Starbucks SBUX Form 10-Q filing Q1 FY2025

PART I. FINANCIAL INFORMATION

Item 1 Financial Statements (Unaudited) 3

Consolidated Statements of Earnings 3

Consolidated Statements of Comprehensive Income 4

Consolidated Balance Sheets 5

Consolidated Statements of Cash Flows 6

Consolidated Statements of Equity 7

Index for Notes to Consolidated Financial Statements 8

Notes to Consolidated Financial Statements 9

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 24

Item 3 Quantitative and Qualitative Disclosures About Market Risk 34

Item 4 Controls and Procedures 35

PART II. OTHER INFORMATION

Item 1 Legal Proceedings 36

Item 1A Risk Factors 36

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 36

Item 3 Defaults Upon Senior Securities 36

Item 4 Mine Safety Disclosures 36

Item 5 Other Information 36

Item 6 Exhibits 37

Signatures 38

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

For the Quarter Ended December 29, 2024 and December 31, 2023

(in millions, except per share data, unaudited)

(1) Includes excise tax on share repurchases.

See Notes to Consolidated Financial Statements.

STARBUCKS CORPORATION

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STARBUCKS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1: Summary of Significant Accounting Policies and Estimates

Financial Statement Preparation

The unaudited consolidated financial statements as of December 29, 2024, and for the quarters ended December 29, 2024 and December 31, 2023, have been prepared by Starbucks Corporation under the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the financial information for the quarters ended December 29, 2024 and December 31, 2023 reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods. In this Quarterly Report on Form 10-Q (“10-Q”), Starbucks Corporation (together with its subsidiaries) is referred to as “Starbucks,” the “Company,” “we,” “us,” or “our.”

Segment information is prepared on the same basis that our ceo, who is our Chief Operating Decision Maker, manages the segments, evaluates financial results, and makes key operating decisions.

The financial information as of September 29, 2024 is derived from our audited consolidated financial statements and notes for the fiscal year ended September 29, 2024 (“fiscal 2024”) included in Item 8 in the fiscal 2024 Annual Report on Form 10-K filed with the SEC on November 20, 2024 (“10-K”). The information included in this 10-Q should be read in conjunction with the footnotes and management’s discussion and analysis of the consolidated financial statements in the 10-K.

The results of operations for the quarter ended December 29, 2024 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending September 28, 2025 (“fiscal 2025”).

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance expanding segment disclosure requirements. The amendments require enhanced disclosure for certain segment items and disclosure on how management uses reported measures to assess segment performance. The amendments do not change how segments are determined, aggregated, or how thresholds are applied to determine reportable segments. We expect to adopt the guidance for the fiscal year ending September 28, 2025. We are currently evaluating the expanded disclosure requirements and do not expect the adoption of this guidance to have a significant impact on our consolidated financial statement disclosures.

In December 2023, the FASB issued guidance expanding disclosure requirements related to income taxes. The amendments require enhanced jurisdictional disclosures for the income tax rate reconciliation and related to cash income taxes paid. Additionally, certain disclosures related to unrecognized tax benefits and indefinite reinvestment assertions were removed. The amendments are effective for our fiscal year ending September 27, 2026. While we are still evaluating the specific impacts and timing of adoption, we anticipate this guidance will have a significant impact on our annual income tax disclosures.

In March 2024, the SEC issued its final climate disclosure rules, which require the disclosure of climate-related information in annual reports and registration statements. The rules require disclosure in the audited financial statements of certain effects of severe weather events and other natural conditions above certain financial thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates, if material. Under the rules as originally issued, disclosure requirements begin phasing in for fiscal years beginning on or after January 1, 2025. However, on April 4, 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges. We are currently evaluating the impact of the new rules and continue to monitor the status of the related legal challenges.

In November 2024, the FASB issued guidance expanding disclosure requirements related to certain income statement expenses. The amendments require tabular disclosure of certain operating expenses disaggregated into categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments are effective for our fiscal year ending October 1, 2028, and may be applied retrospectively. While we are still evaluating the specific impacts and adoption method, we anticipate this guidance will have a significant impact on our consolidated financial statement disclosures.

Note 2: Acquisitions, Divestitures, and Strategic Alliance

On October 14, 2024, we acquired a 100% ownership interest in 23.5 Degrees Topco Limited, a U.K. licensed business partner, to expand our portfolio of company-operated stores and enhance the coffeehouse experience for customers. The acquisition converted 113 licensed stores to company-operated stores within our International operating segment.

The assets acquired and liabilities assumed are included in our International operating segment. Assets acquired primarily include operating lease right-of-use assets, intangible assets, goodwill, and property, plant and equipment. The intangible assets acquired as part of this transaction include reacquired licensee agreement rights, which will be amortized over the estimated

useful life. In addition, we assumed various liabilities, primarily consisting of operating lease liabilities. The transaction is not material to our consolidated financial statements.

Note 3: Derivative Financial Instruments

Interest Rates

From time to time, we enter into designated cash flow hedges to manage the variability in cash flows due to changes in benchmark interest rates. We enter into interest rate swap agreements, including forward-starting interest rate swaps and treasury locks, settled in cash based upon the difference between an agreed-upon benchmark rate and the prevailing benchmark rate at settlement. These agreements are generally settled around the time of the pricing of the related debt. Each derivative agreement’s gain or loss is recorded in accumulated other comprehensive income (“AOCI”) and is subsequently reclassified to interest expense over the life of the related debt.

To hedge the exposure to changes in the fair value of our fixed-rate debt, we enter into interest rate swap agreements, which are designated as fair value hedges. The changes in fair values of these derivative instruments and the offsetting changes in fair values of the underlying hedged debt due to changes in the relevant benchmark interest rates are recorded in interest expense. Refer to Note 8, Debt, for additional information on our long-term debt.

Foreign Currency

To reduce cash flow volatility from foreign currency fluctuations, we enter into forward and swap contracts to hedge portions of cash flows of anticipated royalty revenue, inventory purchases, and intercompany borrowing and lending activities. The resulting gains and losses from these derivatives are recorded in AOCI and subsequently reclassified to revenue, product and distribution costs, or interest income and other, net, respectively, when the hedged exposures affect net earnings.

From time to time, we may enter into financial instruments, including, but not limited to, forward and swap contracts or foreign currency-denominated debt, to hedge the currency exposure of our net investments in certain international operations. The resulting gains and losses from these derivatives are recorded in AOCI and are subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated. Gains and losses from these derivatives, representing hedged components excluded from the assessment of effectiveness, are amortized over the life of the hedging instrument using a systematic and rational method and recognized in interest expense.

Foreign currency forward and swap contracts not designated as hedging instruments are used to mitigate the foreign exchange risk of certain other balance sheet items. Gains and losses from these derivatives are largely offset by the financial impact of translating foreign currency-denominated payables and receivables, and these gains and losses are recorded in interest income and other, net.

Commodities

Depending on market conditions, we may enter into coffee forward contracts, futures contracts, and collars to hedge anticipated cash flows under our price-to-be-fixed green coffee contracts, which are described further in Note 5, Inventories, or our longer-dated forecasted coffee demand where underlying fixed price and price-to-be-fixed contracts are not yet available. The resulting gains and losses are recorded in AOCI and are subsequently reclassified to product and distribution costs when the hedged exposure affects net earnings.

Depending on market conditions, we may also enter into dairy forward contracts and futures contracts to hedge a portion of anticipated cash flows under our dairy purchase contracts and our forecasted dairy demand. The resulting gains or losses are recorded in AOCI and are subsequently reclassified to product and distribution costs when the hedged exposure affects net earnings.

Cash flow hedges related to anticipated transactions are designated and documented at the inception of each hedge. Cash flows from hedging transactions are classified in the same categories as the cash flows from the respective hedged items. For de-designated cash flow hedges in which the underlying transactions are no longer probable of occurring or where price variability in the underlying cash flow ceases to exist, the related accumulated derivative gains or losses are recognized in interest income and other, net on our consolidated statements of earnings. These derivatives may be accounted for prospectively as non-designated derivatives until maturity, re-designated to new hedging relationships, or terminated early. We continue to believe transactions related to our designated cash flow hedges are probable to occur.

To mitigate the price uncertainty of a portion of our future purchases, including diesel fuel and other commodities, we enter into swap contracts, futures, and collars that are not designated as hedging instruments. The resulting gains and losses are recorded in interest income and other, net to help offset price fluctuations on our beverage, food, packaging, and transportation costs, which are included in product and distribution costs on our consolidated statements of earnings.

Gains and losses on derivative contracts and foreign currency-denominated debt designated as hedging instruments included in AOCI and expected to be reclassified into earnings within 12 months, net of tax (in millions):

Pre-tax gains and losses on derivative contracts and foreign currency-denominated long-term debt designated as hedging instruments recognized in other comprehensive income (“OCI”) and reclassifications from AOCI to earnings (in millions):

(1) Gains and losses recognized in earnings relate to components excluded from the assessment of effectiveness.

Pre-tax gains and losses on non-designated derivatives and designated fair value hedging instruments and the related fair value hedged item recognized in earnings (in millions):

Notional amounts of outstanding derivative contracts (in millions):

Fair value of outstanding derivative contracts (in millions) including the location of the asset and/or liability on the consolidated balance sheets:

(1) We also hold cash and cash equivalents from various settled-to-market exchange traded futures related to coffee and dairy hedging.

The following amounts were recorded on the consolidated balance sheets related to fixed-to-floating interest rate swaps designated in fair value hedging relationships (in millions):

Additional disclosures related to cash flow gains and losses included in AOCI, as well as subsequent reclassifications to earnings, are included in Note 11, Equity.

Note 4: Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis (in millions):

There were no material transfers between levels, and there was no significant activity within Level 3 instruments during the periods presented. The fair values of any financial instruments presented above exclude the impact of netting assets and liabilities when a legally enforceable master netting agreement exists.

Gross unrealized holding gains and losses on available-for-sale debt securities, structured deposits, and marketable equity securities were not material as of December 29, 2024 and September 29, 2024.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, right-of-use assets, goodwill and other intangible assets, equity and other investments, and other assets. These assets are measured at fair value if determined to be impaired.

The estimated fair value of our long-term debt based on the quoted market price (Level 2) is included at Note 8, Debt. There were no material fair value adjustments during the quarter ended December 29, 2024 and December 31, 2023.

Note 5: Inventories (in millions):

(1)“Other merchandise held for sale” includes, among other items, serveware, food, and tea. Inventory levels vary due to seasonality, commodity market supply, and price fluctuations.

As of December 29, 2024, we had committed to purchasing green coffee totaling $311 million under fixed-price contracts and an estimated $845 million under price-to-be-fixed contracts. A portion of our price-to-be-fixed contracts are effectively fixed through the use of futures. See Note 3, Derivative Financial Instruments, for further discussion. Price-to-be-fixed contracts are purchase commitments whereby the quality, quantity, delivery period, and other negotiated terms are agreed upon, but the date, and therefore the price, at which the base “C” coffee commodity price component will be fixed has not yet been established. For most contracts, either Starbucks or the seller has the option to “fix” the base “C” coffee commodity price prior to the delivery date. For other contracts, Starbucks and the seller may agree upon pricing parameters determined by the base “C” coffee commodity price. Until prices are fixed, we estimate the total cost of these purchase commitments. We believe, based on established relationships with our suppliers and continuous monitoring, the risk of non-delivery on these purchase commitments is remote.

Note 6: Supplemental Balance Sheet and Statement of Earnings Information (in millions):

Property, Plant and Equipment, net

Accrued Liabilities

Store Operating Expenses

Note 7: Other Intangible Assets and Goodwill

Indefinite-Lived Intangible Assets

Finite-Lived Intangible Assets

Amortization expense for finite-lived intangible assets was $5.6 million for the quarter ended December 29, 2024 and $5.1 million for the quarter ended December 31, 2023.

Estimated future amortization expense as of December 29, 2024 (in millions):

Goodwill

Changes in the carrying amount of goodwill by reportable operating segment (in millions):

(1) Additions to goodwill include the acquisition of 23.5 Degrees Topco Limited in the first quarter of fiscal 2025.

(2)“Other” consists of changes in the goodwill balance resulting from foreign currency translation.

Note 8: Debt

Revolving Credit Facility

Our $3.0 billion unsecured five-year revolving credit facility (the “2021 credit facility”), of which $150.0 million may be used for issuances of letters of credit, is currently set to mature on September 16, 2026. The 2021 credit facility is available for working capital, capital expenditures, and other corporate purposes, including acquisitions and share repurchases. We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $1.0 billion.

Borrowings under the 2021 credit facility, which was most recently amended in April 2023, will bear interest at a variable rate based on Term SOFR, and, for U.S. dollar-denominated loans under certain circumstances, a Base Rate (as defined in the 2021 credit facility), in each case plus an applicable margin. The applicable margin is based on the Company’s long-term credit ratings assigned by the Moody’s and Standard & Poor’s rating agencies. The “Base Rate” is the highest of (i) the Federal Funds Rate (as defined in the 2021 credit facility) plus 0.500%, (ii) Bank of America’s prime rate, and (iii) Term SOFR plus 1.000%. Term SOFR means the forward-looking SOFR term rate administrated by the Chicago Mercantile Exchange plus a SOFR Adjustment of 0.100%.

The 2021 credit facility contains provisions requiring us to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio, which measures our ability to cover financing expenses. As of December 29, 2024, we were in compliance with all applicable covenants. No amounts were outstanding under our 2021 credit facility as of December 29, 2024 or September 29, 2024.

Short-term Debt

Under our commercial paper program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $3.0 billion, with individual maturities that may vary but not exceed 397 days from the date of issue. Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under our 2021 credit facility. The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures, and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock, and share repurchases. We had no borrowings outstanding under our commercial paper program as of December 29, 2024 and September 29, 2024.

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 $31.6 million, credit facility is currently set to mature on December 30, 2025. Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on Tokyo Interbank Offered Rate (“TIBOR”) plus an applicable margin of 0.400%.
• A ¥10.0 billion, or $63.3 million, credit facility is currently set to mature on March 27, 2025. Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300%.

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

Long-term Debt

Components of long-term debt including the associated interest rates and related estimated fair values by calendar maturity (in millions, except interest rates):

(1) Includes the effects of the amortization of any premium or discount and any gain or loss upon settlement of related treasury locks or forward-starting interest rate swaps utilized to hedge interest rate risk prior to the debt issuance.

(2) Amount includes the change in fair value due to changes in benchmark interest rates related to hedging $350.0 million of our August 2029 notes. Refer to Note 3, Derivative Financial Instruments, for additional information on our interest rate swap agreements designated as fair value hedges.

The following table summarizes our long-term debt maturities as of December 29, 2024 by fiscal year (in millions):

Note 9: Leases

The components of lease costs (in millions):

(1) Includes immaterial amounts of sublease income and rent concessions.

The following table includes supplemental information (in millions):

(1) Includes leases obtained in the acquisition of 23.5 Degrees Topco Limited in the first quarter of fiscal 2025.

Finance lease assets are recorded in property, plant and equipment, net with the corresponding lease liabilities included in accrued liabilities and other long-term liabilities on the consolidated balance sheet. These balances were not material as of December 29, 2024 and September 29, 2024. Finance lease costs were also immaterial for the quarters ended December 29, 2024 and December 31, 2023.

Minimum future maturities of operating lease liabilities (in millions):

As of December 29, 2024, we have entered into operating leases that have not yet commenced of $1.6 billion, primarily related to real estate leases. These leases will commence between fiscal year 2025 and fiscal year 2029 with lease terms ranging from five years to twenty years.

Note 10: Deferred Revenue

Our deferred revenue primarily consists of the prepaid royalty from Nestlé, for which we have continuing performance obligations to support the Global Coffee Alliance, our unredeemed stored value card liability, and unredeemed loyalty points (“Stars”) associated with our loyalty program.

As of December 29, 2024 and September 29, 2024, the current and long-term deferred revenue related to the Nestlé up-front payment was $177.0 million and $5.8 billion, respectively. During each of the quarters ended December 29, 2024 and December 31, 2023, we recognized $44.1 million of prepaid royalty revenue related to Nestlé.

Changes in our deferred revenue balance related to our stored value cards and loyalty program (in millions):

(1)“Other” primarily consists of changes in the stored value cards and loyalty program balances resulting from foreign currency translation.

(2) As of December 29, 2024 and December 31, 2023, approximately $2.1 billion and $2.0 billion, respectively, of these amounts were current.

Note 11: Equity

Changes in AOCI by component, net of tax (in millions):

Impact of reclassifications from AOCI on the consolidated statements of earnings (in millions):

In addition to 2.4 billion shares of authorized common stock with $0.001 par value per share, we have 7.5 million shares of authorized preferred stock, none of which was outstanding as of December 29, 2024.

During the quarter ended December 29, 2024, we made no share repurchases. During the quarter ended December 31, 2023, we repurchased 12.8 million shares of common stock on the open market for $1,250.1 million. As of December 29, 2024, 29.8 million shares remained available for repurchase under current authorizations.

During the first quarter of fiscal 2025, our Board of Directors approved a quarterly cash dividend to shareholders of $0.61 per share to be paid on February 28, 2025 to shareholders of record as of the close of business on February 14, 2025.

Note 12: Employee Stock Plans

As of December 29, 2024, there were 75.3 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 9.5 million shares available for issuance under our employee stock purchase plan.

Stock-based compensation expense recognized in the consolidated statements of earnings (in millions):

Stock option and RSU transactions from September 29, 2024 through December 29, 2024 (in millions):

Note 13: Earnings per Share

Calculation of net earnings per common share (“EPS”) — basic and diluted (in millions, except EPS):

Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options (both vested and non-vested) and unvested RSUs, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes anti-dilutive stock options or unvested RSUs, which were immaterial in the periods presented.

Note 14: Commitments and Contingencies

Legal Proceedings

Starbucks is involved in various legal proceedings arising in the ordinary course of business, including litigation matters associated with labor union organizing efforts and certain employment litigation cases that have been certified as class or collective actions, but is not currently a party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations, or cash flows. While we are closely monitoring the operational and financial impacts of labor union organizing efforts on our business, as of the date of this filing, we believe the risk of a material contingent loss associated with these litigation matters is remote. Refer to the Risk Factors in Part I, Item 1A of our most recently filed 10-K for further discussion of potential risks to our brand and related impacts on our financial results.

Note 15: Segment Reporting

Segment information is prepared on the same basis that our chief executive officer, who is our Chief Operating Decision Maker, manages the segments, evaluates financial results, and makes key operating decisions.

Consolidated revenue mix by product type (in millions):

(1)“Beverage” represents sales within our company-operated stores.

(2)“Food” includes sales within our company-operated stores.

(3)“Other” primarily consists of packaged and single-serve coffees and teas, royalty and licensing revenues, beverage-related ingredients, and serveware, among other items.

The tables below present financial information for our reportable operating segments and Corporate and Other (in millions):

Quarter Ended

Item 1F. Financial Statements (Unaudited)

Item 1.Financial Statements

See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

For the Quarter Ended December 29, 2024 and December 31, 2023

(in millions, except per share data, unaudited)

(1) Includes excise tax on share repurchases.

See Notes to Consolidated Financial Statements.

STARBUCKS CORPORATION

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STARBUCKS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1: Summary of Significant Accounting Policies and Estimates

Financial Statement Preparation

The unaudited consolidated financial statements as of December 29, 2024, and for the quarters ended December 29, 2024 and December 31, 2023, have been prepared by Starbucks Corporation under the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the financial information for the quarters ended December 29, 2024 and December 31, 2023 reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods. In this Quarterly Report on Form 10-Q (“10-Q”), Starbucks Corporation (together with its subsidiaries) is referred to as “Starbucks,” the “Company,” “we,” “us,” or “our.”

Segment information is prepared on the same basis that our ceo, who is our Chief Operating Decision Maker, manages the segments, evaluates financial results, and makes key operating decisions.

The financial information as of September 29, 2024 is derived from our audited consolidated financial statements and notes for the fiscal year ended September 29, 2024 (“fiscal 2024”) included in Item 8 in the fiscal 2024 Annual Report on Form 10-K filed with the SEC on November 20, 2024 (“10-K”). The information included in this 10-Q should be read in conjunction with the footnotes and management’s discussion and analysis of the consolidated financial statements in the 10-K.

The results of operations for the quarter ended December 29, 2024 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending September 28, 2025 (“fiscal 2025”).

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance expanding segment disclosure requirements. The amendments require enhanced disclosure for certain segment items and disclosure on how management uses reported measures to assess segment performance. The amendments do not change how segments are determined, aggregated, or how thresholds are applied to determine reportable segments. We expect to adopt the guidance for the fiscal year ending September 28, 2025. We are currently evaluating the expanded disclosure requirements and do not expect the adoption of this guidance to have a significant impact on our consolidated financial statement disclosures.

In December 2023, the FASB issued guidance expanding disclosure requirements related to income taxes. The amendments require enhanced jurisdictional disclosures for the income tax rate reconciliation and related to cash income taxes paid. Additionally, certain disclosures related to unrecognized tax benefits and indefinite reinvestment assertions were removed. The amendments are effective for our fiscal year ending September 27, 2026. While we are still evaluating the specific impacts and timing of adoption, we anticipate this guidance will have a significant impact on our annual income tax disclosures.

In March 2024, the SEC issued its final climate disclosure rules, which require the disclosure of climate-related information in annual reports and registration statements. The rules require disclosure in the audited financial statements of certain effects of severe weather events and other natural conditions above certain financial thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates, if material. Under the rules as originally issued, disclosure requirements begin phasing in for fiscal years beginning on or after January 1, 2025. However, on April 4, 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges. We are currently evaluating the impact of the new rules and continue to monitor the status of the related legal challenges.

In November 2024, the FASB issued guidance expanding disclosure requirements related to certain income statement expenses. The amendments require tabular disclosure of certain operating expenses disaggregated into categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments are effective for our fiscal year ending October 1, 2028, and may be applied retrospectively. While we are still evaluating the specific impacts and adoption method, we anticipate this guidance will have a significant impact on our consolidated financial statement disclosures.

Note 2: Acquisitions, Divestitures, and Strategic Alliance

On October 14, 2024, we acquired a 100% ownership interest in 23.5 Degrees Topco Limited, a U.K. licensed business partner, to expand our portfolio of company-operated stores and enhance the coffeehouse experience for customers. The acquisition converted 113 licensed stores to company-operated stores within our International operating segment.

The assets acquired and liabilities assumed are included in our International operating segment. Assets acquired primarily include operating lease right-of-use assets, intangible assets, goodwill, and property, plant and equipment. The intangible assets acquired as part of this transaction include reacquired licensee agreement rights, which will be amortized over the estimated

useful life. In addition, we assumed various liabilities, primarily consisting of operating lease liabilities. The transaction is not material to our consolidated financial statements.

Note 3: Derivative Financial Instruments

Interest Rates

From time to time, we enter into designated cash flow hedges to manage the variability in cash flows due to changes in benchmark interest rates. We enter into interest rate swap agreements, including forward-starting interest rate swaps and treasury locks, settled in cash based upon the difference between an agreed-upon benchmark rate and the prevailing benchmark rate at settlement. These agreements are generally settled around the time of the pricing of the related debt. Each derivative agreement’s gain or loss is recorded in accumulated other comprehensive income (“AOCI”) and is subsequently reclassified to interest expense over the life of the related debt.

To hedge the exposure to changes in the fair value of our fixed-rate debt, we enter into interest rate swap agreements, which are designated as fair value hedges. The changes in fair values of these derivative instruments and the offsetting changes in fair values of the underlying hedged debt due to changes in the relevant benchmark interest rates are recorded in interest expense. Refer to Note 8, Debt, for additional information on our long-term debt.

Foreign Currency

To reduce cash flow volatility from foreign currency fluctuations, we enter into forward and swap contracts to hedge portions of cash flows of anticipated royalty revenue, inventory purchases, and intercompany borrowing and lending activities. The resulting gains and losses from these derivatives are recorded in AOCI and subsequently reclassified to revenue, product and distribution costs, or interest income and other, net, respectively, when the hedged exposures affect net earnings.

From time to time, we may enter into financial instruments, including, but not limited to, forward and swap contracts or foreign currency-denominated debt, to hedge the currency exposure of our net investments in certain international operations. The resulting gains and losses from these derivatives are recorded in AOCI and are subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated. Gains and losses from these derivatives, representing hedged components excluded from the assessment of effectiveness, are amortized over the life of the hedging instrument using a systematic and rational method and recognized in interest expense.

Foreign currency forward and swap contracts not designated as hedging instruments are used to mitigate the foreign exchange risk of certain other balance sheet items. Gains and losses from these derivatives are largely offset by the financial impact of translating foreign currency-denominated payables and receivables, and these gains and losses are recorded in interest income and other, net.

Commodities

Depending on market conditions, we may enter into coffee forward contracts, futures contracts, and collars to hedge anticipated cash flows under our price-to-be-fixed green coffee contracts, which are described further in Note 5, Inventories, or our longer-dated forecasted coffee demand where underlying fixed price and price-to-be-fixed contracts are not yet available. The resulting gains and losses are recorded in AOCI and are subsequently reclassified to product and distribution costs when the hedged exposure affects net earnings.

Depending on market conditions, we may also enter into dairy forward contracts and futures contracts to hedge a portion of anticipated cash flows under our dairy purchase contracts and our forecasted dairy demand. The resulting gains or losses are recorded in AOCI and are subsequently reclassified to product and distribution costs when the hedged exposure affects net earnings.

Cash flow hedges related to anticipated transactions are designated and documented at the inception of each hedge. Cash flows from hedging transactions are classified in the same categories as the cash flows from the respective hedged items. For de-designated cash flow hedges in which the underlying transactions are no longer probable of occurring or where price variability in the underlying cash flow ceases to exist, the related accumulated derivative gains or losses are recognized in interest income and other, net on our consolidated statements of earnings. These derivatives may be accounted for prospectively as non-designated derivatives until maturity, re-designated to new hedging relationships, or terminated early. We continue to believe transactions related to our designated cash flow hedges are probable to occur.

To mitigate the price uncertainty of a portion of our future purchases, including diesel fuel and other commodities, we enter into swap contracts, futures, and collars that are not designated as hedging instruments. The resulting gains and losses are recorded in interest income and other, net to help offset price fluctuations on our beverage, food, packaging, and transportation costs, which are included in product and distribution costs on our consolidated statements of earnings.

Gains and losses on derivative contracts and foreign currency-denominated debt designated as hedging instruments included in AOCI and expected to be reclassified into earnings within 12 months, net of tax (in millions):

Pre-tax gains and losses on derivative contracts and foreign currency-denominated long-term debt designated as hedging instruments recognized in other comprehensive income (“OCI”) and reclassifications from AOCI to earnings (in millions):

(1) Gains and losses recognized in earnings relate to components excluded from the assessment of effectiveness.

Pre-tax gains and losses on non-designated derivatives and designated fair value hedging instruments and the related fair value hedged item recognized in earnings (in millions):

Notional amounts of outstanding derivative contracts (in millions):

Fair value of outstanding derivative contracts (in millions) including the location of the asset and/or liability on the consolidated balance sheets:

(1) We also hold cash and cash equivalents from various settled-to-market exchange traded futures related to coffee and dairy hedging.

The following amounts were recorded on the consolidated balance sheets related to fixed-to-floating interest rate swaps designated in fair value hedging relationships (in millions):

Additional disclosures related to cash flow gains and losses included in AOCI, as well as subsequent reclassifications to earnings, are included in Note 11, Equity.

Note 4: Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis (in millions):

There were no material transfers between levels, and there was no significant activity within Level 3 instruments during the periods presented. The fair values of any financial instruments presented above exclude the impact of netting assets and liabilities when a legally enforceable master netting agreement exists.

Gross unrealized holding gains and losses on available-for-sale debt securities, structured deposits, and marketable equity securities were not material as of December 29, 2024 and September 29, 2024.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, right-of-use assets, goodwill and other intangible assets, equity and other investments, and other assets. These assets are measured at fair value if determined to be impaired.

The estimated fair value of our long-term debt based on the quoted market price (Level 2) is included at Note 8, Debt. There were no material fair value adjustments during the quarter ended December 29, 2024 and December 31, 2023.

Note 5: Inventories (in millions):

(1)“Other merchandise held for sale” includes, among other items, serveware, food, and tea. Inventory levels vary due to seasonality, commodity market supply, and price fluctuations.

As of December 29, 2024, we had committed to purchasing green coffee totaling $311 million under fixed-price contracts and an estimated $845 million under price-to-be-fixed contracts. A portion of our price-to-be-fixed contracts are effectively fixed through the use of futures. See Note 3, Derivative Financial Instruments, for further discussion. Price-to-be-fixed contracts are purchase commitments whereby the quality, quantity, delivery period, and other negotiated terms are agreed upon, but the date, and therefore the price, at which the base “C” coffee commodity price component will be fixed has not yet been established. For most contracts, either Starbucks or the seller has the option to “fix” the base “C” coffee commodity price prior to the delivery date. For other contracts, Starbucks and the seller may agree upon pricing parameters determined by the base “C” coffee commodity price. Until prices are fixed, we estimate the total cost of these purchase commitments. We believe, based on established relationships with our suppliers and continuous monitoring, the risk of non-delivery on these purchase commitments is remote.

Note 6: Supplemental Balance Sheet and Statement of Earnings Information (in millions):

Property, Plant and Equipment, net

Accrued Liabilities

Store Operating Expenses

Note 7: Other Intangible Assets and Goodwill

Indefinite-Lived Intangible Assets

Finite-Lived Intangible Assets

Amortization expense for finite-lived intangible assets was $5.6 million for the quarter ended December 29, 2024 and $5.1 million for the quarter ended December 31, 2023.

Estimated future amortization expense as of December 29, 2024 (in millions):

Goodwill

Changes in the carrying amount of goodwill by reportable operating segment (in millions):

(1) Additions to goodwill include the acquisition of 23.5 Degrees Topco Limited in the first quarter of fiscal 2025.

(2)“Other” consists of changes in the goodwill balance resulting from foreign currency translation.

Note 8: Debt

Revolving Credit Facility

Our $3.0 billion unsecured five-year revolving credit facility (the “2021 credit facility”), of which $150.0 million may be used for issuances of letters of credit, is currently set to mature on September 16, 2026. The 2021 credit facility is available for working capital, capital expenditures, and other corporate purposes, including acquisitions and share repurchases. We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $1.0 billion.

Borrowings under the 2021 credit facility, which was most recently amended in April 2023, will bear interest at a variable rate based on Term SOFR, and, for U.S. dollar-denominated loans under certain circumstances, a Base Rate (as defined in the 2021 credit facility), in each case plus an applicable margin. The applicable margin is based on the Company’s long-term credit ratings assigned by the Moody’s and Standard & Poor’s rating agencies. The “Base Rate” is the highest of (i) the Federal Funds Rate (as defined in the 2021 credit facility) plus 0.500%, (ii) Bank of America’s prime rate, and (iii) Term SOFR plus 1.000%. Term SOFR means the forward-looking SOFR term rate administrated by the Chicago Mercantile Exchange plus a SOFR Adjustment of 0.100%.

The 2021 credit facility contains provisions requiring us to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio, which measures our ability to cover financing expenses. As of December 29, 2024, we were in compliance with all applicable covenants. No amounts were outstanding under our 2021 credit facility as of December 29, 2024 or September 29, 2024.

Short-term Debt

Under our commercial paper program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $3.0 billion, with individual maturities that may vary but not exceed 397 days from the date of issue. Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under our 2021 credit facility. The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures, and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock, and share repurchases. We had no borrowings outstanding under our commercial paper program as of December 29, 2024 and September 29, 2024.

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 $31.6 million, credit facility is currently set to mature on December 30, 2025. Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on Tokyo Interbank Offered Rate (“TIBOR”) plus an applicable margin of 0.400%.
• A ¥10.0 billion, or $63.3 million, credit facility is currently set to mature on March 27, 2025. Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300%.

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

Long-term Debt

Components of long-term debt including the associated interest rates and related estimated fair values by calendar maturity (in millions, except interest rates):

(1) Includes the effects of the amortization of any premium or discount and any gain or loss upon settlement of related treasury locks or forward-starting interest rate swaps utilized to hedge interest rate risk prior to the debt issuance.

(2) Amount includes the change in fair value due to changes in benchmark interest rates related to hedging $350.0 million of our August 2029 notes. Refer to Note 3, Derivative Financial Instruments, for additional information on our interest rate swap agreements designated as fair value hedges.

The following table summarizes our long-term debt maturities as of December 29, 2024 by fiscal year (in millions):

Note 9: Leases

The components of lease costs (in millions):

(1) Includes immaterial amounts of sublease income and rent concessions.

The following table includes supplemental information (in millions):

(1) Includes leases obtained in the acquisition of 23.5 Degrees Topco Limited in the first quarter of fiscal 2025.

Finance lease assets are recorded in property, plant and equipment, net with the corresponding lease liabilities included in accrued liabilities and other long-term liabilities on the consolidated balance sheet. These balances were not material as of December 29, 2024 and September 29, 2024. Finance lease costs were also immaterial for the quarters ended December 29, 2024 and December 31, 2023.

Minimum future maturities of operating lease liabilities (in millions):

As of December 29, 2024, we have entered into operating leases that have not yet commenced of $1.6 billion, primarily related to real estate leases. These leases will commence between fiscal year 2025 and fiscal year 2029 with lease terms ranging from five years to twenty years.

Note 10: Deferred Revenue

Our deferred revenue primarily consists of the prepaid royalty from Nestlé, for which we have continuing performance obligations to support the Global Coffee Alliance, our unredeemed stored value card liability, and unredeemed loyalty points (“Stars”) associated with our loyalty program.

As of December 29, 2024 and September 29, 2024, the current and long-term deferred revenue related to the Nestlé up-front payment was $177.0 million and $5.8 billion, respectively. During each of the quarters ended December 29, 2024 and December 31, 2023, we recognized $44.1 million of prepaid royalty revenue related to Nestlé.

Changes in our deferred revenue balance related to our stored value cards and loyalty program (in millions):

(1)“Other” primarily consists of changes in the stored value cards and loyalty program balances resulting from foreign currency translation.

(2) As of December 29, 2024 and December 31, 2023, approximately $2.1 billion and $2.0 billion, respectively, of these amounts were current.

Note 11: Equity

Changes in AOCI by component, net of tax (in millions):

Impact of reclassifications from AOCI on the consolidated statements of earnings (in millions):

In addition to 2.4 billion shares of authorized common stock with $0.001 par value per share, we have 7.5 million shares of authorized preferred stock, none of which was outstanding as of December 29, 2024.

During the quarter ended December 29, 2024, we made no share repurchases. During the quarter ended December 31, 2023, we repurchased 12.8 million shares of common stock on the open market for $1,250.1 million. As of December 29, 2024, 29.8 million shares remained available for repurchase under current authorizations.

During the first quarter of fiscal 2025, our Board of Directors approved a quarterly cash dividend to shareholders of $0.61 per share to be paid on February 28, 2025 to shareholders of record as of the close of business on February 14, 2025.

Note 12: Employee Stock Plans

As of December 29, 2024, there were 75.3 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 9.5 million shares available for issuance under our employee stock purchase plan.

Stock-based compensation expense recognized in the consolidated statements of earnings (in millions):

Stock option and RSU transactions from September 29, 2024 through December 29, 2024 (in millions):

Note 13: Earnings per Share

Calculation of net earnings per common share (“EPS”) — basic and diluted (in millions, except EPS):

Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options (both vested and non-vested) and unvested RSUs, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes anti-dilutive stock options or unvested RSUs, which were immaterial in the periods presented.

Note 14: Commitments and Contingencies

Legal Proceedings

Starbucks is involved in various legal proceedings arising in the ordinary course of business, including litigation matters associated with labor union organizing efforts and certain employment litigation cases that have been certified as class or collective actions, but is not currently a party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations, or cash flows. While we are closely monitoring the operational and financial impacts of labor union organizing efforts on our business, as of the date of this filing, we believe the risk of a material contingent loss associated with these litigation matters is remote. Refer to the Risk Factors in Part I, Item 1A of our most recently filed 10-K for further discussion of potential risks to our brand and related impacts on our financial results.

Note 15: Segment Reporting

Segment information is prepared on the same basis that our chief executive officer, who is our Chief Operating Decision Maker, manages the segments, evaluates financial results, and makes key operating decisions.

Consolidated revenue mix by product type (in millions):

(1)“Beverage” represents sales within our company-operated stores.

(2)“Food” includes sales within our company-operated stores.

(3)“Other” primarily consists of packaged and single-serve coffees and teas, royalty and licensing revenues, beverage-related ingredients, and serveware, among other items.

The tables below present financial information for our reportable operating segments and Corporate and Other (in millions):

Quarter Ended

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction and Overview

Starbucks is the premier roaster, marketer, and retailer of specialty coffee globally, with a presence in 88 markets worldwide. As of December 29, 2024, Starbucks had more than 40,500 company-operated and licensed stores, an increase of 5% from the prior year. Additionally, we sell a variety of consumer-packaged goods, primarily through the Global Coffee Alliance established with Nestlé and other partnerships and joint ventures.

We have three reportable operating segments: 1) North America, which is inclusive of the U.S. and Canada; 2) International, which is inclusive of China, Japan, Asia Pacific, Europe, Middle East, Africa, Latin America, and the Caribbean; and 3) Channel Development. Unallocated corporate expenses are reported within Corporate and Other.

We believe our financial results and long-term growth model will continue to be driven by new store openings, comparable store sales, and operating margin management, underpinned by disciplined capital allocation. We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies. Throughout this MD&A, we commonly discuss the following key operating metrics:

• New store openings and store count
• Comparable store sales
• Operating margin

Comparable store sales represents the percentage change in sales in one period from the same prior year period for company-operated stores open for 13 months or longer and excludes the impact of foreign currency translation. We analyze comparable store sales on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements. Stores that are temporarily closed or operating at reduced hours remain in comparable store sales while stores identified for permanent closure have been removed.

Our fiscal year ends on the Sunday closest to September 30. Fiscal 2025 and 2024 include 52 weeks. All references to store counts, including data for new store openings, are reported net of store closures, unless otherwise noted.

Starbucks results for the first quarter of fiscal 2025 reflect early progress toward our “Back to Starbucks” plan, as we focused on strategic actions, targeted investments, and operational efficiencies to drive gradual top-line improvements. During the first quarter of fiscal 2025, consolidated net revenues were flat compared to the first quarter of fiscal 2024, primarily driven by a decline in global comparable store sales and lower product and equipment sales to our licensees, partially offset by incremental revenues from net new company-operated store openings over the past 12 months. During the quarter ended December 29, 2024, our global comparable store sales declined 4%, primarily driven by a 4% decline in the U.S. market and a 4% decline internationally. Specific to the U.S. market, the decrease in comparable store sales was driven by an 8% decrease in comparable transactions, partially offset by a 4% increase in average ticket, primarily due to annualization of pricing, attach, and fewer discounts. These drivers more than offset mix shift into lower priced beverages, and the removal of the extra charge for non-dairy milk customizations. Consolidated operating margin contracted 390 basis points from the prior year to 11.9%, primarily driven by deleverage, investments in support of “Back to Starbucks,” including store partner wages, benefits, and hours, and the removal of the extra charge for non-dairy milk customizations. The contraction was partially offset by the annualization of pricing and supply chain efficiencies.

As we look ahead, for the balance of this fiscal year, we will continue to learn and implement our “Back to Starbucks” plan, building momentum from this first quarter of fiscal 2025. We will continue to focus our efforts on making disciplined investments that align with our strategies of supporting our green apron partners, re-introducing Starbucks to the world, enhancing the customer experience to win the morning, and reestablishing ourselves as the community coffeehouse.

Results of Operations (in millions)

Revenues

For the quarter ended December 29, 2024 compared with the quarter ended December 31, 2023

Total net revenues for the first quarter of fiscal 2025 decreased $28 million, primarily due to lower revenues from licensed stores ($56 million), partially offset by an increase in revenues from company-operated stores ($30 million).

Company-operated store revenue increased $30 million, primarily driven by incremental revenues from 1,347 net new company-operated stores, or a 7% increase, over the past 12 months ($301 million), and incremental revenue from the conversion of 113 licensed stores to company-operated stores ($27 million) following the acquisition of 23.5 Degrees Topco Limited, a U.K. licensed business partner, during the quarter. These increases in net revenue were partially offset by a 4% decrease in comparable store sales ($283 million), attributable to a 6% decrease in comparable transactions, partially offset by a 3% increase in average ticket, as well as unfavorable foreign currency translation impacts ($18 million).

Licensed stores revenue decreased $56 million, primarily driven by lower product and equipment sales to our licensees ($39 million), the impact of the acquisition of 23.5 Degrees Topco Limited ($9 million), and unfavorable foreign currency translation impacts ($8 million).

Operating Expenses

For the quarter ended December 29, 2024 compared with the quarter ended December 31, 2023

Product and distribution costs as a percentage of total net revenues decreased 80 basis points for the first quarter of fiscal 2025, primarily due to supply chain efficiencies (approximately 70 basis points).

Store operating expenses as a percentage of total net revenues increased 380 basis points for the first quarter of fiscal 2025. Store operating expenses as a percentage of company-operated stores revenue increased 430 basis points, primarily due to deleverage (approximately 260 basis points) and investments in support of “Back to Starbucks,” including store partner wages, benefits, and hours (approximately 190 basis points).

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

General and administrative expenses increased $18 million, primarily due to increased costs to support leadership transitions ($13 million) and incremental investments in technology ($10 million).

Income from equity investees decreased $9 million, primarily due to higher costs in our North American Coffee Partnership joint venture income.

The combination of these changes resulted in an overall decrease in operating margin of 390 basis points for the first quarter of fiscal 2025.

Other Income and Expenses

For the quarter ended December 29, 2024 compared with the quarter ended December 31, 2023

Interest income and other, net, decreased $6 million, primarily due to higher foreign currency exchange losses and lower interest rates in the current year.

Interest expense decreased $13 million, primarily due to savings from cross-currency interest rate hedging, partially offset by higher interest rates on refinanced long-term debt.

The effective tax rate for the quarter ended December 29, 2024 was 23.6% compared to 25.7% for the same period in fiscal 2024. The decrease was primarily due to the discrete impact of a tax status change for a certain foreign entity (approximately 300 basis points).

Segment Information

Results of operations by segment (in millions):

North America

For the quarter ended December 29, 2024 compared with the quarter ended December 31, 2023

Revenues

North America total net revenues for the first quarter of fiscal 2025 decreased $49 million, or 1%, primarily due to a net 4% decrease in comparable store sales ($234 million), driven by an 8% decrease in comparable transactions, partially offset by a 4% increase in average ticket, primarily due to annualization of pricing, attach, and fewer discounts. These drivers more than offset mix shift into lower priced beverages, and the removal of the extra charge for non-dairy milk customizations. Also contributing to the decrease were lower product sales to, and royalty revenues from, our licensees ($35 million). These decreases were partially offset by net new company-operated store growth of 5%, or 527 stores, over the past 12 months ($230 million).

Operating Margin

North America operating income for the first quarter of fiscal 2025 decreased 22% to $1.2 billion, compared to $1.5 billion in the first quarter of fiscal 2024. Operating margin contracted 470 basis points to 16.7%, primarily driven by deleverage (approximately 370 basis points) and investments in support of “Back to Starbucks,” including store partner wages, benefits, and hours (approximately 180 basis points), and the removal of the extra charge for non-dairy milk customizations (approximately 60 basis points). This contraction in operating margin was partially offset by the annualization of pricing (approximately 230 basis points).

International

For the quarter ended December 29, 2024 compared with the quarter ended December 31, 2023

Revenues

International total net revenues for the first quarter of fiscal 2025 increased $25 million, or 1%, primarily due to net new company-operated store growth of 9%, or 820 stores, over the past 12 months ($72 million), and the incremental net revenue from the conversion of 113 licensed stores to company-operated stores ($18 million) following the acquisition of 23.5 Degrees Topco Limited, a U.K. licensed business partner, during the quarter. The net revenue increases were partially offset by a 4% decline in comparable store sales ($48 million), driven by a 2% decline in both average ticket and comparable transactions, and unfavorable foreign currency translation impacts ($16 million). Also contributing to the decrease in revenue were lower product and equipment sales to our licensees ($4 million), which were partially offset by the opening of 563 net new licensed stores over the past 12 months.

Operating Margin

International operating income for the first quarter of fiscal 2025 decreased 2% to $237 million, compared to $242 million in the first quarter of fiscal 2024. Operating margin contracted 40 basis points to 12.7%, primarily due to increased promotional activity (approximately 170 basis points) and investments in store partner wages and benefits (approximately 90 basis points). This contraction was partially offset by supply chain efficiencies (approximately 130 basis points) and in-store operational efficiencies (approximately 100 basis points).

Channel Development

For the quarter ended December 29, 2024 compared with the quarter ended December 31, 2023

Revenues

Channel Development total net revenues for the first quarter of fiscal 2025 decreased $12 million, or 3%, primarily due to a decline in revenue in the Global Coffee Alliance ($7 million) from product SKU optimization and lower revenue in our global ready-to-drink business ($3 million).

Operating Margin

Channel Development operating income for the first quarter of fiscal 2025 decreased 1% to $208 million, compared to $210 million in the first quarter of fiscal 2024. Operating margin expanded 90 basis points to 47.7%, primarily driven by mix shift (approximately 180 basis points), and lower product costs related to the Global Coffee Alliance (approximately 80 basis points), partially offset by higher costs in our North American Coffee Partnership joint venture income (approximately 170 basis points).

Corporate and Other

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

For the quarter ended December 29, 2024 compared with the quarter ended December 31, 2023

Corporate and Other operating loss increased 4% to $505 million for the first quarter of fiscal 2025 compared to $487 million for the first quarter of fiscal 2024, primarily due to increased costs to support leadership transitions ($13 million) and incremental investments in technology ($10 million).

Quarterly Store Data

Our store data for the periods presented is as follows:

(1) 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 $4.2 billion as of December 29, 2024 and $3.8 billion as of September 29, 2024. We actively manage our cash and investments in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, fund acquisitions, and return cash to shareholders through common stock cash dividend payments and share repurchases. Our investment portfolio primarily includes highly liquid available-for-sale securities, including corporate debt securities and government treasury securities (domestic and foreign), as well as principal-protected structured deposits. As of December 29, 2024, approximately $2.1 billion of cash and short-term investments were held in foreign subsidiaries.

Borrowing Capacity

Revolving Credit Facility

Our $3.0 billion unsecured five-year revolving credit facility (the “2021 credit facility”), of which $150.0 million may be used for issuances of letters of credit, is currently set to mature on September 16, 2026. The 2021 credit facility is available for working capital, capital expenditures, and other corporate purposes, including acquisitions and share repurchases. We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $1.0 billion.

Borrowings under the 2021 credit facility, which was most recently amended in April 2023, will bear interest at a variable rate based on Term SOFR, and, for U.S. dollar-denominated loans under certain circumstances, a Base Rate (as defined in the 2021 credit facility), in each case plus an applicable margin. The applicable margin is based on the Company’s long-term credit ratings assigned by the Moody’s and Standard & Poor’s rating agencies. The “Base Rate” is the highest of (i) the Federal Funds Rate (as defined in the 2021 credit facility) plus 0.500%, (ii) Bank of America’s prime rate, and (iii) Term SOFR plus 1.000%. Term SOFR means the forward-looking SOFR term rate administrated by the Chicago Mercantile Exchange plus a SOFR Adjustment of 0.100%.

The 2021 credit facility contains provisions requiring us to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio, which measures our ability to cover financing expenses. As of December 29, 2024, we were in compliance with all applicable covenants. No amounts were outstanding under our 2021 credit facility as of December 29, 2024 or September 29, 2024.

Commercial Paper

Under our commercial paper program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $3.0 billion, with individual maturities that may vary but not exceed 397 days from the date of issue. Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under our 2021 credit facility. The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures, and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock, and share repurchases. We had no borrowings outstanding under our commercial paper

program as of December 29, 2024 and September 29, 2024. Our total available contractual borrowing capacity for general corporate purposes was $3.0 billion as of the end of our first quarter of fiscal 2025.

Credit Facilities in Japan

Additionally, we hold the following Japanese yen-denominated credit facilities that are available for working capital needs and capital expenditures within our Japanese market.

• A ¥5.0 billion, or $31.6 million, credit facility is currently set to mature on December 30, 2025. Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.400%.
• A ¥10.0 billion, or $63.3 million, credit facility is currently set to mature on March 27, 2025. Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300%.

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

See Note 8, Debt, to the consolidated financial statements included in Item 1 of Part I of this 10-Q for details of the components of our long-term debt.

Our ability to incur new liens and conduct sale and leaseback transactions on certain material properties is subject to compliance with terms of the indentures under which the long-term notes were issued. As of December 29, 2024, we were in compliance with all applicable covenants.

Use of Cash

We expect to use our available cash and investments, including, but not limited to, additional potential future borrowings under the credit facilities, commercial paper program, and the issuance of debt to support and invest in our core businesses, including investing in new ways to serve our customers and supporting our store partners, repaying maturing debts, returning cash to shareholders through common stock cash dividend payments and discretionary share repurchases, and investing in new business opportunities related to our core and developing businesses. Furthermore, we may use our available cash resources to make proportionate capital contributions to our investees. We may also seek strategic acquisitions to leverage existing capabilities and further build our business. Acquisitions may include increasing our ownership interests in our investees. Any decisions to increase such ownership interests will be driven by valuation and fit with our ownership strategy.

We believe that net future cash flows generated from operations and existing cash and investments both domestically and internationally, combined with our ability to leverage our balance sheet through the issuance of debt, will be sufficient to finance capital requirements for our core businesses as well as shareholder distributions for at least the next 12 months. We are currently not aware of any trends or demands, commitments, events, or uncertainties that will result in, or that are reasonably likely to result in, our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months. We have borrowed funds and continue to believe we have the ability to do so at reasonable interest rates; however, additional borrowings would result in increased interest expense in the future. In this regard, we may incur additional debt, within targeted levels, as part of our plans to fund our capital programs, including cash returns to shareholders through future dividends and discretionary share repurchases, refinancing debt maturities, as well as investing in new business opportunities. If necessary, we may pursue additional sources of financing, including both short-term and long-term borrowings and debt issuances.

We regularly review our cash positions and our determination of partial indefinite reinvestment of foreign earnings. In the event we determine that all or another portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes, which could be material. Any foreign earnings that are not indefinitely reinvested may be repatriated at management’s discretion.

During the first quarter of fiscal 2025, our Board of Directors approved a quarterly cash dividend to shareholders of $0.61 per share to be paid on February 28, 2025 to shareholders of record as of the close of business on February 14, 2025.

During the quarter ended December 29, 2024, we made no common stock share repurchases. As of December 29, 2024, 29.8 million shares remained available for repurchase under current authorizations.

Other than normal operating expenses, cash requirements for the remainder of fiscal 2025 are expected to consist primarily of capital expenditures for investments in our new and existing stores, our supply chain, and corporate facilities. Total capital expenditures for fiscal 2025 are expected to be reasonably consistent with fiscal 2024.

In the MD&A included in the 10-K, we disclosed that we had $35.6 billion of current and long-term material cash requirements as of September 29, 2024. There have been no material changes to our material cash requirements during the period covered by this 10-Q outside of the normal course of our business.

Cash Flows

Net cash provided by operating activities was $2.1 billion for the first quarter of fiscal 2025, compared to $2.4 billion for the same period in fiscal 2024. The change was primarily due to a decrease in net earnings of $244 million and a net increase of $149 million in inventories, which was primarily driven by a net increase in green coffee inventories.

Net cash used in investing activities totaled $855 million for the first quarter of fiscal 2025, compared to $569 million for the same period in fiscal 2024. The change was primarily due to the acquisition of 23.5 Degrees Topco Limited, a net decrease of $166 million in maturities and calls of investments, primarily structured deposit investments, and a net increase of $97 million in capital expenditures. These cash uses were partially offset by a net decrease of $151 million in purchases of investments, primarily structured deposit investments.

Net cash used in financing activities for the first quarter of fiscal 2025 totaled $755 million, compared to $2.4 billion for the same period in fiscal 2024. The change was primarily due to no current year share repurchases of our common stock and no current year repayments of long-term debt compared to repurchases and repayments in the prior year. These cash uses were partially offset by a decrease of $300 million in proceeds from issuances of commercial paper.

Commodity Prices, Availability and General Risk Conditions

Commodity price risk represents our primary market risk, generated by our purchases of green coffee and dairy products, among other items. We purchase, roast, and sell high-quality arabica coffee and related products, and risk arises from the price volatility of green coffee. In addition to coffee, we also purchase significant amounts of dairy products to support the needs of our company-operated stores. The price and availability of these commodities, including recent sustained increases in green coffee prices, directly impact our results of operations, and we expect commodity prices, particularly coffee, to continue to impact future results of operations. For additional details, see Product Supply in Part 1, Item 1 of the 10-K, as well as Risk Factors in Part I, Item 1A of the 10-K.

Seasonality and Quarterly Results

Our business is subject to moderate seasonal fluctuations, of which our fiscal second quarter typically experiences lower revenues and operating income. Additionally, as our stored value cards (“Starbucks Cards”) are issued to, and loaded by, customers during the holiday season, we tend to have higher cash flows from operations during the first quarter of the fiscal year. However, since revenues from Starbucks Cards are recognized upon redemption and not when cash is loaded onto the Starbucks Cards, the impact of seasonal fluctuations on the consolidated statements of earnings is much less pronounced. As a result of moderate seasonal fluctuations, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions, and estimates that affect the amounts reported. Note 1, Summary of Significant Accounting Policies and Estimates, to the consolidated financial statements included in Item 1 of Part I of this 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 10-K describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1, Summary of Significant Accounting Policies and Estimates, to the consolidated financial statements included in Item 1 of Part I of this 10-Q, for a detailed description of recent accounting pronouncements.