What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-28 compared with 2026-01-28 · 168 added, 89 removed, 239 unchanged (52% of the section changed)

9 unchanged sentences

• 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 ” strategy and our restructuring 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, other strategic transactions or entry into joint ventures, including our previously announced plans to form a joint venture with respect to Starbucks retail operations in China;

• 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, other strategic transactions or entry into joint ventures, including our joint venture with respect to Starbucks retail operations in China;

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

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

• the potential negative effects of food or beverage safety incidents, or product recalls, and any perceived association with such incidents;

• the potential negative effects of food or beverage safety incidents or product recalls, including any perceived association of our products or brands with such incidents;

• our ability to open new stores and efficiently maintain the attractiveness of our existing stores and manage related costs;

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• our ability to operate and successfully expand our footprint in international markets, which is influenced by factors distinct from our North America operating segment;

• 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 import/export regulations, 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 tariffs and import/export regulations;

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 and related volatility;

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• changes in the availability and cost of labor, including any union organizing efforts and our responses to such efforts;

• the impact of, and our ability to respond to, substantial competition from new entrants, consolidations by competitors, and other competitive activities, such as pricing actions (including price reductions, promotions, discounting, couponing, or free goods), marketing, category expansion, product introductions, or entry or expansion in our geographic markets;

category expansion;

product introductions;

or entry or expansion in our geographic markets;

• evolving corporate governance and public disclosure regulations and expectations;

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

This information should be read in conjunction with the unaudited consolidated financial statements and the notes included in Item 1 of Part I of this 10-Q and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contained in the 10-K.

This information should be read in conjunction with the unaudited consolidated financial statements and the notes included in Item 1 of Part I of this 10-Q, as well as the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contained in the 10-K.

Introduction and Overview

Starbucks is the premier roaster, marketer, and retailer of specialty coffee globally, with a presence in 90 markets worldwide.

As of December 28, 2025, Starbucks had more than 41,000 company-operated and licensed stores, an increase of 1% from the prior year.

As of March 29, 2026, Starbucks had more than 41,000 company-operated and licensed stores, an increase of 1% 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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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.

The comparable store sales metric includes company-operated stores open 13 months or longer, and excludes the effects of foreign currency exchange rates.

Stores that are temporarily closed for fewer than three weeks or operating at reduced hours remain in comparable store sales while permanent store closures are removed in the month following closure.

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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 first quarter of fiscal 2026 showed continued progress and momentum on key “Back to Starbucks” initiatives, as demonstrated through meaningful revenue growth.

These investments included implementing the Green Apron Service standard to improve the coffeehouse experience, engaging consumer marketing, and on-trend menu innovation, all of which deliver greater connection and value for customers.

During the first quarter of fiscal 2026, consolidated net revenues increased 6% to $9.9 billion compared to $9.4 billion in the first quarter of fiscal 2025, primarily due to a 4% increase in global comparable store sales, driven by a 4% increase in the U.S.

Starbucks results for the second quarter of fiscal 2026 showed continued progress and momentum on key “Back to Starbucks” initiatives, as demonstrated through meaningful revenue growth.

These investments included the Green Apron Service standard to improve the coffeehouse experience, engaging consumer marketing, disciplined menu innovation, and a redesigned Starbucks Rewards program, all of which deliver greater connection, consistency, and value for customers.

During the second quarter of fiscal 2026, consolidated net revenues increased 9% to $9.5 billion compared to $8.8 billion in the second quarter of fiscal 2025, primarily due to a 6.2% increase in global comparable store sales, driven by a 7.1% increase in the U.S.

market and a 2.6% increase internationally.

Also contributing to the increase were incremental revenues from net new company-operated store openings over the past 12 months, and an increase in revenue from the Global Coffee Alliance.

Also contributing to the increase was higher revenues from the Global Coffee Alliance and our licensed store business.

Specific to the U.S.

market, the increase in comparable store sales was driven by a 3% increase in comparable transactions and a 1% increase in average ticket, primarily driven by an increase in customer beverage modifications in the current year.

Consolidated operating margin contracted 290 basis points from the prior year to 9.0%, primarily driven by labor investments in support of “Back to Starbucks,” and inflationary pressures, largely driven by elevated coffee pricing and tariffs.

In support of our “Back to Starbucks” strategy, we continued 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 majority of International store closures were completed in the first quarter of fiscal 2026.

market, the increase in comparable store sales was driven by a 4.3% increase in comparable transactions and a 2.7% increase in average ticket, primarily driven by higher delivery sales in the current year.

Consolidated operating margin expanded 180 basis points from the prior year to 8.7%, primarily driven by sales leverage and lower store operating and depreciation and amortization costs after classifying assets for Starbucks retail operations in China as held for sale, partially offset by labor investments largely in support of “Back to Starbucks.”

In support of our “Back to Starbucks” strategy, as part of the restructuring plan announced in the fourth quarter of fiscal 2025, we continued 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.

Those store closures in North America were substantially completed in fiscal 2025, and the majority of those International store closures were completed in the first quarter of fiscal 2026.

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

We anticipate that these actions, along with our simplified 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.

In November, we announced that the Company entered into an agreement to form a joint venture with Boyu Capital to operate Starbucks retail in China (the “disposal group”), marking a significant milestone in the Company’s ongoing transformation and underscoring its commitment to accelerating long-term growth in one of the Company’s most important and fastest-growing global markets.

During the first quarter of fiscal 2026, we classified the assets and liabilities of the disposal group as held for sale on the consolidated balance sheets, which required us to cease property, plant, and equipment depreciation and operating lease ROU asset amortization of the related long-lived assets, resulting in reduced depreciation and amortization and store operating expenses.

We also changed our indefinite reinvestment assertions upon classification as held for sale resulting in an increase in our income tax expense.

As the fiscal year progresses, we will continue to refine and execute our “Back to Starbucks” initiatives to continue topline momentum and build sales leverage while investing in our cafes and customer experience, delivering seamless digital experiences, improving our supply chain, and enabling technological efficiencies.

In the second quarter of fiscal 2026, management approved a restructuring plan to relocate certain functions of our support organization to an additional office in Nashville, Tennessee, further supporting the Company’s “Back to Starbucks” strategy and the intention to establish a more strategic presence in the Southeast region of the United States.

Our new office in Nashville reflects three key advantages:

proximity to key suppliers, access to a deep and growing talent pool in the region, notably in technology, and alignment with where we expect future coffeehouse growth.

As the fiscal year progresses, we will continue to refine and execute our “Back to Starbucks” initiatives to continue topline momentum and build sales leverage while investing in our cafes and customer experience, delivering seamless digital experiences, strengthening our supply chain, and enabling technological efficiencies.

We will continue to amplify our brand, engaging with our customers authentically and distinctly as Starbucks, through broad-based marketing, with the goal of deepening brand loyalty and affinity.

As our international business shifts toward a more predominantly licensed model, we will look toward strengthening how we support our licensed business partners.

Our approach will strive to bring decision-making closer to customers and local markets, while enabling us to focus on establishing standards and best practices.

We expect certain macroeconomic pressures to alleviate in the second half of the fiscal year, including impacts on product and distribution costs from tariffs and elevated coffee pricing.

Further, we look forward to working with our new strategic joint venture partner, Boyu Capital, to expand into more cities across China, deliver exceptional coffee experiences, create new career opportunities for partners, and strengthen Starbucks position as a global brand for long-term growth.

Given the held-for-sale classification of the retail operations assets

in China, we expect reduced depreciation and amortization, and store operating expenses, through the close of the transaction with Boyu Capital, which is expected in early calendar year 2026.

Upon closing, under the equity method of accounting, we will transition from recording revenues and expenses of the disposal group to recording our share of income from the joint venture, recognized as income from equity investees.

While we believe we are making the right strategic investments to improve our operating foundations, our focus going forward will be on driving consistency at scale while balancing and maintaining a healthier cost structure.

We will continue to test, learn, and refine our approach to deliver the best of Starbucks to drive durable, profitable, long-term growth.

In November, we announced that the Company entered into an agreement to form a joint venture with Boyu Capital to operate Starbucks retail in China (the “disposal group”), marking a significant milestone in the Company’s long-term strategy to unlock sustainable, disciplined growth in one of the Company’s critical growth markets.

During the first quarter of fiscal 2026, we classified the assets and liabilities of the disposal group as held for sale on the consolidated balance sheets and the disposal group remained classified as held for sale as of March 29, 2026.

The classification required us to cease property, plant, and equipment depreciation and operating lease ROU asset amortization of the related long-lived assets, resulting in reduced depreciation and amortization and store operating expenses, which were reflected through the close of the transaction.

We also changed our indefinite reinvestment assertions upon classification as held for sale resulting in an increase in our income tax expense.

On March 30, 2026, in the third quarter of fiscal 2026, the transaction subsequently closed, and under the terms of the agreement, funds managed by Boyu Capital acquired a 60% stake in Starbucks China retail operations, while Starbucks retained a 40% ownership interest and continues to own and license the brand and intellectual property to the joint venture.

The joint venture oversees 7,991 company-operated coffeehouses, which transitioned to a licensed operating model, with a shared long-term aspiration to grow to as many as 20,000 locations over time.

Further, Starbucks and Boyu Capital transitioned into the operational phase of the joint venture, with a focus on expansion, innovation, and delivering exceptional coffee and welcoming experiences to customers across China.

We transitioned from recording revenues and expenses of the disposal group to recording our share of income from the joint venture, recognized as income from equity investees under the equity method of accounting.

This transition will result in lower revenues and higher operating margin for Starbucks beginning in the third quarter of fiscal 2026, as compared to the historical, company-operated model.

The disposal group was deconsolidated from our financial statements and will be reported as part of our licensed portfolio in the third quarter.

We currently plan to use our transaction proceeds for debt reduction, strengthening our balance sheet and allowing us to execute our long-term growth strategy with greater financial flexibility.

While we believe we are making the right strategic investments to improve our operating foundations, these investments will take time to flow through to sustainable earnings growth, and we will continue to test, learn, and refine our approach to deliver the best of Starbucks to drive durable, profitable, long-term growth.

By bringing together the trusted Starbucks brand, and Boyu Capital’s deep local expertise, we believe we will be able to serve more customers, enter more cities, strengthen profitability, and better compete in China’s dynamic and evolving market.

Results of Operations (in millions)

Quarter Ended

Quarter Ended Two Quarters Ended

Company-operated stores $ 7,816.4 $ 7,285.0 $ 531.4 7.3 % $ 16,004.4 $ 15,070.3 $ 934.1 6.2 %

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Total net revenues $ 9,531.5 $ 8,761.6 $ 769.9 8.8 % $ 19,446.6 $ 18,159.4 $ 1,287.2 7.1 %

For the quarter ended December 28, 2025 compared with the quarter ended December 29, 2024

Total net revenues for the first quarter of fiscal 2026 increased $517 million, primarily due to higher revenues from company-operated stores ($403 million) and other revenues ($120 million).

Company-operated store revenue increased $403 million, primarily driven by a 4% increase in comparable store sales ($293 million), attributable to a 3% increase in comparable transactions and a 1% increase in average ticket.

Also contributing to the overall increase in company-operated store revenue were incremental revenues from 198 net new company-operated stores, representing a 1% increase, over the past 12 months ($103 million).

Licensed stores revenue decreased $5 million, primarily driven by lower product sales to, and royalty revenues from, our licensees in our North America segment ($41 million), and lower equipment sales to our licensees globally ($21 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 ($58 million).

For the quarter ended March 29, 2026, compared with the quarter ended March 30, 2025

Total net revenues for the second quarter of fiscal 2026 increased $770 million, primarily due to higher revenues from company-operated stores ($531 million) and other revenues ($166 million).

Company-operated stores revenue increased $531 million, primarily driven by a 6.2% increase in comparable store sales ($433 million) attributable to a 3.8% increase in comparable transactions and a 2.3% increase in average ticket.

Also contributing to the overall increase in company-operated stores revenue were incremental revenues from 52 net-new company-operated stores over the past 12 months ($50 million).

Licensed stores revenue increased $72 million, primarily driven by higher product sales to, and royalty revenues from, our licensees ($86 million), partially offset by lower equipment sales to licensees ($15 million).

Other revenues increased $166 million, primarily due to an increase in revenue in the Global Coffee Alliance ($149 million).

For the two quarters ended March 29, 2026, compared with the two quarters ended March 30, 2025

Total net revenues for the first two quarters of fiscal 2026 increased $1.3 billion, primarily due to higher revenues from company-operated stores ($934 million) and other revenues ($286 million).

Company-operated stores revenue increased $934 million, primarily driven by a 5.0% increase in comparable store sales ($726 million) attributable to a 3.3% increase in comparable transactions and a 1.7% increase in average ticket.

Also contributing to the overall increase in company-operated stores revenue were incremental revenues from 52 net-new company-operated stores over the past 12 months ($149 million).

Licensed stores revenue increased $67 million, primarily driven by higher product sales to, and royalty revenues from, our licensees in our International segment ($132 million).

The increase in licensed stores revenue was partially offset by lower equipment sales to our licensees globally ($36 million) and a decrease in product sales to, and royalty revenues from, our licensees in our North America segment ($29 million).

Other revenues increased $286 million, primarily due to an increase in revenue in the Global Coffee Alliance ($222 million) and increased sales of cocoa butter to third parties ($34 million).

Operating Expenses

Quarter Ended

Quarter Ended Two Quarters Ended

Change Mar 29,

Total Net Revenues As a % of

Total Net Revenues

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Store operating expenses as a % of company-operated stores revenue

For the quarter ended December 28, 2025 compared with the quarter ended December 29, 2024

Product and distribution costs as a percentage of total net revenues increased 220 basis points for the first quarter of fiscal 2026, largely due to inflationary pressures (approximately 140 basis points), primarily driven by elevated coffee pricing and tariffs.

Store operating expenses as a percentage of total net revenues increased 120 basis points for the first quarter of fiscal 2026.

Store operating expenses as a percentage of company-operated stores revenue increased 160 basis points, primarily due to labor investments in support of “Back to Starbucks” (approximately 230 basis points).

56.4 % 57.3 % 56.0 % 55.6 %

For the quarter ended March 29, 2026, compared with the quarter ended March 30, 2025

Product and distribution costs as a percentage of total net revenues increased 250 basis points for the second quarter of fiscal 2026, largely due to mix shift (90 basis points) and inflationary pressures (approximately 90 basis points), primarily driven by elevated coffee pricing and tariffs.

Store operating expenses as a percentage of total net revenues decreased 140 basis points for the second quarter of fiscal 2026.

Store operating expenses as a percentage of company-operated stores revenue decreased 90 basis points, primarily due to sales leverage (330 basis points), partially offset by labor investments largely in support of “Back to Starbucks” (approximately 230 basis points).

Other operating expenses decreased $8 million, primarily due to savings from simplifying our licensed business support organization ($16 million).

Depreciation and amortization expenses as a percentage of total net revenues decreased 100 basis points, primarily as a result of ceasing depreciation upon classifying our Starbucks retail operations in China as held for sale.

General and administrative expenses decreased $27 million, largely due to restructuring related savings ($66 million), partially offset by transaction-related expenses related to the strategic partnership with Boyu Capital to operate Starbucks retail in China ($20 million).

Restructuring and impairments was $88 million, largely due to costs associated with the closure of coffeehouses and simplification of our support organization.

General and administrative expenses decreased $14 million, primarily due to restructuring-related savings ($44 million), partially offset by increases in performance-based compensation ($27 million).

Restructuring and impairments decreased $91 million, largely due to lapping costs associated with the simplification of our support organization in the prior year.

See Note 17 , Restructuring, to the consolidated financial statements included in Item 1 of Part I of this 10-Q for further discussion.

Income from equity investees increased $14 million, primarily due to higher income from our North American Coffee Partnership joint venture.

The combination of these changes resulted in an overall decrease in operating margin of 290 basis points for the first quarter of fiscal 2026.

Income from equity investees decreased $8 million, primarily due to income from our North American Coffee Partnership joint venture.

The combination of these changes resulted in an overall increase in operating margin of 180 basis points for the second quarter of fiscal 2026.

For the two quarters ended March 29, 2026, compared with the two quarters ended March 30, 2025

Product and distribution costs as a percentage of total net revenues increased 230 basis points for the first two quarters of fiscal 2026, largely due to inflationary pressures (approximately 120 basis points), primarily driven by elevated coffee pricing and tariffs, and mix shift (70 basis points).

Store operating expenses as a percentage of total net revenues was flat for the first two quarters of fiscal 2026.

Store operating expenses as a percentage of company-operated stores revenue increased 40 basis points, primarily due to labor investments largely in support of “Back to Starbucks” (approximately 230 basis points), offset by sales leverage (approximately 240 basis points).

Other operating expenses decreased $30 million, primarily due to savings from simplifying our licensed business support organization ($31 million).

Depreciation and amortization expenses as a percentage of total net revenues decreased 60 basis points, primarily as a result of ceasing depreciation upon classifying our Starbucks retail operations in China as held for sale.

General and administrative expenses decreased $41 million, largely due to restructuring-related savings ($111 million), partially offset by increases in performance-based compensation ($27 million) and transaction-related expenses related to the strategic partnership with Boyu Capital to operate Starbucks retail in China ($30 million).

Restructuring and impairments decreased $3 million, largely due to lapping costs associated with the simplification of our support organization in the prior year, partially offset by costs associated with the closure of coffeehouses in the current year.

See Note 17 , Restructuring, to the consolidated financial statements included in Item 1 of Part I of this 10-Q, for further discussion.

Income from equity investees increased $6 million, primarily due to income from our North American Coffee Partnership joint venture.

The combination of these changes resulted in an overall decrease in operating margin of 70 basis points for the first two quarters of fiscal 2026.

Other Income and Expenses

Quarter Ended

Change Dec 28,

Quarter Ended Two Quarters Ended

Change Mar 29,

As a % of Total

Net Revenues As a % of Total

Operating income $ 828.1 $ 601.0 $ 227.1 8.7 % 6.9 % $ 1,718.8 $ 1,722.8 $ (4.0) 8.8 % 9.5 %

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Effective tax rate including noncontrolling interests 29.8 % 23.5 % 46.1 % 23.6 %

For the quarter ended December 28, 2025 compared with the quarter ended December 29, 2024

Interest income and other, n et decreased $14.8 million, primarily due to unfavorable investment performance and non-core investment impairments.

Interest expen se increased $11.8 million, primarily due to a higher debt balance and higher interest rates on refinanced long-term debt in the current year.

The effective tax rate for the quarter ended December 28, 2025 was 61.7% compared to 23.6% for the same period in fiscal 2025.

The increase was primarily due to the $266 million discrete impact of changes in indefinite reinvestment assertions as a result of classifying Starbucks retail operations in China as held for sale in the first quarter of fiscal 2026 (approximately 3,500 basis points) and lapping the discrete impact of a tax status change for a certain foreign entity in the first quarter of fiscal 2025 (300 basis points).

For the quarter ended March 29, 2026, compared with the quarter ended March 30, 2025

Interest income and other, net increased $9 million, primarily due to favorable investment performance.

Interest expense increased $10 million, primarily due to higher interest rates on refinanced long-term debt in the current year and reduced savings from cross-currency interest rate hedging.

The effective tax rate for the quarter ended March 29, 2026, was 29.8% compared to 23.5% for the same period in fiscal 2025.

The increase was primarily due to the impact of reorganizing certain entities in China (approximately 280 basis points), the $8 million discrete increase to the change in indefinite reinvestment assertions as a result of classifying the Starbucks retail operations in China as held for sale in the first quarter of fiscal 2026 (approximately 110 basis points), and the effect of higher pre-tax earnings and the proportionate impacts from certain permanent differences and discrete items.

For the two quarters ended March 29, 2026, compared with the two quarters ended March 30, 2025

Interest income and other, net decreased $6 million, primarily due to non-core investment impairments.

Interest expense increased $22 million, primarily due to higher interest rates on refinanced long-term debt in the current year and reduced savings from cross-currency interest rate hedging.

The effective tax rate for the two quarters ended March 29, 2026, was 46.1% compared to 23.6% for the same period in fiscal 2025.

The increase was primarily due to the $273 million discrete impact of changes in indefinite reinvestment assertions as a result of classifying Starbucks retail operations in China as held for sale in the first quarter of fiscal 2026 (approximately 1,830 basis points), lapping the discrete impact of a tax status change for a certain foreign entity in the first quarter of fiscal 2025 (approximately 200 basis points), and the impact of reorganizing certain entities in China (approximately 130 basis points).

Segment Information

1 unchanged sentence

North America

Quarter Ended

Quarter Ended Two Quarters Ended

Change Mar 29,

As a % of North America

Total Net Revenues As a % of North America

Total Net Revenues

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Store operating expenses as a % of company-operated stores revenue

For the quarter ended December 28, 2025 compared with the quarter ended December 29, 2024

North America total net revenues for the first quarter of fiscal 2026 increased $209 million, or 3%, primarily driven by an increase in company-operated store revenue due to a 4% increase in comparable store sales ($222 million), driven by a 3% increase in comparable transactions and a 1% increase in average ticket.

58.7 % 58.5 % 57.9 % 56.3 %

For the quarter ended March 29, 2026, compared with the quarter ended March 30, 2025

North America total net revenues for the second quarter of fiscal 2026 increased $421 million, or 7%, primarily driven by an increase in company-operated stores revenue due to a 7.1% increase in comparable store sales ($396 million), driven by a 4.4% increase in comparable transactions and a 2.6% increase in average ticket, primarily due to higher delivery sales.

Operating Margin

North America operating income for the first quarter of fiscal 2026 decreased 27% to $867 million, compared to $1.2 billion in the first quarter of fiscal 2025.

Operating margin contracted 480 basis points to 11.9%, primarily driven by labor investments in support of “Back to Starbucks,” (approximately 260 basis points) and inflationary pressures (approximately 150 basis points), primarily driven by tariffs and elevated coffee pricing.

North America operating income for the second quarter of fiscal 2026 decreased 9% to $680 million, compared to $748 million in the second quarter of fiscal 2025.

Operating margin contracted 170 basis points to 10%, primarily driven by labor investments largely in support of “Back to Starbucks,” (approximately 260 basis points), product mix shift (90 basis points) and inflationary pressures (approximately 90 basis points), primarily driven by tariffs and elevated coffee pricing, partially offset by sales leverage (370 basis points).

For the two quarters ended March 29, 2026, compared with the two quarters ended March 30, 2025

North America total net revenues for the first two quarters of fiscal 2026 increased $630 million, or 5%, primarily driven by an increase in company-operated stores revenue due to a 5.3% increase in comparable store sales ($618 million), driven by a 3.6% increase in comparable transactions and a 1.6% increase in average ticket, primarily due to higher delivery sales, and an increase in customer beverage modifications.

Operating Margin

North America operating income for the first two quarters of fiscal 2026 decreased 20% to $1.5 billion, compared to $1.9 billion in the first two quarters of fiscal 2025.

Operating margin contracted 330 basis points to 11%, primarily driven by labor investments largely in support of “Back to Starbucks” (approximately 260 basis points), inflationary pressures (approximately 120 basis points), primarily driven by tariffs and elevated coffee pricing, and product mix shift (40 basis points), partially offset by sales leverage (180 basis points).

International

Quarter Ended

Quarter Ended Two Quarters Ended

As a % of International

Total Net Revenues As a % of International

Total Net Revenues

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Store operating expenses as a % of company-operated stores revenue 46.8 % 52.3 % 48.1 % 52.4 %

For the quarter ended December 28, 2025 compared with the quarter ended December 29, 2024

International total net revenues for the first quarter of fiscal 2026 increased $194 million, or 10%, primarily driven by an increase in company-operated store revenue due to a 5% increase in comparable store sales ($72 million), driven by a 3% increase in comparable transactions and a 2% increase in average ticket, and higher product sales to, and royalty revenues from, our licensees ($58 million), primarily due to the opening of 357 net new licensed stores over the past 12 months.

Also contributing to the increase in revenue was net new company-operated store growth of 4%, or 362 stores, over the past 12 months ($51 million).

For the quarter ended March 29, 2026, compared with the quarter ended March 30, 2025

International total net revenues for the second quarter of fiscal 2026 increased $184 million, or 10%, primarily driven by higher product sales to, and royalty revenues from, our licensees ($74 million), primarily due to the opening of 321 net-new licensed stores over the past 12 months.

Additional contributing factors were favorable foreign currency translation impacts ($40 million), an increase in company-operated stores revenue due to a 2.6% increase in comparable store sales ($37 million), driven by a 2.1% increase in comparable transactions and a 0.5% increase in average ticket, and net-new company-operated store growth of 3%, or 261 stores, over the past 12 months ($35 million).

Operating Margin

International operating income for the first quarter of fiscal 2026 increased 19% to $283 million, compared to $237 million in the first quarter of fiscal 2025.

Operating margin expanded 100 basis points to 13.7%, primarily due to sales leverage (approximately 360 basis points), and lower store operating and depreciation and amortization costs after classifying assets for Starbucks retail operations in China as held for sale (approximately 200 basis points), partially offset by restructuring costs associated with the closure of coffeehouses (approximately 210 basis points) and inflationary pressures (approximately 190 basis points), primarily driven by elevated coffee pricing.

International operating income for the second quarter of fiscal 2026 increased 84% to $399 million, compared to $217 million in the second quarter of fiscal 2025.

Operating margin expanded 780 basis points to 19%, primarily due to lower store operating and depreciation and amortization costs after classifying assets for Starbucks retail operations in China as held for sale (approximately 520 basis points), and sales leverage (430 basis points), partially offset by inflationary pressures (approximately 120 basis points), primarily driven by elevated coffee pricing.

For the two quarters ended March 29, 2026, compared with the two quarters ended March 30, 2025

International total net revenues for the first two quarters of fiscal 2026 increased $378 million, or 10%, primarily driven by higher product sales to, and royalty revenues from, our licensees ($132 million), primarily due to the opening of 321 net-new licensed stores over the past 12 months.

Also contributing was an increase in company-operated stores revenue due to a 3.9% increase in comparable store sales ($108 million), driven by a 2.5% increase in comparable transactions and a 1.4% increase in average ticket, as well as net-new company-operated store growth of 3%, or 261 stores, over the past 12 months ($85 million), and favorable foreign currency translation impacts ($51 million).

Operating Margin

International operating income for the first two quarters of fiscal 2026 increased 50% to $681 million, compared to $454 million in the first two quarters of fiscal 2025.

Operating margin expanded 450 basis points to 17%, primarily due to sales leverage (420 basis points) and lower store operating and depreciation and amortization costs after classifying assets for Starbucks retail operations in China as held for sale (approximately 340 basis points), partially offset by inflationary pressures (approximately 160 basis points), primarily driven by elevated coffee pricing, and restructuring costs associated with the closure of coffeehouses (approximately 90 basis points).

Channel Development

Quarter Ended

Quarter Ended Two Quarters Ended

Change Mar 29,

As a % of Channel Development

Total Net Revenues As a % of Channel Development

Total Net Revenues

7 unchanged sentences

Operating income $ 229.9 $ 193.5 $ 36.4 40.5 % 47.3 % $ 445.7 $ 401.6 $ 44.1 40.9 % 47.5 %

For the quarter ended December 28, 2025 compared with the quarter ended December 29, 2024

Channel Development total net revenues for the first quarter of fiscal 2026 increased $86 million, or 20%, primarily due to an increase in revenue in the Global Coffee Alliance ($73 million) and higher revenue in our global ready-to-drink business ($11 million).

For the quarter ended March 29, 2026, compared with the quarter ended March 30, 2025

Channel Development total net revenues for the second quarter of fiscal 2026 increased $159 million, or 39%, primarily due to an increase in revenue in the Global Coffee Alliance ($149 million).

Operating Margin

Channel Development operating income for the first quarter of fiscal 2026 increased 4% to $216 million, compared to $208 million in the first quarter of fiscal 2025.

Operating margin contracted 640 basis points to 41.3%, primarily driven by mix shift (approximately 440 basis points), and higher global product costs (approximately 370 basis points), partially offset by an increase in our North American Coffee Partnership joint venture income (approximately 100 basis points).

Channel Development operating income for the second quarter of fiscal 2026 increased 19% to $230 million, compared to $194 million in the second quarter of fiscal 2025.

Operating margin contracted 680 basis points to 41%, primarily driven by lower income from the North American Coffee Partnership joint venture relative to segment revenue growth (approximately 550 basis points) and other product mix shifts (160 basis points).

For the two quarters ended March 29, 2026, compared with the two quarters ended March 30, 2025

Channel Development total net revenues for the first two quarters of fiscal 2026 increased $245 million, or 29%, primarily due to an increase in revenue in the Global Coffee Alliance ($222 million).

Operating Margin

Channel Development operating income for the first two quarters of fiscal 2026 increased 11% to $446 million, compared to $402 million in the first two quarters of fiscal 2025.

Operating margin contracted 660 basis points to 41%, primarily driven by product mix shifts (approximately 470 basis points) and lower North American Coffee Partnership joint venture income growth relative to segment revenue growth (230 basis points).

Corporate and Other

Quarter Ended

Quarter Ended Two Quarters Ended

Net revenues:

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General and administrative expenses 436.0 449.7 (13.7) (3.0) 883.3 923.8 (40.5) (4.4)

Restructuring and impairments 4.2 — 4.2 nm

Restructuring and impairments 11.1 77.2 (66.1) (85.6) 15.4 77.2 (61.8) (80.1)

Total operating expenses 499.1 570.6 (71.5) (12.5) 1,021.0 1,093.6 (72.6) (6.6)

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

For the quarter ended December 28, 2025 compared with the quarter ended December 29, 2024

Corporate and Other operating loss decreased 6% to $475 million for the first quarter of fiscal 2026 compared to $505 million for the first quarter of fiscal 2025, largely due to restructuring related savings ($62 million), partially offset by transaction-related expenses related to the strategic partnership with Boyu Capital to operate Starbucks retail in China ($20 million).

For the quarter ended March 29, 2026, compared with the quarter ended March 30, 2025

Corporate and Other operating loss decreased 14% to $480 million for the second quarter of fiscal 2026 compared to $558 million for the second quarter of fiscal 2025, primarily due to lower costs associated with restructuring our support organization ($66 million), primarily severance costs, in support of our “Back to Starbucks” strategy.

For the two quarters ended March 29, 2026, compared with the two quarters ended March 30, 2025

Corporate and Other operating loss decreased 10% to $955 million for the first two quarters of fiscal 2026 compared to $1.1 billion for the first two quarters of fiscal 2025, primarily due to restructuring-related savings in the current year ($111 million) and lower costs associated with restructuring our support organization ($62 million), primarily severance costs, in support of our “Back to Starbucks” strategy, partially offset by transaction-related expenses for the strategic partnership with Boyu Capital to operate Starbucks retail in China ($24 million) and increases in performance-based compensation ($20 million).

Quarterly Store Data

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Net stores opened/(closed) and transferred during the period (1)

Quarter Ended Stores open as of

Quarter Ended Two Quarters Ended Stores open as of

North America

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Total Company 11 213 139 590 41,129 40,789

(1) Includes 165 stores closed in the first quarter of fiscal 2026 as part of our “Back to Starbucks” restructuring plan.

(1) Includes 62 and 227 stores closed in the quarter and two quarters ended March 29, 2026, respectively, as part of our “Back to Starbucks” restructuring plan.

(2) 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.

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Cash and Investment Overview

Our cash and investments were $3.9 billion as of December 28, 2025 and $3.7 billion as of September 28, 2025.

Our cash and investments were $2.0 billion as of March 29, 2026, and $3.7 billion as of September 28, 2025.

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 U.S.

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

As of December 28, 2025, approximately $1.3 billion of cash and short-term investments were held in foreign subsidiaries, excluding cash balances for Starbucks retail operations in China that were classified as held for sale.

government treasury securities.

As of March 29, 2026, approximately $0.8 billion of cash and short-term investments were held in foreign subsidiaries, excluding cash balances for Starbucks retail operations in China that were classified as held for sale.

Borrowing Capacity

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

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

As of March 29, 2026, we were in compliance with all applicable covenants.

No amounts were outstanding under our 2025 credit facility as of March 29, 2026, or September 28, 2025.

Commercial Paper

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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.

We had no borrowings outstanding under our commercial paper program as of December 28, 2025 and September 28, 2025.

Our total available contractual borrowing capacity for general corporate purposes was $3.0 billion as of the end of our first quarter of fiscal 2026.

We had no borrowings outstanding under our commercial paper program as of March 29, 2026 and September 28, 2025.

Our total available contractual borrowing capacity for general corporate purposes was $3.0 billion as of the end of our second quarter of fiscal 2026.

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 December 28, 2025 and September 28, 2025, we had no borrowings outstanding under these credit facilities.

As of March 29, 2026, and September 28, 2025, 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 December 28, 2025, we were in compliance with all applicable covenants.

As of March 29, 2026, 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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We believe that net future cash flows generated from operations and existing cash and investments both domestically and internationally, combined with our ability to leverage our balance sheet through the issuance of debt, will be sufficient to finance capital requirements for our core businesses as well as shareholder distributions for at least the next 12 months.

Aside from the expected proceeds from our planned divestiture of Starbucks retail operations in China, we are currently not aware of any trends or demands, commitments, events, or uncertainties that will result in, or that are reasonably likely to result in, our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months.

Aside from the proceeds from our divestiture of Starbucks retail operations in China, we are currently not aware of any trends or demands, commitments, events, or uncertainties that will result in, or that are reasonably likely to result in, our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months.

We currently plan to use the proceeds from our divestiture for Starbucks retail operations in China for debt reduction, strengthening our balance sheet and allowing us to execute our long-term growth strategy with greater financial flexibility.

We have borrowed funds and continue to believe we have the ability to do so at reasonable interest rates;

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

In the first quarter of fiscal 2026, we released all of our remaining indefinite reinvestment assertions and recorded a one-time discrete tax expense of $266 million.

In the first quarter of fiscal 2026, we released all of our remaining indefinite reinvestment assertions and recorded a discrete tax expense of $266 million, which was subsequently increased in the second quarter of fiscal 2026 by $8 million.

In future periods, any foreign earnings may be repatriated at management’s discretion without any material, incremental tax consequences.

During the first quarter of fiscal 2026, our Board of Directors approved a quarterly cash dividend to shareholders of $0.62 per share to be paid on February 27, 2026 to shareholders of record as of the close of business on February 13, 2026.

During the first quarter of fiscal 2025, we made no common stock share repurchases.

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

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

On February 20, 2026, the U.S.

Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ( IEEPA) were unlawful.

Starbucks imports were previously subject to such tariffs under IEEPA.

Effective April 20, 2026, the U.S.

Customs and Border Protection launched a platform for importers of record to begin submitting IEEPA tariff refund requests.

As the timing and amount of any recovery are uncertain, we are unable to estimate the financial effects, if any, at this time.

We will continue to evaluate new information and will recognize the refund when the right to receive any amounts becomes probable and estimable.

During the second quarter of fiscal 2026, our Board of Directors approved a quarterly cash dividend to shareholders of $0.62 per share to be paid on May 29, 2026, to shareholders of record as of the close of business on May 15, 2026.

During the two quarters ended March 29, 2026, we made no common stock share repurchases.

As of March 29, 2026, 29.8 million shares of common stock remained available for repurchase under current authorizations.

Other than normal operating expenses, cash requirements for the remainder of fiscal 2026 are expected to consist primarily of repayments of long-term debt, as well as capital expenditures for investments in our new and existing stores, our supply chain, and corporate facilities.

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

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There have been no material changes to our material cash requirements during the period covered by this 10-Q outside of the normal course of our business.

Cash provided by operating activities was $1.6 billion for the first quarter of fiscal 2026, compared to $2.1 billion for the same period in fiscal 2025.

The change was primarily due to a decrease in net earnings of $487.7 million and a net decrease in cash flow of $269.2 million in Accounts Payable, which was primarily driven by payment timing.

Cash provided by operating activities was $2.0 billion for the first two quarters of fiscal 2026, compared to $2.4 billion for the same period in fiscal 2025.

The change was primarily due to a decrease in cash flow of $380.8 million in Accounts Payable, which was primarily driven by payment timing, and a decrease in net earnings of $361.1 million.

These impacts were partially offset by a net increase in cash flow of $375.4 million in deferred income taxes primarily related to the change in indefinite reinvestment assertion as a result of classifying our Starbucks retail operations in China as held for sale.

Cash used in investing activities totaled $0.3 billion for the first quarter of fiscal 2026, compared to $0.9 billion for the same period in fiscal 2025.

The change was primarily due to a net decrease in capital expenditures of $369.2 million driven by a reduction in retail renovations and new store investments in North America, and lapping the acquisition of 23.5 Degrees Topco Limited in the first quarter of fiscal 2025.

Cash used in financing activities for the first quarter of fiscal 2026 totaled $0.7 billion, compared to $0.8 billion for the same period in fiscal 2025, and primarily consisted of cash dividend payments in both periods.

Cash used in investing activities totaled $653.3 million for the first two quarters of fiscal 2026, compared to $1.5 billion for the same period in fiscal 2025.

The change was primarily due to a net decrease in capital expenditures of $685.7 million, driven by a reduction in new store investments and retail renovations in North America and global non-retail facilities spend, and lapping the acquisition of 23.5 Degrees Topco Limited in the first quarter of fiscal 2025.

Cash used in financing activities for the first two quarters of fiscal 2026 totaled $2.4 billion, compared to $1.4 billion for the same period in fiscal 2025.

The change was primarily due to a $1.0 billion repayment of long-term debt in the current year.

Commodity Prices, Availability and General Risk Conditions

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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