STARBUCKS CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Interim Report on Form 10-Q includes certain“forward-looking”statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and the potential future results of Starbucks Corporation (together with its subsidiaries) that are based on our current expectations, estimates, forecasts, and projections about, among other things, our business, our results of operations, the industry in which we operate, our economic and market outlook, and the beliefs and assumptions of our management. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “continues,” “expects,” “anticipates,” “forecasts,” “estimates,” “intends,” “plans,” “seeks,” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could,” “would,” “may,” “aims,” “intends,” or “projects,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. By their nature, forward-looking statements involve risks, uncertainties, and other factors (many beyond our control) that could cause our actual results to differ materially from our historical experience or from our current expectations or projections. Our forward-looking statements, and the risks and uncertainties related thereto, include, but are not limited to, those described under the “Risk Factors” and “Management ’ s Discussion and Analysis of Financial Condition and Results of Operations” sections of our most recently filed 10-K and 10-Q and in other reports we file with the U.S. Securities and Exchange Commission (“SEC”), as well as, among others: • our ability to preserve, grow, and leverage our brands; • the impact of our brand marketing, promotional, advertising, and pricing strategies, platforms, reformulations, innovations, or customer experience initiatives or investments; • 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 joint venture with respect to Starbucks retail operations in China; • our ability to align our investment efforts with our strategic goals; • evolving consumer preferences, demand, consumption, or spending behavior, reduction in discretionary spending and price increases, and our ability to anticipate or react to these changes; • the ability of our business partners, suppliers, and third-party providers to fulfill their responsibilities and commitments and our reliance on certain key business partners and suppliers; • 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; • our heavy reliance on the financial performance of our North America operating segment and our dependence on the performance and growth of certain international markets; • 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; • higher costs, lower quality, or unavailability of coffee, dairy, cocoa, energy, water, raw materials, or product ingredients and related volatility; • the ability of our supply chain to meet current or future business needs and our ability to scale and improve our forecasting, planning, production, and logistics management; • the potential impact on our supply chain and operations of adverse weather conditions, natural disasters, or significant increases in logistics costs; • a worsening in the terms and conditions upon which we engage with our manufacturers and source suppliers; • the impact of unfavorable macroeconomic conditions and other factors, including economic slowdowns or recessions, rising real estate costs, supply chain disruptions, climate change and extreme weather events, inflation and interest rate fluctuations, government shutdowns, labor unrest, geopolitical instability, disruptions in credit markets and foreign current exchange rate volatility; • failure to meet market expectations for our financial performance or any announced guidance and the impact thereof; • failure to attract or retain key executive or partner talent; • 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; 34 Table of Contents • evolving corporate governance and public disclosure regulations and expectations; • the potential impact of activist shareholder actions or tactics; • failure to comply with applicable laws and complex and changing legal and regulatory requirements, including in privacy and data protection; • the impact or likelihood of significant legal disputes and proceedings or government investigations; • the unauthorized access, use, theft, or destruction of our data, or of our proprietary or confidential information and the impact thereof; • potential negative effects of, and our ability to respond to, a material failure, inadequacy, or interruption of our information technology systems or those of our third-party business partners or service providers, or failure to comply with data protection laws; and • our ability to adequately protect our intellectual property or adequately ensure that we are not infringing the intellectual property of others. In addition, many of the foregoing risks and uncertainties are, or could be, exacerbated by any worsening of the global business and economic environment, and new risks periodically emerge. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. We are under no obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. This information should be read in conjunction with the unaudited consolidated financial statements and the notes included in Item 1 of Part I of this 10-Q, 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. 35 Table of Contents Introduction and Overview Starbucks is the premier roaster, marketer, and retailer of specialty coffee globally, with a presence in 90 markets worldwide. 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. We have three reportable operating segments: 1) North America, which is inclusive of the U.S. and Canada; 2) International, which is inclusive of China, Japan, Asia Pacific, Europe, Middle East, Africa, Latin America, and the Caribbean; and 3) Channel Development. Unallocated corporate expenses are reported within Corporate and Other. We believe our financial results and long-term growth model will continue to be driven by new store openings, comparable store sales, and operating margin management, underpinned by disciplined capital allocation. 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. We analyze comparable store sales on a constant currency basis as this helps identify underlying business trends without distortion from the effects of currency movements. Throughout this MD&A, we commonly discuss the following key operating metrics, which we believe 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: • New store openings and store count • Comparable store sales • Operating margin Our fiscal year ends on the Sunday closest to September 30. Fiscal 2026 and 2025 include 52 weeks. All references to store counts, including data for new store openings, are reported net of store closures, unless otherwise noted. Starbucks results for the second quarter of fiscal 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 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 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 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. 36 Table of Contents 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. 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. 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) Revenues Quarter Ended Two Quarters Ended Mar 29, 2026 Mar 30, 2025 $ Change % Change Mar 29, 2026 Mar 30, 2025 $ Change % Change Company-operated stores $ 7,816.4 $ 7,285.0 $ 531.4 7.3 % $ 16,004.4 $ 15,070.3 $ 934.1 6.2 % Licensed stores 1,088.4 1,016.0 72.4 7.1 2,218.8 2,151.7 67.1 3.1 Other 626.7 460.6 166.1 36.1 1,223.4 937.4 286.0 30.5 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 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). 37 Table of Contents 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 Two Quarters Ended Mar 29, 2026 Mar 30, 2025 $ Change Mar 29, 2026 Mar 30, 2025 Mar 29, 2026 Mar 30, 2025 $ Change Mar 29, 2026 Mar 30, 2025 As a % of Total Net Revenues As a % of Total Net Revenues Product and distribution costs $ 3,208.5 $ 2,737.6 $ 470.9 33.7 % 31.2 % $ 6,482.1 $ 5,631.3 $ 850.8 33.3 % 31.0 % Store operating expenses 4,408.6 4,176.0 232.6 46.3 47.7 8,961.0 8,379.1 581.9 46.1 46.1 Other operating expenses 130.5 138.7 (8.2) 1.4 1.6 261.7 291.3 (29.6) 1.3 1.6 Depreciation and amortization expenses 363.4 418.9 (55.5) 3.8 4.8 764.3 826.2 (61.9) 3.9 4.5 General and administrative expenses 618.1 632.3 (14.2) 6.5 7.2 1,256.8 1,298.0 (41.2) 6.5 7.1 Restructuring and impairments 25.1 116.2 (91.1) 0.3 1.3 113.2 116.2 (3.0) 0.6 0.6 Total operating expenses 8,754.2 8,219.7 534.5 91.8 93.8 17,839.1 16,542.1 1,297.0 91.7 91.1 Income from equity investees 50.8 59.1 (8.3) 0.5 0.7 111.3 105.5 5.8 0.6 0.6 Operating income $ 828.1 $ 601.0 $ 227.1 8.7 % 6.9 % $ 1,718.8 $ 1,722.8 $ (4.0) 8.8 % 9.5 % Store operating expenses as a % of company-operated stores revenue 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. 38 Table of Contents 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 $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 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. 39 Table of Contents Other Income and Expenses Quarter Ended Two Quarters Ended Mar 29, 2026 Mar 30, 2025 $ Change Mar 29, 2026 Mar 30, 2025 Mar 29, 2026 Mar 30, 2025 $ Change Mar 29, 2026 Mar 30, 2025 As a % of Total Net Revenues As a % of Total Net Revenues Operating income $ 828.1 $ 601.0 $ 227.1 8.7 % 6.9 % $ 1,718.8 $ 1,722.8 $ (4.0) 8.8 % 9.5 % Interest income and other, net 37.0 28.4 8.6 0.4 0.3 50.1 56.2 (6.1) 0.3 0.3 Interest expense (137.0) (127.3) (9.7) (1.4) (1.5) (276.0) (254.5) (21.5) (1.4) (1.4) Earnings before income taxes 728.1 502.1 226.0 7.6 5.7 1,492.9 1,524.5 (31.6) 7.7 8.4 Income tax expense 217.3 118.0 99.3 2.3 % 1.3 % 688.9 359.4 329.5 3.5 % 2.0 % Net earnings including noncontrolling interests 510.8 384.1 126.7 5.4 4.4 804.0 1,165.1 (361.1) 4.1 6.4 Net earnings/(loss) attributable to noncontrolling interests (0.1) (0.1) 0.0 0.0 0.0 (0.2) 0.1 (0.3) 0.0 0.0 Net earnings attributable to Starbucks $ 510.9 $ 384.2 $ 126.7 5.4 % 4.4 % $ 804.2 $ 1,165.0 $ (360.8) 4.1 % 6.4 % Effective tax rate including noncontrolling interests 29.8 % 23.5 % 46.1 % 23.6 % 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). 40 Table of Contents Segment Information Results of operations by segment (in millions) : North America Quarter Ended Two Quarters Ended Mar 29, 2026 Mar 30, 2025 $ Change Mar 29, 2026 Mar 30, 2025 Mar 29, 2026 Mar 30, 2025 $ Change Mar 29, 2026 Mar 30, 2025 As a % of North America Total Net Revenues As a % of North America Total Net Revenues Net revenues: Company-operated stores $ 6,284.7 $ 5,861.7 $ 423.0 91.2 % 90.6 % $ 12,920.2 $ 12,229.5 $ 690.7 91.2 % 90.3 % Licensed stores 608.0 610.3 (2.3) 8.8 9.4 1,251.2 1,313.0 (61.8) 8.8 9.7 Other 1.1 0.7 0.4 0.0 0.0 2.9 2.1 0.8 0.0 0.0 Total net revenues 6,893.8 6,472.7 421.1 100.0 100.0 14,174.3 13,544.6 629.7 100.0 100.0 Product and distribution costs 2,068.8 1,807.1 261.7 30.0 27.9 4,204.3 3,774.6 429.7 29.7 27.9 Store operating expenses 3,691.9 3,431.6 260.3 53.6 53.0 7,477.0 6,890.1 586.9 52.8 50.9 Other operating expenses 56.0 68.6 (12.6) 0.8 1.1 115.8 147.0 (31.2) 0.8 1.1 Depreciation and amortization expenses 299.5 299.2 0.3 4.3 4.6 598.3 588.1 10.2 4.2 4.3 General and administrative expenses 92.4 96.6 (4.2) 1.3 1.5 186.7 193.9 (7.2) 1.3 1.4 Restructuring and impairments 5.3 21.3 (16.0) 0.1 0.3 45.3 21.3 24.0 0.3 0.2 Total operating expenses 6,213.9 5,724.4 489.5 90.1 88.4 12,627.4 11,615.0 1,012.4 89.1 85.8 Operating income $ 679.9 $ 748.3 $ (68.4) 9.9 % 11.6 % $ 1,546.9 $ 1,929.6 $ (382.7) 10.9 % 14.2 % Store operating expenses as a % of company-operated stores revenue 58.7 % 58.5 % 57.9 % 56.3 % For the quarter ended March 29, 2026, compared with the quarter ended March 30, 2025 Revenues 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 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). 41 Table of Contents For the two quarters ended March 29, 2026, compared with the two quarters ended March 30, 2025 Revenues 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). 42 Table of Contents International Quarter Ended Two Quarters Ended Mar 29, 2026 Mar 30, 2025 $ Change Mar 29, 2026 Mar 30, 2025 Mar 29, 2026 Mar 30, 2025 $ Change Mar 29, 2026 Mar 30, 2025 As a % of International Total Net Revenues As a % of International Total Net Revenues Net revenues: Company-operated stores $ 1,531.7 $ 1,423.3 $ 108.4 74.7 % 76.2 % $ 3,084.2 $ 2,840.8 $ 243.4 74.9 % 76.0 % Licensed stores 480.4 405.7 74.7 23.4 21.7 967.6 838.7 128.9 23.5 22.4 Other 39.0 38.1 0.9 1.9 2.0 64.2 58.9 5.3 1.6 1.6 Total net revenues 2,051.1 1,867.1 184.0 100.0 100.0 4,116.0 3,738.4 377.6 100.0 100.0 Product and distribution costs 749.7 659.8 89.9 36.6 35.3 1,497.8 1,306.8 191.0 36.4 35.0 Store operating expenses 716.7 744.4 (27.7) 34.9 39.9 1,484.0 1,489.0 (5.0) 36.1 39.8 Other operating expenses 55.6 55.1 0.5 2.7 3.0 112.3 115.7 (3.4) 2.7 3.1 Depreciation and amortization expenses 32.6 89.0 (56.4) 1.6 4.8 102.7 178.1 (75.4) 2.5 4.8 General and administrative expenses 89.0 84.8 4.2 4.3 4.5 184.9 177.2 7.7 4.5 4.7 Restructuring and impairments 8.8 16.8 (8.0) 0.4 0.9 52.4 16.8 35.6 1.3 0.4 Total operating expenses 1,652.4 1,649.9 2.5 80.6 88.4 3,434.1 3,283.6 150.5 83.4 87.8 Income/(loss) from equity investees (0.1) (0.2) 0.1 0.0 0.0 (0.5) (0.7) 0.2 0.0 0.0 Operating income $ 398.6 $ 217.0 $ 181.6 19.4 % 11.6 % $ 681.4 $ 454.1 $ 227.3 16.6 % 12.1 % Store operating expenses as a % of company-operated stores revenue 46.8 % 52.3 % 48.1 % 52.4 % For the quarter ended March 29, 2026, compared with the quarter ended March 30, 2025 Revenues 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 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. 43 Table of Contents For the two quarters ended March 29, 2026, compared with the two quarters ended March 30, 2025 Revenues 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 Two Quarters Ended Mar 29, 2026 Mar 30, 2025 $ Change Mar 29, 2026 Mar 30, 2025 Mar 29, 2026 Mar 30, 2025 $ Change Mar 29, 2026 Mar 30, 2025 As a % of Channel Development Total Net Revenues As a % of Channel Development Total Net Revenues Net revenues $ 567.8 $ 409.0 $ 158.8 $ 1,090.5 $ 845.3 $ 245.2 Product and distribution costs 370.5 257.7 112.8 65.3 % 63.0 % 723.1 517.5 205.6 66.3 % 61.2 % Other operating expenses 17.7 15.0 2.7 3.1 3.7 31.5 28.4 3.1 2.9 3.4 General and administrative expenses 0.7 1.2 (0.5) 0.1 0.3 1.9 3.1 (1.2) 0.2 0.4 Restructuring and impairments (0.1) 0.9 (1.0) 0.0 0.2 0.1 0.9 (0.8) 0.0 0.1 Total operating expenses 388.8 274.8 114.0 68.5 67.2 756.6 549.9 206.7 69.4 65.1 Income from equity investees 50.9 59.3 (8.4) 9.0 14.5 111.8 106.2 5.6 10.3 12.6 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 March 29, 2026, compared with the quarter ended March 30, 2025 Revenues 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 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). 44 Table of Contents For the two quarters ended March 29, 2026, compared with the two quarters ended March 30, 2025 Revenues 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 Two Quarters Ended Mar 29, 2026 Mar 30, 2025 $ Change % Change Mar 29, 2026 Mar 30, 2025 $ Change % Change Net revenues: Other $ 18.8 $ 12.8 $ 6.0 46.9 % $ 65.8 $ 31.1 $ 34.7 111.6 % Total net revenues 18.8 12.8 6.0 46.9 65.8 31.1 34.7 111.6 Product and distribution costs 19.5 13.0 6.5 50.0 56.9 32.4 24.5 75.6 Other operating expenses 1.2 — 1.2 nm 2.1 0.2 1.9 950.0 Depreciation and amortization expenses 31.3 30.7 0.6 2.0 63.3 60.0 3.3 5.5 General and administrative expenses 436.0 449.7 (13.7) (3.0) 883.3 923.8 (40.5) (4.4) 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) Operating loss $ (480.3) $ (557.8) $ 77.5 (13.9) % $ (955.2) $ (1,062.5) $ 107.3 (10.1) % Corporate and Other primarily consists of our unallocated corporate expenses and sales of cocoa butter to third parties. Unallocated corporate expenses include corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments. For the quarter ended March 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). 45 Table of Contents Quarterly Store Data Our store data for the periods presented is as follows: Net stores opened/(closed) and transferred during the period (1) Quarter Ended Two Quarters Ended Stores open as of Mar 29, 2026 Mar 30, 2025 Mar 29, 2026 Mar 30, 2025 Mar 29, 2026 Mar 30, 2025 North America Company-operated stores 44 89 104 170 11,122 11,331 Licensed stores (19) 1 (30) 33 7,263 7,296 Total North America 25 90 74 203 18,385 18,627 International Company-operated stores (2) (10) 91 (61) 317 10,435 10,174 Licensed stores (2) (4) 32 126 70 12,309 11,988 Total International (14) 123 65 387 22,744 22,162 Total Company 11 213 139 590 41,129 40,789 (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. Financial Condition, Liquidity, and Capital Resources Cash and Investment Overview 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 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 Credit Facilities and Commercial Paper Revolving Credit Facility Our $3.0 billion unsecured five-year revolving credit facility (the “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 2025 credit facility will bear interest at a fluctuating rate based on the Term Secured Overnight Financing Rate (“Term SOFR”), and, for U.S. dollar-denominated loans under certain circumstances, a Base Rate (as defined in the 2025 credit facility), in each case plus an applicable rate. The applicable rate is based on the Company’s long-term credit ratings assigned by Moody’s and Standard & Poor’s rating agencies. The 2025 credit facility contains alternative interest rate provisions specifying rate calculations to be used at such time Term SOFR ceases to be available as a benchmark due to reference rate reform. The “Base Rate” of interest is the highest of (i) the Federal Funds Rate plus 0.50%, (ii) Bank of America’s prime rate, (iii) Term SOFR plus 1.00%, and (iv) 1.00%. Upon the occurrence of any event of default under the 2025 credit facility, interest on the outstanding amount of the indebtedness under the 2025 credit facility will bear interest at a rate per annum equal to 2% in excess of the interest then borne by such borrowings. The 2025 credit facility contains provisions requiring us to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio, which measures our ability to cover financing expenses. As of March 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. 46 Table of Contents Commercial Paper Under our commercial paper program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $3.0 billion, with individual maturities that may vary but not exceed 397 days from the date of issue. Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under our 2025 credit facility. The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures, and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock, and share repurchases. We had no borrowings outstanding under our commercial paper program as of March 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 Additionally, we hold the following Japanese yen-denominated credit facilities that are available for working capital needs and capital expenditures within our Japanese market: • A ¥5.0 billion, or $31.3 million, credit facility is currently set to mature on December 30, 2026. Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.400%. • A ¥10.0 billion, or $62.6 million, credit facility is currently set to mature on March 27, 2027. Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300%. As of March 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 March 29, 2026, we were in compliance with all applicable covenants. Use of Cash We expect to use our available cash and investments, including, but not limited to, additional potential future borrowings under the credit facilities, commercial paper program, and the issuance of debt to support and invest in our core businesses, including investing in new ways to serve our customers and supporting our store partners, repaying maturing debts, returning cash to shareholders through common stock cash dividend payments and discretionary share repurchases, and investing in new business opportunities related to our core and developing businesses. Furthermore, we may use our available cash resources to make proportionate capital contributions to our investees. We may also seek strategic acquisitions to leverage existing capabilities and further build our business. Acquisitions may include increasing our ownership interests in our investees. Any decisions to increase such ownership interests will be driven by valuation and fit with our ownership strategy. We believe that net future cash flows generated from operations and existing cash and investments both domestically and internationally, combined with our ability to leverage our balance sheet through the issuance of debt, will be sufficient to finance capital requirements for our core businesses as well as shareholder distributions for at least the next 12 months. 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; however, additional borrowings would result in increased interest expense in the future. In this regard, we may incur additional debt, within targeted levels, as part of our plans to fund our capital programs, including cash returns to shareholders through future dividends and discretionary share repurchases, refinancing debt maturities, as well as investing in new business opportunities. If necessary, we may pursue additional sources of financing, including both short-term and long-term borrowings and debt issuances. 47 Table of Contents We regularly review our cash positions and our determination of partial indefinite reinvestment of foreign earnings. In the event we determine that all or another portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes, which could be material. Any foreign earnings that are not indefinitely reinvested may be repatriated at management’s discretion. 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. 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. In the MD&A included in the 10-K, we disclosed that we had $36.5 billion of current and long-term material cash requirements as of September 28, 2025. There have been no material changes to our material cash requirements during the period covered by this 10-Q outside of the normal course of our business. Cash Flows 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 $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 Commodity price risk represents our primary market risk, generated by our purchases of green coffee and dairy products, among other items. We purchase, roast, and sell high-quality arabica coffee and related products, and risk arises from the price volatility of green coffee. In addition to coffee, we also purchase significant amounts of dairy products to support the needs of our company-operated stores. The price and availability of these commodities, including 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 Part 1, Item 1 of the 10-K, as well as Risk Factors in Part I, Item 1A of the 10-K. Seasonality and Quarterly Results Our business is subject to moderate seasonal fluctuations, of which our fiscal second quarter typically experiences lower revenues and operating income. Additionally, as our stored value cards (“Starbucks Cards”) are issued to, and loaded by, customers during the holiday season, we tend to have higher cash flows from operations during the first quarter of the fiscal year. However, since revenues from Starbucks Cards are recognized upon redemption and not when cash is loaded onto the Starbucks Cards, the impact of seasonal fluctuations on the consolidated statements of earnings is much less pronounced. As a result of moderate seasonal fluctuations, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. 48 Table of Contents Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions, and estimates that affect the amounts reported. Note 1 , Summary of Significant Accounting Policies, to the consolidated financial statements included in Item 1 of Part I of this 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 10-K describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 10-K. RECENT ACCOUNTING PRONOUNCEMENTS See Note 1 , Summary of Significant Accounting Policies, to the consolidated financial statements included in Item 1 of Part I of this 10-Q, for a detailed description of recent accounting pronouncements. Item 3. Quantitative and Qualitative Disclosures About Market Risk There has been no material change in the commodity price risk, foreign currency exchange risk, equity security price risk, or interest rate risk discussed in Item 7A of the 10-K.