 billion.

Using the most recent quantitative assessment performed, the estimated fair value of our reporting units exceeded carrying value by approximately $ 120 billion.

When assessing indefinite-lived intangible assets for impairment, where we perform a qualitative assessment, we evaluate if changes in events or circumstances have occurred that indicate that impairment may exist.

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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-K

Item 7. Management’s Discussion and Analysis