UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2017January 1, 2023
OR
¨ ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 0-20322000-20322
Starbucks Corporation
(Exact Name of Registrant as Specified in its Charter)
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Washington | 91-1325671 |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
2401 Utah Avenue South, Seattle, Washington 98134
(Address of principal executive offices)
(206) 447-1575
(Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title | Trading Symbol | Name of each exchange on which registered |
Common Stock, par value $0.001 per share | SBUX | Nasdaq Global Select Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | x | Accelerated filer | ¨ | Non-accelerated filer | ¨ | Smaller reporting company | ☐ |
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Large accelerated filer | x | Accelerated filer | ¨ |
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Non-accelerated filer | ¨ (Do not check if a smaller reporting company)
| Smaller reporting company | ¨ |
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Emerging growth company | ¨☐ | | | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No x
Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. |
| |
Title | Shares Outstanding as of January 24, 201827, 2023 |
Common Stock, par value $0.001 per share | 1,405.61,149.3 million |
STARBUCKS CORPORATION
FORM 10-Q
For the Quarterly Period Ended December 31, 2017January 1, 2023
Table of Contents
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PART I. FINANCIAL INFORMATION |
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PART I. FINANCIAL INFORMATION |
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Item 1 | | |
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Item 2 | | |
Item 3 | | |
Item 4 | | |
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PART II. OTHER INFORMATION |
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Item 1 | | |
Item 1A | | |
Item 2 | | |
Item 63 | | |
Item 4 | | |
Item 5 | | |
Item 6 | | |
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PART I — FINANCIAL INFORMATION
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Item 1. | Financial Statements |
Item 1.Financial Statements STARBUCKS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except per share data)
(unaudited) | | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | | | |
Net revenues: | | | | | | | |
Company-operated stores | $ | 7,083.5 | | | $ | 6,722.4 | | | | | |
Licensed stores | 1,119.5 | | | 850.8 | | | | | |
Other | 510.9 | | | 477.2 | | | | | |
Total net revenues | 8,713.9 | | | 8,050.4 | | | | | |
Product and distribution costs | 2,810.2 | | | 2,526.9 | | | | | |
Store operating expenses | 3,665.3 | | | 3,400.0 | | | | | |
Other operating expenses | 129.3 | | | 101.7 | | | | | |
Depreciation and amortization expenses | 327.1 | | | 366.0 | | | | | |
General and administrative expenses | 580.9 | | | 525.8 | | | | | |
Restructuring and impairments | 5.8 | | | (7.5) | | | | | |
Total operating expenses | 7,518.6 | | | 6,912.9 | | | | | |
Income from equity investees | 57.8 | | | 40.3 | | | | | |
Operating income | 1,253.1 | | | 1,177.8 | | | | | |
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Interest income and other, net | 11.6 | | | (0.1) | | | | | |
Interest expense | (129.7) | | | (115.3) | | | | | |
Earnings before income taxes | 1,135.0 | | | 1,062.4 | | | | | |
Income tax expense | 279.8 | | | 246.3 | | | | | |
Net earnings including noncontrolling interests | 855.2 | | | 816.1 | | | | | |
Net earnings attributable to noncontrolling interests | — | | | 0.2 | | | | | |
Net earnings attributable to Starbucks | $ | 855.2 | | | $ | 815.9 | | | | | |
Earnings per share - basic | $ | 0.74 | | | $ | 0.70 | | | | | |
Earnings per share - diluted | $ | 0.74 | | | $ | 0.69 | | | | | |
Weighted average shares outstanding: | | | | | | | |
Basic | 1,148.5 | | | 1,169.6 | | | | | |
Diluted | 1,152.9 | | | 1,176.6 | | | | | |
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| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 |
Net revenues: | | | |
Company-operated stores | $ | 4,741.8 |
| | $ | 4,469.3 |
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Licensed stores | 682.4 |
| | 602.4 |
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CPG, foodservice and other | 649.5 |
| | 661.2 |
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Total net revenues | 6,073.7 |
| | 5,732.9 |
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Cost of sales including occupancy costs | 2,502.9 |
| | 2,295.0 |
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Store operating expenses | 1,737.0 |
| | 1,638.2 |
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Other operating expenses | 141.6 |
| | 145.4 |
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Depreciation and amortization expenses | 258.8 |
| | 249.7 |
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General and administrative expenses | 379.1 |
| | 356.4 |
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Restructuring expenses | 27.6 |
| | — |
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Total operating expenses | 5,047.0 |
| | 4,684.7 |
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Income from equity investees | 89.4 |
| | 84.4 |
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Operating income | 1,116.1 |
| | 1,132.6 |
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Gain resulting from acquisition of joint venture | 1,326.3 |
| | — |
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Gains resulting from divestiture of certain operations | 501.2 |
| | — |
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Interest income and other, net | 88.2 |
| | 24.1 |
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Interest expense | (25.9 | ) | | (23.8 | ) |
Earnings before income taxes | 3,005.9 |
| | 1,132.9 |
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Income tax expense | 755.8 |
| | 381.4 |
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Net earnings including noncontrolling interests | 2,250.1 |
| | 751.5 |
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Net loss attributable to noncontrolling interests | (0.1 | ) | | (0.3 | ) |
Net earnings attributable to Starbucks | $ | 2,250.2 |
| | $ | 751.8 |
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Earnings per share - basic | $ | 1.58 |
| | $ | 0.52 |
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Earnings per share - diluted | $ | 1.57 |
| | $ | 0.51 |
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Weighted average shares outstanding: | | | |
Basic | 1,421.0 |
| | 1,457.5 |
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Diluted | 1,434.6 |
| | 1,470.5 |
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Cash dividends declared per share | $ | 0.30 |
| | $ | 0.25 |
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See Notes to Condensed Consolidated Financial Statements.
STARBUCKS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions, unaudited)
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| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | | | |
Net earnings including noncontrolling interests | $ | 855.2 | | | $ | 816.1 | | | | | |
Other comprehensive income/(loss), net of tax: | | | | | | | |
Unrealized holding gains/(losses) on available-for-sale debt securities | 2.0 | | | (3.4) | | | | | |
Tax (expense)/benefit | (0.5) | | | 0.8 | | | | | |
Unrealized gains/(losses) on cash flow hedging instruments | (180.7) | | | 88.7 | | | | | |
Tax (expense)/benefit | 29.5 | | | (11.8) | | | | | |
Unrealized gains/(losses) on net investment hedging instruments | (64.6) | | | 41.5 | | | | | |
Tax (expense)/benefit | 16.3 | | | (10.5) | | | | | |
Translation adjustment and other | 208.9 | | | 14.2 | | | | | |
Tax (expense)/benefit | — | | | — | | | | | |
Reclassification adjustment for net (gains)/losses realized in net earnings for available-for-sale debt securities, hedging instruments, and translation adjustment | (98.4) | | | (16.1) | | | | | |
Tax expense/(benefit) | 11.8 | | | 2.9 | | | | | |
Other comprehensive income/(loss) | (75.7) | | | 106.3 | | | | | |
Comprehensive income including noncontrolling interests | 779.5 | | | 922.4 | | | | | |
Comprehensive income attributable to noncontrolling interests | — | | | 0.2 | | | | | |
Comprehensive income attributable to Starbucks | $ | 779.5 | | | $ | 922.2 | | | | | |
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| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 |
Net earnings including noncontrolling interests | $ | 2,250.1 |
| | $ | 751.5 |
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Other comprehensive income/(loss), net of tax: | | | |
Unrealized holding losses on available-for-sale securities | (2.8 | ) | | (13.4 | ) |
Tax (expense)/benefit | 1.0 |
| | 4.1 |
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Unrealized gains/(losses) on cash flow hedging instruments | (3.7 | ) | | 113.5 |
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Tax (expense)/benefit | 0.8 |
| | (26.5 | ) |
Unrealized gains/(losses) on net investment hedging instruments | (0.3 | ) | | 41.1 |
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Tax (expense)/benefit | 0.1 |
| | (15.2 | ) |
Translation adjustment and other | 18.0 |
| | (171.8 | ) |
Tax (expense)/benefit | 2.9 |
| | — |
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Reclassification adjustment for net (gains)/losses realized in net earnings for available-for-sale securities, hedging instruments, and translation adjustment | 15.1 |
| | (81.7 | ) |
Tax expense/(benefit) | (0.8 | ) | | 16.0 |
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Other comprehensive income/(loss) | 30.3 |
| | (133.9 | ) |
Comprehensive income including noncontrolling interests | 2,280.4 |
| | 617.6 |
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Comprehensive loss attributable to noncontrolling interests | (0.1 | ) | | (0.3 | ) |
Comprehensive income attributable to Starbucks | $ | 2,280.5 |
| | $ | 617.9 |
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See Notes to Condensed Consolidated Financial Statements.
STARBUCKS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
(unaudited) | | | | | | | | | | | |
| Jan 1, 2023 | | Oct 2, 2022 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 3,186.5 | | | $ | 2,818.4 | |
Short-term investments | 123.9 | | | 364.5 | |
Accounts receivable, net | 1,162.9 | | | 1,175.5 | |
Inventories | 2,088.1 | | | 2,176.6 | |
Prepaid expenses and other current assets | 373.5 | | | 483.7 | |
Total current assets | 6,934.9 | | | 7,018.7 | |
Long-term investments | 283.6 | | | 279.1 | |
Equity investments | 330.5 | | | 311.2 | |
Property, plant and equipment, net | 6,699.5 | | | 6,560.5 | |
Operating lease, right-of-use asset | 8,133.8 | | | 8,015.6 | |
Deferred income taxes, net | 1,811.8 | | | 1,799.7 | |
Other long-term assets | 527.6 | | | 554.2 | |
Other intangible assets | 151.4 | | | 155.9 | |
Goodwill | 3,383.0 | | | 3,283.5 | |
TOTAL ASSETS | $ | 28,256.1 | | | $ | 27,978.4 | |
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) | | | |
Current liabilities: | | | |
Accounts payable | $ | 1,348.2 | | | $ | 1,441.4 | |
Accrued liabilities | 2,089.6 | | | 2,137.1 | |
Accrued payroll and benefits | 664.6 | | | 761.7 | |
Current portion of operating lease liability | 1,257.5 | | | 1,245.7 | |
Stored value card liability and current portion of deferred revenue | 2,137.0 | | | 1,641.9 | |
Short-term debt | — | | | 175.0 | |
Current portion of long-term debt | 1,749.3 | | | 1,749.0 | |
Total current liabilities | 9,246.2 | | | 9,151.8 | |
Long-term debt | 13,176.7 | | | 13,119.9 | |
Operating lease liability | 7,635.4 | | | 7,515.2 | |
Deferred revenue | 6,263.2 | | | 6,279.7 | |
Other long-term liabilities | 600.5 | | | 610.5 | |
Total liabilities | 36,922.0 | | | 36,677.1 | |
Shareholders' deficit: | | | |
Common stock ($0.001 par value) — authorized, 2,400.0 shares; issued and outstanding, 1,148.5 and 1,147.9 shares, respectively | 1.1 | | | 1.1 | |
Additional paid-in capital | 67.2 | | | 205.3 | |
Retained deficit | (8,203.2) | | | (8,449.8) | |
Accumulated other comprehensive income/(loss) | (538.9) | | | (463.2) | |
Total shareholders’ deficit | (8,673.8) | | | (8,706.6) | |
Noncontrolling interests | 7.9 | | | 7.9 | |
Total deficit | (8,665.9) | | | (8,698.7) | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) | $ | 28,256.1 | | | $ | 27,978.4 | |
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| Dec 31, 2017 | | Oct 1, 2017 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 3,661.4 |
| | $ | 2,462.3 |
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Short-term investments | 106.6 |
| | 228.6 |
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Accounts receivable, net | 851.8 |
| | 870.4 |
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Inventories | 1,313.2 |
| | 1,364.0 |
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Prepaid expenses and other current assets | 950.5 |
| | 358.1 |
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Total current assets | 6,883.5 |
| | 5,283.4 |
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Long-term investments | 363.5 |
| | 542.3 |
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Equity and cost investments | 287.6 |
| | 481.6 |
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Property, plant and equipment, net | 5,378.7 |
| | 4,919.5 |
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Deferred income taxes, net | 157.9 |
| | 795.4 |
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Other long-term assets | 526.3 |
| | 362.8 |
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Other intangible assets | 1,246.2 |
| | 441.4 |
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Goodwill | 3,674.8 |
| | 1,539.2 |
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TOTAL ASSETS | $ | 18,518.5 |
| | $ | 14,365.6 |
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LIABILITIES AND EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 852.1 |
| | $ | 782.5 |
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Accrued liabilities | 3,761.1 |
| | 1,934.5 |
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Insurance reserves | 210.0 |
| | 215.2 |
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Stored value card liability | 1,668.0 |
| | 1,288.5 |
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Current portion of long-term debt | 349.9 |
| | — |
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Total current liabilities | 6,841.1 |
| | 4,220.7 |
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Long-term debt | 4,566.5 |
| | 3,932.6 |
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Other long-term liabilities | 1,352.0 |
| | 755.3 |
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Total liabilities | 12,759.6 |
| | 8,908.6 |
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Shareholders’ equity: | | | |
Common stock ($0.001 par value) — authorized, 2,400.0 shares; issued and outstanding, 1,407.6 and 1,431.6 shares, respectively | 1.4 |
| | 1.4 |
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Additional paid-in capital | 41.1 |
| | 41.1 |
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Retained earnings | 5,834.9 |
| | 5,563.2 |
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Accumulated other comprehensive loss | (125.3 | ) | | (155.6 | ) |
Total shareholders’ equity | 5,752.1 |
| | 5,450.1 |
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Noncontrolling interests | 6.8 |
| | 6.9 |
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Total equity | 5,758.9 |
| | 5,457.0 |
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TOTAL LIABILITIES AND EQUITY | $ | 18,518.5 |
| | $ | 14,365.6 |
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See Notes to Condensed Consolidated Financial Statements.
STARBUCKS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 |
OPERATING ACTIVITIES: | | | |
Net earnings including noncontrolling interests | $ | 2,250.1 |
| | $ | 751.5 |
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Adjustments to reconcile net earnings to net cash provided by operating activities: | | | |
Depreciation and amortization | 272.4 |
| | 263.2 |
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Deferred income taxes, net | 744.8 |
| | 56.4 |
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Income earned from equity method investees | (66.2 | ) | | (65.3 | ) |
Distributions received from equity method investees | 81.3 |
| | 39.1 |
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Gain resulting from acquisition of joint venture | (1,326.3 | ) | | — |
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Gains resulting from divestiture of certain retail operations | (501.2 | ) | | — |
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Stock-based compensation | 61.4 |
| | 55.0 |
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Other | 3.3 |
| | 9.3 |
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Cash provided by changes in operating assets and liabilities: | | | |
Accounts receivable | 1.3 |
| | (128.7 | ) |
Inventories | 71.2 |
| | 146.4 |
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Accounts payable | 28.1 |
| | (34.7 | ) |
Stored value card liability | 359.6 |
| | 425.0 |
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Other operating assets and liabilities | (145.8 | ) | | 12.6 |
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Net cash provided by operating activities | 1,834.0 |
| | 1,529.8 |
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INVESTING ACTIVITIES: | | | |
Purchases of investments | (35.2 | ) | | (323.4 | ) |
Sales of investments | 316.1 |
| | 149.6 |
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Maturities and calls of investments | 21.3 |
| | 18.1 |
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Additions to property, plant and equipment | (429.3 | ) | | (307.4 | ) |
Cash acquired from purchase of equity in joint venture | 129.5 |
| | — |
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Net proceeds from the sale of certain operations | 397.1 |
| | — |
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Other | (4.5 | ) | | 61.6 |
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Net cash provided by/(used by) investing activities | 395.0 |
| | (401.5 | ) |
FINANCING ACTIVITIES: | | | |
Proceeds from issuance of long-term debt | 998.3 |
| | — |
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Repayments of long-term debt | — |
| | (400.0 | ) |
Proceeds from issuance of common stock | 54.3 |
| | 51.2 |
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Cash dividends paid | (428.1 | ) | | (364.0 | ) |
Repurchase of common stock | (1,601.0 | ) | | (408.1 | ) |
Minimum tax withholdings on share-based awards | (56.0 | ) | | (68.3 | ) |
Other | (7.2 | ) | | 0.1 |
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Net cash used by financing activities | (1,039.7 | ) | | (1,189.1 | ) |
Effect of exchange rate changes on cash and cash equivalents | 9.8 |
| | (33.4 | ) |
Net increase/(decrease) in cash and cash equivalents | 1,199.1 |
| | (94.2 | ) |
CASH AND CASH EQUIVALENTS: | | | |
Beginning of period | 2,462.3 |
| | 2,128.8 |
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End of period | $ | 3,661.4 |
| | $ | 2,034.6 |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | |
Cash paid during the period for: | | | |
Interest, net of capitalized interest | $ | 38.3 |
| | $ | 41.1 |
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Income taxes, net of refunds | $ | 140.1 |
| | $ | 270.8 |
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SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: | | | |
Payable for East China acquisition (Note 2) | $ | 1,431.0 |
| | $ | — |
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| Quarter Ended |
| Jan 1, 2023 | | Jan 2, 2022 |
OPERATING ACTIVITIES: | | | |
Net earnings including noncontrolling interests | $ | 855.2 | | | $ | 816.1 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | |
Depreciation and amortization | 342.5 | | | 386.4 | |
Deferred income taxes, net | 15.8 | | | (0.3) | |
Income earned from equity method investees | (56.9) | | | (46.6) | |
Distributions received from equity method investees | 45.7 | | | 44.9 | |
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Stock-based compensation | 85.2 | | | 95.8 | |
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Non-cash lease costs | 263.7 | | | 330.4 | |
Loss on retirement and impairment of assets | 21.1 | | | 50.7 | |
Other | 6.7 | | | (4.9) | |
Cash provided by/(used in) changes in operating assets and liabilities: | | | |
Accounts receivable | 42.0 | | | (91.6) | |
Inventories | 108.5 | | | (36.0) | |
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Accounts payable | (117.3) | | | 84.0 | |
Deferred revenue | 461.0 | | | 461.3 | |
Operating lease liability | (281.4) | | | (363.3) | |
Other operating assets and liabilities | (198.6) | | | 144.0 | |
Net cash provided by operating activities | 1,593.2 | | | 1,870.9 | |
INVESTING ACTIVITIES: | | | |
Purchases of investments | (10.5) | | | (61.0) | |
Sales of investments | 0.8 | | | 72.6 | |
Maturities and calls of investments | 253.3 | | | 45.6 | |
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Additions to property, plant and equipment | (516.8) | | | (416.8) | |
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Other | (6.1) | | | (41.4) | |
Net cash used in investing activities | (279.3) | | | (401.0) | |
FINANCING ACTIVITIES: | | | |
Net proceeds/(payments) from issuance of commercial paper | (175.0) | | | 200.0 | |
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Proceeds from issuance of common stock | 45.9 | | | 41.3 | |
Cash dividends paid | (608.3) | | | (576.0) | |
Repurchase of common stock | (191.4) | | | (3,520.9) | |
Minimum tax withholdings on share-based awards | (79.0) | | | (113.6) | |
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Net cash provided by/(used in) financing activities | (1,007.8) | | | (3,969.2) | |
Effect of exchange rate changes on cash and cash equivalents | 62.0 | | | 13.0 | |
Net increase/(decrease) in cash and cash equivalents | 368.1 | | | (2,486.3) | |
CASH AND CASH EQUIVALENTS: | | | |
Beginning of period | 2,818.4 | | | 6,455.7 | |
End of period | $ | 3,186.5 | | | $ | 3,969.4 | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | |
Cash paid during the period for: | | | |
Interest, net of capitalized interest | $ | 116.7 | | | $ | 108.3 | |
Income taxes | $ | 106.2 | | | $ | 161.4 | |
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See Notes to Condensed Consolidated Financial Statements.
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
For the Quarters Ended January 1, 2023 and January 2, 2022
(in millions, except per share data, unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Retained Earnings/(Deficit) | | Accumulated Other Comprehensive Income/(Loss) | | Shareholders’ Equity/(Deficit) | | Noncontrolling Interests | | Total |
| Shares | | Amount | | | | | | |
Balance, October 2, 2022 | 1,147.9 | | $ | 1.1 | | | $ | 205.3 | | | $ | (8,449.8) | | | $ | (463.2) | | | $ | (8,706.6) | | | $ | 7.9 | | | $ | (8,698.7) | |
| | | | | | | | | | | | | | | |
Net earnings | — | | — | | | — | | | 855.2 | | | — | | | 855.2 | | | — | | | 855.2 | |
Other comprehensive loss | — | | — | | | — | | | — | | | (75.7) | | | (75.7) | | | — | | | (75.7) | |
Stock-based compensation expense | — | | — | | | 86.4 | | | — | | | — | | | 86.4 | | | — | | | 86.4 | |
Exercise of stock options/vesting of RSUs | 2.4 | | — | | | (44.7) | | | — | | | — | | | (44.7) | | | — | | | (44.7) | |
Sale of common stock | 0.1 | | — | | | 11.6 | | | — | | | — | | | 11.6 | | | — | | | 11.6 | |
Repurchase of common stock | (1.9) | | — | | | (191.4) | | | — | | | — | | | (191.4) | | | — | | | (191.4) | |
Cash dividends declared, $0.53 per share | — | | — | | | — | | | (608.6) | | | — | | | (608.6) | | | — | | | (608.6) | |
| | | | | | | | | | | | | | | |
Balance, January 1, 2023 | 1,148.5 | | $ | 1.1 | | | $ | 67.2 | | | $ | (8,203.2) | | | $ | (538.9) | | | $ | (8,673.8) | | | $ | 7.9 | | | $ | (8,665.9) | |
| | | | | | | | | | | | | | | |
Balance, October 3, 2021 | 1,180.0 | | $ | 1.2 | | | $ | 846.1 | | | $ | (6,315.7) | | | $ | 147.2 | | | $ | (5,321.2) | | | $ | 6.7 | | | $ | (5,314.5) | |
| | | | | | | | | | | | | | | |
Net earnings | — | | — | | | — | | | 815.9 | | | — | | | 815.9 | | | 0.2 | | | 816.1 | |
Other comprehensive income | — | | — | | | — | | | — | | | 106.3 | | | 106.3 | | | — | | | 106.3 | |
Stock-based compensation expense | — | | — | | | 97.1 | | | — | | | — | | | 97.1 | | | — | | | 97.1 | |
Exercise of stock options/vesting of RSUs | 2.6 | | — | | | (84.1) | | | — | | | — | | | (84.1) | | | — | | | (84.1) | |
Sale of common stock | 0.1 | | — | | | 11.8 | | | — | | | — | | | 11.8 | | | — | | | 11.8 | |
Repurchase of common stock | (31.1) | | — | | | (829.8) | | | (2,691.1) | | | — | | | (3,520.9) | | | — | | | (3,520.9) | |
Cash dividends declared, $0.49 per share | — | | — | | | — | | | (562.1) | | | — | | | (562.1) | | | — | | | (562.1) | |
| | | | | | | | | | | | | | | |
Balance, January 2, 2022 | 1,151.6 | | $ | 1.2 | | | $ | 41.1 | | | $ | (8,753.0) | | | $ | 253.5 | | | $ | (8,457.2) | | | $ | 6.9 | | | $ | (8,450.3) | |
See Notes to Consolidated Financial Statements.
STARBUCKS CORPORATION
INDEX FOR NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Note 1 | | |
Note 2 | | |
Note 3 | | |
Note 4 | | |
Note 5 | | |
Note 6 | | |
Note 7 | | |
Note 8 | | |
Note 9 | | |
Note 10 | | |
Note 11 | | |
Note 12 | | |
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Note 113 | | |
Note 2 | | |
Note 3 | | |
Note 4 | | |
Note 5 | | |
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Note 1214 | | |
Note 15 | | |
Note 16 | | |
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STARBUCKS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| |
Note 1: | Summary of Significant Accounting Policies |
Note 1: Summary of Significant Accounting Policies and Estimates
Financial Statement Preparation
The unaudited condensed consolidated financial statements as of December 31, 2017,January 1, 2023, and for the quarters ended December 31, 2017January 1, 2023 and January 1, 2017,2, 2022, 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 31, 2017January 1, 2023 and January 1, 20172, 2022 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 is referred to as “Starbucks,” the “Company,” “we,” “us” or “our.”
Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes.
Certain prior period information on the consolidated statements of cash flows have been reclassified to conform to the current presentation.
The financial information as of October 1, 20172, 2022 is derived from our audited consolidated financial statements and notes for the fiscal year ended October 1, 20172, 2022 (“fiscal 2017”2022”) included in Item 8 in the Fiscal 20172022 Annual Report on Form 10-K (the “10-K”(“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 31, 2017January 1, 2023 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending September 30, 2018October 1, 2023 (“fiscal 2018”2023”).
RecentThe novel coronavirus, known as the global COVID-19 pandemic, was first identified in December 2019 before spreading to markets where we have company-operated or licensed stores. We have since established the necessary protocols to operate safely, and in many of our markets, our businesses demonstrated powerful momentum beyond recovery from the COVID-19 pandemic. During the first quarter of fiscal 2023, our China market continued to experience pandemic-related business interruptions, including escalating COVID outbreaks that suppressed customer mobility. We continue to monitor the COVID-19 pandemic and its effect on our business and results of operations; however, we cannot predict the duration, scope or severity of the COVID-19 pandemic or its future impact on our business, results of operations, cash flows and financial condition.
Restructuring
In fiscal 2022, we announced our plan in the U.S. market to increase efficiency while elevating the partner and customer experience (the “Reinvention Plan”). We believe the investments in partner wages and trainings will increase retention and productivity while the acceleration of purpose-built store concepts and innovations in technologies will provide additional convenience and connection with our customers. As a result of the restructuring efforts in connection with the Reinvention Plan, we recorded an immaterial charge on our consolidated statements of earnings during the quarter ended January 1, 2023. Future restructuring and impairment costs attributable to our Reinvention Plan are not expected to be material.
As of January 1, 2023 and October 2, 2022, there were no material restructuring-related accrued liabilities on our consolidated balance sheets.
Recently Adopted Accounting Pronouncements
In August 2017,the first quarter of fiscal 2022, we adopted the Financial Accounting Standards Board (“FASB”) amended its guidance on the financial reporting of hedging relationships. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness, expands permissible cash flow hedges on contractually specified components, and simplifies hedge documentation and effectiveness assessment. The guidance will be effective at the beginning of our first quarter of fiscal year 2020 and will require a modified retrospective approach on existing cash flow and net investment hedges. The presentation and disclosure requirements will be applied prospectively. We are currently evaluating the impact this guidance will have on our consolidated financial statements and the timing of adoption.
In October 2016, the FASB issued guidance on the accounting for income tax effects of intercompany sales or transfers of assets other than inventory. The guidance requires entities to recognize the income tax impact of an intra-entity sale or transfer of an asset other than inventory when the sale or transfer occurs, rather than when the asset has been sold to an outside party. The guidance will require a modified retrospective application with a cumulative catch-up adjustment to opening retained earnings at the beginning of our first quarter of fiscal 2019 but permits adoption in an earlier period. We are currently evaluating the impact this guidance will have on our consolidated financial statements and the timing of adoption.
In March 2016, the FASB issued guidance related to stock-based compensation, which changesreference rate reform. The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting and classification of excess tax benefits and minimum tax withholdings on share-based awards. This guidance requires that excess tax benefits and tax deficienciesto ease the financial reporting burden related to stock-based compensationthe expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be prospectively reflected as income tax expense in our consolidated statement of earnings instead of additional paid-in capital on our consolidated balance sheet. Additionally, within our consolidated statement of cash flows, this guidance requires excess tax benefitsapplied to be presented as an operating activity, rather than a financing activity, in the same manner as other cash flows related to income taxes. We adopted this guidance in the first quarter of fiscal 2018. The primary impact of the adoption was the recognition of excess tax benefits that reduced income tax expenses by $28.2 million for the three months endedapplicable contract modifications through December 31, 2017, instead2024. The adoption of additional paid-in capital. As a result, net income increased $28.2 million and basic and diluted earnings per share increased $0.02 for the three months ended December 31, 2017. Excess tax benefits of $34.1 million, for the three months ended January 1, 2017, previously reported in financing activities have been reclassified to operating activities in the consolidated statements of cash flows.
In March 2016, the FASB issued guidance for financial liabilities resulting from selling prepaid stored value products that are redeemable at third-party merchants. Under the new guidance expected breakage amounts associated with these products must be recognized proportionately in earnings as redemption occurs. Our current accounting policy of applying the remote method to all of our stored value cards, including cards redeemable at the third-party licensed locations, will no longer be allowed. We will adopt and implement the provisions of this guidance and the new revenue recognition standard issued by the FASB, as discussed below, in the first quarter of fiscal 2019.
In February 2016, the FASB issued guidance on the recognition and measurement of leases. Under the new guidance, lessees are required to recognizedid not have a lease liability, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for most leases. The guidance retains the current accounting for lessors and does not make significant changes to the recognition, measurement, and presentation of expenses and cash flows by
a lessee. Enhanced disclosures will also be required to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases. The guidance will require modified retrospective application at the beginning of our first quarter of fiscal 2020, with optional practical expedients, but permits adoption in an earlier period. We are currently evaluating the impact this guidance will have on our consolidated financial statements. We expect this adoption will result in a material increase in the assets and liabilities on our consolidated balance sheets but will likely have an insignificant impact on our consolidated statements of earnings. In preparation for the adoption of the guidance, we are in the process of implementing controlsfinancial statements.
Note 2: Acquisitions, Divestitures and key system changes to enable the preparation of financial information.
In May 2014, the FASB issued guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. We are currently evaluating the overall impact this guidance will have on our consolidated financial statements, as well as the expected method of adoption. Based on our continued assessment, which may identify other accounting impacts, we have determined the adoption will change the timing of recognition and classification of our stored value card breakage income, which is currently recognized using the remote method and recorded in interest income and other, net. The new guidance will require application of the proportional method and classification within total net revenues on our consolidated statements of earnings. Additionally, the new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. We will adopt this guidance in the first quarter of fiscal 2019.
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Note 2: | Acquisitions and Divestitures |
Fiscal 2018
On December 31, 2017, we acquired the remaining 50% interest of our East China joint venture (East China) from President Chain Store (Hong Kong) Holding Ltd. and Kai Yu (BVI) collectively, “Uni-President Group” or “UPG”, for approximately $1.4 billion in the form of a payable to UPG. Approximately $1.3 billion had been settled as of the date of this filing. The final purchase price and remaining payment will be determined upon finalizing East China’s full year results for calendar year 2017. Approximately $86.3 million of pre-existing liabilities owed by East China to Starbucks were effectively settled upon the acquisition. Acquiring the remaining interest of East China, which operates over 1,400 stores in the Shanghai, Jiangsu and Zhejiang Provinces, builds on the Company's ongoing investment in China. The estimated fair values of the assets acquired and liabilities assumed are based on preliminary valuation as of the December 31, 2017 acquisition date and are subject to change as additional information becomes available.
Concurrently, with the purchase of our East China joint venture, we sold our 50% interest in President Starbucks Coffee Taiwan Limited, our joint venture operations in Taiwan, to UPG for approximately $177.6 million. The consideration, less associated transaction taxes, was recorded as a receivable from UPG within prepaid expenses and other current assets at December 31, 2017. Approximately $161.6 million of the proceeds have been received as of the date of this filing. The final sales price and remaining proceeds will be determined upon finalizing the Taiwan JV’s full year results for calendar year 2017. The transaction resulted in a pre-tax gain of $153.0 million, which was included in gains from divestiture of certain operations on our consolidated statements of earnings.
The following table summarizes the preliminary allocation of the total consideration to the fair values of the assets acquired and liabilities assumed as of December 31, 2017, which are reported within our China/Asia Pacific segment (in millions):
|
| | | | |
Consideration: | | |
Acquisition payable for UPG 50% equity interest | | $ | 1,431.0 |
|
Fair value of our preexisting 50% equity interest | | 1,431.0 |
|
Settlement of pre-existing liabilities | | 86.3 |
|
Total consideration | | $ | 2,948.3 |
|
| | |
Fair value of assets acquired and liabilities assumed: | | |
Cash and cash equivalents | | $ | 129.5 |
|
Accounts receivable, net | | 14.3 |
|
Inventories | | 18.0 |
|
Prepaid expenses and other current assets | | 20.6 |
|
Property, plant and equipment | | 256.6 |
|
Other long-term assets | | 35.7 |
|
Other intangible assets | | 818.0 |
|
Goodwill | | 2,137.1 |
|
Total assets acquired | | 3,429.8 |
|
Accounts payable | | 43.2 |
|
Accrued liabilities | | 173.8 |
|
Stored value card liability | | 18.0 |
|
Other long-term liabilities | | 246.5 |
|
Total liabilities assumed | | 481.5 |
|
Total consideration | | $ | 2,948.3 |
|
The assets acquired and liabilities assumed are reported within our China/Asia Pacific segment. Other current and long-term assets acquired primarily include lease deposits and prepaid rent. Accrued liabilities and other long-term liabilities assumed primarily include deferred income tax, dividend payable, accrued payroll, income tax payable and accrued occupancy costs.
The definite-lived intangibles primarily relate to reacquired rights to operate stores exclusively in East China. The reacquired rights of $798.0 million represent the fair value calculated over the remaining original contractual period and will be amortized on a straight-line basis through September 2022. Amortization expense for these definite-lived intangible assets will commence in the second quarter of fiscal 2018 and estimated to be approximately $130.3 million in fiscal 2018, $173.7 million each year for the next three years and approximately $166.6 million in the final year of fiscal 2022.
The $2.1 billion of goodwill represents the intangible assets that do not qualify for separate recognition and primarily includes the acquired customer base, the acquired workforce including store partners in the region that have strong relationships with these customers, and the existing geographic retail and online presence. The goodwill was allocated to the China/Asia Pacific segment and is not deductible for income tax purposes.
The table below summarizes our estimated minimum future rental payments under the acquired non-cancelable operating leases as of December 31, 2017 (in millions):
|
| | | |
| Operating Leases |
Year 1 | $ | 69.6 |
|
Year 2 | 60.6 |
|
Year 3 | 52.2 |
|
Year 4 | 45.8 |
|
Year 5 | 37.0 |
|
Thereafter | 83.5 |
|
Total minimum lease payments | $ | 348.7 |
|
As a result of this acquisition, we remeasured the carrying value of our preexisting 50% equity method investment to fair value, which resulted in a gain of $1.3 billion, that was largely non-taxable. The gain was recorded in the first quarter of fiscal 2018 and was presented separately as gain resulting from acquisition of joint venture on our consolidated statements of earnings. The fair value of $1.4 billion was calculated using an income approach, which was based on significant inputs that are not observable in the market and thus represents a fair value measurement categorized within Level 3 of the fair value hierarchy. Key assumptions used in estimating future cash flows included projected revenue growth and operating expenses, as well as the selection of an appropriate discount rate. Estimates of revenue growth and operating expenses were based on internal projections and considered the historical performance of stores, local market economics and the business environments impacting store performance. The discount rate applied was based on East China's weighted-average cost of capital and included company-specific and size risk premiums.
We will begin consolidating East China's results of operations and cash flows into our consolidated financial statements after December 31, 2017. For the quarter ended December 31, 2017, the business performance of East China was recorded in income from equity investees on our consolidated statement of earnings as the transaction closed on the last day of the quarter.
The following table provides the supplemental pro forma revenue and net earnings of the combined entity had the acquisition date of East China been October 3, 2016, the first day of our first quarter of fiscal 2017, rather than the end of our first quarter of fiscal 2018 (in millions):
|
| | | | | | | | |
| | Pro Forma (unaudited) |
| | Quarter Ended |
| | Dec 31, 2017 | | Jan 1, 2017(1) |
Revenue | | $ | 6,344.7 |
| | $ | 5,948.0 |
|
Net earnings attributable to Starbucks | | 1,122.8 |
| | 1,799.2 |
|
| |
(1)
| The pro forma net earnings attributable to Starbucks for fiscal 2017 includes the acquisition-related gain of $1.3 billion, and transaction and integration costs of $3.7 million for the quarter ended December 31, 2017. |
The amounts in the supplemental pro forma earnings for the periods presented above fully eliminate intercompany transactions, apply our accounting policies and reflect adjustments for additional occupancy costs as well as depreciation and amortization that would have been charged assuming the same fair value adjustments to leases, property, plant and equipment and acquired intangibles had been applied on October 3, 2016. These pro forma results are unaudited and are not necessarily indicative of results of operations that would have occurred had the acquisition actually closed in the prior year period or indicative of the results of operations for any future period.
During the quarter ended December 31, 2017, we incurred approximately $2.5 million of acquisition-related costs, such as regulatory, legal, and advisory fees, which we have recorded within unallocated corporate general and administrative expenses.
On December 11, 2017, we sold the assets associated with our Tazo brand including Tazo® signature recipes, intellectual property and inventory to Unilever for a total of $383.8 million. The transaction resulted in a pre-tax gain of $347.9 million, which was included in gains from divestiture of certain operations on our consolidated statements of earnings. Results from Tazo operations prior to the sale are reported primarily in Channel Development.
Fiscal 2017Strategic Alliance
In the fourth quarter of fiscal 2017,2022, we sold our company-operated retail store assetsEvolution Fresh brand and operations in Singaporebusiness to Maxim's Caterers Limited, converting these operations to a fully licensed market, for a total of $119.9 million.Bolthouse Farms. This transaction resulted indid not have a pre-tax gain of $83.9 million, which was included in interest income and other, netmaterial impact on our consolidated statementsfinancial statements.
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Note 3: | Derivative Financial Instruments |
Note 3: Derivative Financial Instruments
Interest Rates
We are subject to interest rate volatility with regard to existing and future issuances of debt. From time to time, we enter into swap agreementsdesignated cash flow hedges to manage our exposure to interest rate fluctuations.
To hedge the variability in cash flows due to changes in benchmark interest rates, werates. We enter into interest rate swap agreements related to anticipated debt issuances.and treasury locks, which are synthetic forward sales of U.S. Treasury securities settled in cash based upon the difference between an agreed-upon treasury rate and the prevailing treasury rate at settlement. These agreements are cash settled at the time of the pricing of the related debt. The effective portion of the derivative'sEach 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 and have an insignificant impact on our condensed consolidated statement of earnings.expense. Refer to Note 78, 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 intercompany royalty payments, inventory purchases, and intercompany borrowing and lending activities. The effective portion of the derivative's gain or loss isresulting gains and losses from these derivatives are recorded in AOCI and is subsequently reclassified to revenue, cost of sales including occupancyproduct and distribution costs, or interest income and other, net, respectively, when the hedged exposure affectsexposures affect net earnings.
From time to time, we may enter into financial instruments, including, but not limited to, forward and swap contracts or use foreign currency-denominated debt, to hedge the currency exposure of our net investmentinvestments in certain international operations. The effective portion ofresulting gains and losses from these instruments' gain or loss isderivatives are recorded in AOCI and isare subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated.
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 denominatedcurrency-denominated payables and receivables;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 (the combination of a purchased call option and a sold put option) to hedge a portion of anticipated cash flows under our price-to-be-fixed green coffee contracts, which are described further in Note 5,, Inventories. Inventories, or our longer-dated forecasted coffee demand where underlying fixed price and price-to-be-fixed contracts are not yet available. The effective portion of each derivative's gain or loss isresulting gains and losses are recorded in AOCI and isare subsequently reclassified to cost of sales including occupancyproduct 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, 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 other designated cash flow hedges are probable to occur.
To mitigate the price uncertainty of a portion of our future purchases, primarily of dairy products,including diesel fuel and other commodities, we enter into swap contracts, futures and collars that are not designated as hedging instruments. GainsThe resulting gains and losses from these derivatives 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 cost of sales including occupancyproduct 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): | | | | | | | | | | | | | | | | | | | | | | | |
| Net Gains/(Losses) Included in AOCI | | Net Gains/(Losses) Expected to be Reclassified from AOCI into Earnings within 12 Months | | Outstanding Contract/Debt Remaining Maturity (Months) |
| Jan 1, 2023 | | Oct 2, 2022 | | |
Cash Flow Hedges: | | | | | | | |
Coffee | $ | (36.4) | | | $ | 153.9 | | | $ | (20.7) | | | 5 |
Cross-currency swaps | (1.7) | | | (1.9) | | | — | | | 23 |
Dairy | (4.2) | | | (2.6) | | | (4.2) | | | 8 |
Foreign currency - other | 12.8 | | | 55.3 | | | 12.1 | | | 33 |
Interest rates | (5.4) | | | (5.8) | | | 0.7 | | | 0 |
Net Investment Hedges: | | | | | | | |
Cross-currency swaps | 52.7 | | | 67.3 | | | — | | | 111 |
Foreign currency | 16.1 | | | 16.1 | | | — | | | 0 |
Foreign currency debt | 88.1 | | | 125.7 | | | — | | | 15 |
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| | | | | | | | | | | | | |
| Net Gains/(Losses) Included in AOCI | | Net Gains Expected to be Reclassified from AOCI into Earnings within 12 Months | | Outstanding Contract/Debt Remaining Maturity (Months) |
| Dec 31, 2017 | | Oct 1, 2017 | | |
Cash Flow Hedges: | | | | | | | |
Interest rates | $ | 16.8 |
| | $ | 17.6 |
| | $ | 3.0 |
| | 0 |
Cross-currency swaps | (7.5 | ) | | (6.0 | ) | | — |
| | 83 |
Foreign currency - other | (8.2 | ) | | (9.1 | ) | | (5.8 | ) | | 36 |
Coffee | (2.3 | ) | | (6.6 | ) | | (2.3 | ) | | 3 |
Net Investment Hedges: | | | | | | | |
Foreign currency | 16.1 |
| | 16.2 |
| | — |
| | 0 |
Foreign currency debt | (2.4 | ) | | (2.2 | ) | | — |
| | 76 |
PretaxPre-tax gains and losses on derivative contracts and foreign-denominatedforeign currency-denominated long-term debt designated as hedging instruments recognized in other comprehensive income (“OCI”) and reclassifications from AOCI to earnings (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarter Ended | | |
| | Gains/(Losses) Recognized in OCI Before Reclassifications | | Gains/(Losses) Reclassified from AOCI to Earnings | | Location of gain/(loss) |
| | | | Jan 1, 2023 | | Jan 2, 2022 | | Jan 1, 2023 | | Jan 2, 2022 | |
Cash Flow Hedges: | | | | | | | | | | | | |
Coffee | | | | $ | (119.4) | | | $ | 71.5 | | | $ | 96.7 | | | $ | 6.5 | | | Product and distribution costs |
| | | | | | | | | | |
Cross-currency swaps | | | | (11.7) | | | 4.5 | | | (2.7) | | | (0.8) | | | Interest expense |
| | | | | (9.1) | | | 6.9 | | | Interest income and other, net |
Dairy | | | | (3.6) | | | 4.6 | | | (1.5) | | | (0.4) | | | Product and distribution costs |
| | | | | | | | | |
Foreign currency - other | | | | (46.0) | | | 6.9 | | | 8.0 | | | 2.2 | | | Licensed stores revenue |
| | | | | 2.2 | | | (1.5) | | | Product and distribution costs |
| | | | | 0.2 | | | — | | | Interest income and other, net |
Interest rates | | | | — | | | 1.2 | | | (0.5) | | | (0.4) | | | Interest expense |
| | | | | | | | | |
Net Investment Hedges: | | | | | | | | | | | | |
Cross-currency swaps | | | | (14.0) | | | 16.3 | | | 5.3 | | | 3.4 | | | Interest expense |
| | | | | | | | | | | | |
Foreign currency debt | | | | (50.6) | | | 25.2 | | | — | | | — | | | |
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| | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
|
|
| | | | | | | | | | | | | | | |
| Quarter Ended |
| Gains/(Losses) Recognized in OCI Before Reclassifications | | Gains/(Losses) Reclassified from AOCI to Earnings |
| Dec 31, 2017 | | Jan 1, 2017 | | Dec 31, 2017 | | Jan 1, 2017 |
Cash Flow Hedges: | | | | | | | |
Interest rates | $ | — |
| | $ | — |
| | $ | 1.2 |
| | $ | 1.2 |
|
Cross-currency swaps | (2.4 | ) | | 75.3 |
| | (0.5 | ) | | 77.6 |
|
Foreign currency - other | (1.3 | ) | | 37.2 |
| | (2.8 | ) | | 4.4 |
|
Coffee | — |
| | 1.0 |
| | (4.7 | ) | | (0.7 | ) |
Net Investment Hedges: | | | | | | | |
Foreign currency | (0.3 | ) | | 41.1 |
| | 0.1 |
| | — |
|
Foreign currency debt | — |
| | — |
| | — |
| | — |
|
PretaxPre-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): | | | | | | | | | | | | | | | | | | | | | |
| | | Gains/(Losses) Recognized in Earnings | | | | |
| Location of gain/(loss) recognized in earnings | | Quarter Ended | | |
| | Jan 1, 2023 | | Jan 2, 2022 | | | | |
Non-Designated Derivatives: | | | | | | | | | |
| | | | | | | | | |
Foreign currency - other | Interest income and other, net | | $ | (11.6) | | | $ | 10.2 | | | | | |
Coffee | Interest income and other, net | | (5.5) | | | 3.1 | | | | | |
Diesel fuel and other commodities | Interest income and other, net | | (0.2) | | | — | | | | | |
Fair Value Hedges: | | | | | | | | | |
Interest rate swap | Interest expense | | (1.6) | | | (4.8) | | | | | |
Long-term debt (hedged item) | Interest expense | | (3.3) | | | 8.2 | | | | | |
|
| | | | | | | |
| Gains/(Losses) Recognized in Earnings |
| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 |
Non-Designated Derivatives: | | | |
Foreign currency - other | $ | 3.7 |
| | $ | 8.3 |
|
Dairy | (2.1 | ) | | 5.1 |
|
Diesel fuel and other commodities | 1.4 |
| | 0.2 |
|
Designated Fair Value Hedging Instruments: | | | |
Interest rate swap | (7.5 | ) | | — |
|
Notional amounts of outstanding derivative contracts (in millions): | | | | | | | | | | | |
| Jan 1, 2023 | | Oct 2, 2022 |
Coffee | $ | 401 | | | $ | 649 | |
Cross-currency swaps | 1,124 | | | 741 | |
Dairy | 68 | | | 94 | |
Diesel fuel and other commodities | 25 | | | 33 | |
Foreign currency - other | 1,305 | | | 1,269 | |
Interest rate swaps | 1,100 | | | 1,100 | |
|
| | | | | | | |
| Dec 31, 2017 | | Oct 1, 2017 |
Interest rate swap | $ | 750 |
| | $ | 750 |
|
Cross-currency swaps | 495 |
| | 514 |
|
Foreign currency - other | 998 |
| | 901 |
|
Dairy | 57 |
| | 14 |
|
Diesel fuel and other commodities | 13 |
| | 41 |
|
Fair value of outstanding derivative contracts (in millions) including the location of the asset and/or liability on the consolidated balance sheets: | | | | | | | | | | | | | | | | | |
| | | Derivative Assets |
| Balance Sheet Location | | Jan 1, 2023 | | Oct 2, 2022 |
Designated Derivative Instruments: | | | | | |
Cross-currency swaps | Other long-term assets | | $ | 85.4 | | | $ | 115.4 | |
| | | | | |
Dairy | Prepaid expenses and other current assets | | 0.2 | | | 0.5 | |
| | | | | |
Foreign currency - other | Prepaid expenses and other current assets | | 22.4 | | | 39.9 | |
Other long-term assets | | 13.8 | | | 33.5 | |
| | | | | |
| | | | | |
Non-designated Derivative Instruments: | | | | | |
| | | | | |
| | | | | |
Diesel fuel and other commodities | Prepaid expenses and other current assets | | 0.1 | | | 0.4 | |
Foreign currency | Prepaid expenses and other current assets | | 15.8 | | | 34.3 | |
Other long-term assets | | — | | | 7.3 | |
| | | | | |
| | | Derivative Liabilities |
| Balance Sheet Location | | Jan 1, 2023 | | Oct 2, 2022 |
Designated Derivative Instruments: | | | | | |
Cross-currency swaps | Other long-term liabilities | | $ | 1.6 | | | $ | — | |
| | | | | |
| | | | | |
| | | | | |
Dairy | Accrued liabilities | | 3.1 | | | 2.9 | |
Foreign currency - other | Accrued liabilities | | 10.0 | | | 0.3 | |
Other long-term liabilities | | 10.1 | | | — | |
Interest rate | Accrued liabilities | | 20.4 | | | 12.0 | |
Interest rate swap | Other long-term liabilities | | 33.6 | | | 34.0 | |
Non-designated Derivative Instruments: | | | | | |
| | | | | |
Diesel fuel and other commodities | Accrued liabilities | | 0.4 | | | — | |
Foreign currency | Accrued liabilities | | 1.3 | | | 5.8 | |
| | | | | |
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): | | | | | | | | | | | | | | | | | | | | | | | |
| Carrying amount of hedged item | | Cumulative amount of fair value hedging adjustment included in the carrying amount |
| Jan 1, 2023 | | Oct 2, 2022 | | Jan 1, 2023 | | Oct 2, 2022 |
Location on the balance sheet | | | | | | | |
Long-term debt | $ | 1,051.0 | | | $ | 1,047.7 | | | $ | (49.0) | | | $ | (52.3) | |
|
| | | | | | | | | | | | | | | |
| Derivative Assets | | Derivative Liabilities |
| Dec 31, 2017 | | Oct 1, 2017 | | Dec 31, 2017 | | Oct 1, 2017 |
Designated Derivative Instruments: | | | | | | | |
Cross-currency swaps | $ | 10.0 |
| | $ | 12.4 |
| | $ | 9.9 |
| | $ | 9.8 |
|
Foreign currency - other | 6.4 |
| | 7.7 |
| | 18.0 |
| | 20.8 |
|
Net investment hedges | — |
| | 0.3 |
| | — |
| | — |
|
Interest rate swap | — |
| | — |
| | 11.6 |
| | 3.8 |
|
Non-designated Derivative Instruments: | | | | | | | |
Foreign currency | 21.2 |
| | 15.8 |
| | 4.1 |
| | 1.4 |
|
Dairy | — |
| | — |
| | 3.8 |
| | 2.4 |
|
Diesel fuel and other commodities | 2.7 |
| | 1.6 |
| | 0.8 |
| | 0.3 |
|
Additional disclosures related to cash flow gains and losses included in AOCI, as well as subsequent reclassifications to earnings, are included in Note 811, Equity.
| |
Note 4: | Fair Value Measurements |
Note 4: Fair Value Measurements
Assets and Liabilities Measuredliabilities measured at Fair Valuefair value on a Recurring Basisrecurring basis (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Fair Value Measurements at Reporting Date Using |
| Balance at January 1, 2023 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | |
Cash and cash equivalents | $ | 3,186.5 | | | $ | 3,042.5 | | | $ | 144.0 | | | $ | — | |
Short-term investments: | | | | | | | |
Available-for-sale debt securities | | | | | | | |
| | | | | | | |
| | | | | | | |
Commercial paper | 0.2 | | | — | | | 0.2 | | | — | |
Corporate debt securities | 23.2 | | | — | | | 23.2 | | | — | |
U.S. government treasury securities | 8.9 | | | 8.9 | | | — | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total available-for-sale debt securities | 32.3 | | | 8.9 | | | 23.4 | | | — | |
Structured deposits | 28.8 | | | — | | | 28.8 | | | — | |
Marketable equity securities | 62.8 | | | 62.8 | | | — | | | — | |
Total short-term investments | 123.9 | | | 71.7 | | | 52.2 | | | — | |
Prepaid expenses and other current assets: | | | | | | | |
Derivative assets | 38.5 | | | — | | | 38.5 | | | — | |
Long-term investments: | | | | | | | |
Available-for-sale debt securities | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Corporate debt securities | 136.4 | | | — | | | 136.4 | | | — | |
Foreign government obligations | 3.8 | | | — | | | 3.8 | | | — | |
Mortgage and other asset-backed securities | 53.3 | | | — | | | 53.3 | | | — | |
State and local government obligations | 1.3 | | | — | | | 1.3 | | | — | |
U.S. government treasury securities | 88.8 | | | 88.8 | | | — | | | — | |
Total long-term investments | 283.6 | | | 88.8 | | | 194.8 | | | — | |
Other long-term assets: | | | | | | | |
Derivative assets | 99.2 | | | — | | | 99.2 | | | — | |
| | | | | | | |
Total assets | $ | 3,731.7 | | | $ | 3,203.0 | | | $ | 528.7 | | | $ | — | |
Liabilities: | | | | | | | |
Accrued liabilities: | | | | | | | |
Derivative liabilities | $ | 35.2 | | | $ | — | | | $ | 35.2 | | | $ | — | |
Other long-term liabilities: | | | | | | | |
Derivative liabilities | 45.3 | | | — | | | 45.3 | | | — | |
Total liabilities | $ | 80.5 | | | $ | — | | | $ | 80.5 | | | $ | — | |
|
| | | | | | | | | | | | | | | |
| | | Fair Value Measurements at Reporting Date Using |
| Balance at Dec 31, 2017 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | |
Cash and cash equivalents | $ | 3,661.4 |
| | $ | 3,661.4 |
| | $ | — |
| | $ | — |
|
Short-term investments: | | | | | | | |
Available-for-sale securities | | | | | | | |
Corporate debt securities | 14.9 |
| | — |
| | 14.9 |
| | — |
|
U.S. government treasury securities | 10.5 |
| | 10.5 |
| | — |
| | — |
|
Total available-for-sale securities | 25.4 |
| | 10.5 |
| | 14.9 |
| | — |
|
Trading securities | 81.2 |
| | 81.2 |
| | — |
| | — |
|
Total short-term investments | 106.6 |
| | 91.7 |
| | 14.9 |
| | — |
|
Prepaid expenses and other current assets: | | | | | | | |
Derivative assets | 24.1 |
| | — |
| | 24.1 |
| | — |
|
Long-term investments: | | | | | | | |
Available-for-sale securities | | | | | | | |
Agency obligations | 8.5 |
| | — |
| | 8.5 |
| | — |
|
Corporate debt securities | 165.9 |
| | — |
| | 165.9 |
| | — |
|
Auction rate securities | 5.9 |
| | — |
| | — |
| | 5.9 |
|
Foreign government obligations | 12.0 |
| | — |
| | 12.0 |
| | — |
|
U.S. government treasury securities | 112.1 |
| | 112.1 |
| | — |
| | — |
|
State and local government obligations | 7.0 |
| | — |
| | 7.0 |
| | — |
|
Mortgage and other asset-backed securities | 52.1 |
| | — |
| | 52.1 |
| | — |
|
Total long-term investments | 363.5 |
| | 112.1 |
| | 245.5 |
| | 5.9 |
|
Other long-term assets: | | | | | | | |
Derivative assets | 16.2 |
| | — |
| | 16.2 |
| | — |
|
Total assets | $ | 4,171.8 |
| | $ | 3,865.2 |
| | $ | 300.7 |
| | $ | 5.9 |
|
Liabilities: | | | | | | | |
Accrued liabilities: | | | | | | | |
Derivative liabilities | $ | 20.8 |
| | $ | 4.6 |
| | $ | 16.2 |
| | $ | — |
|
Other long-term liabilities: | | | | | | | |
Derivative liabilities | 27.4 |
| | — |
| | 27.4 |
| | — |
|
Total liabilities | $ | 48.2 |
| | $ | 4.6 |
| | $ | 43.6 |
| | $ | — |
|
| | | | | Fair Value Measurements at Reporting Date Using | | | | Fair Value Measurements at Reporting Date Using |
| Balance at Oct 1, 2017 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Balance at October 2, 2022 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | | Assets: | | | | | | | |
Cash and cash equivalents | $ | 2,462.3 |
| | $ | 2,462.3 |
| | $ | — |
| | $ | — |
| Cash and cash equivalents | $ | 2,818.4 | | | $ | 2,797.3 | | | $ | 21.1 | | | $ | — | |
Short-term investments: | | | | | | | | Short-term investments: | |
Available-for-sale securities | | | | | | | | |
Agency obligations | 7.5 |
| | — |
| | 7.5 |
| | — |
| |
Commercial paper | 2.0 |
| | — |
| | 2.0 |
| | — |
| |
Available-for-sale debt securities | | Available-for-sale debt securities | |
| Corporate debt securities | 49.4 |
| | — |
| | 49.4 |
| | — |
| Corporate debt securities | 22.4 | | | — | | | 22.4 | | | — | |
Foreign government obligations | 7.1 |
| | — |
| | 7.1 |
| | — |
| |
U.S. government treasury securities | 81.4 |
| | 81.4 |
| | — |
| | — |
| U.S. government treasury securities | 9.3 | | | 9.3 | | | — | | | — | |
State and local government obligations | 2.0 |
| | — |
| | 2.0 |
| | — |
| |
Certificates of deposit | 2.3 |
| | — |
| | 2.3 |
| | — |
| |
Total available-for-sale securities | 151.7 |
| | 81.4 |
| | 70.3 |
| | — |
| |
Trading securities | 76.9 |
| | 76.9 |
| | — |
| | — |
| |
| Total available-for-sale debt securities | | Total available-for-sale debt securities | 31.7 | | | 9.3 | | | 22.4 | | | — | |
Structured deposits | | Structured deposits | 275.1 | | | — | | | 275.1 | | | — | |
Marketable equity securities | | Marketable equity securities | 57.7 | | | 57.7 | | | — | | | — | |
Total short-term investments | 228.6 |
| | 158.3 |
| | 70.3 |
| | — |
| Total short-term investments | 364.5 | | | 67.0 | | | 297.5 | | | — | |
Prepaid expenses and other current assets: | | | | | | | | Prepaid expenses and other current assets: | |
Derivative assets | 13.4 |
| | 0.1 |
| | 13.3 |
| | — |
| Derivative assets | 75.1 | | | — | | | 75.1 | | | — | |
Long-term investments: | | | | | | | | Long-term investments: | |
Available-for-sale securities | | | | | | | | |
Agency obligations | 21.8 |
| | — |
| | 21.8 |
| | — |
| |
Available-for-sale debt securities | | Available-for-sale debt securities | |
| Corporate debt securities | 207.4 |
| | — |
| | 207.4 |
| | — |
| Corporate debt securities | 134.7 | | | — | | | 134.7 | | | — | |
Auction rate securities | 5.9 |
| | — |
| | — |
| | 5.9 |
| |
Foreign government obligations | 17.1 |
| | — |
| | 17.1 |
| | — |
| Foreign government obligations | 3.8 | | | — | | | 3.8 | | | — | |
Mortgage and other asset-backed securities | | Mortgage and other asset-backed securities | 56.5 | | | — | | | 56.5 | | | — | |
State and local government obligations | | State and local government obligations | 1.3 | | | — | | | 1.3 | | | — | |
U.S. government treasury securities | 127.4 |
| | 127.4 |
| | — |
| | — |
| U.S. government treasury securities | 82.8 | | | 82.8 | | | — | | | — | |
State and local government obligations | 7.0 |
| | — |
| | 7.0 |
| | — |
| |
Mortgage and other asset-backed securities | 155.7 |
| | — |
| | 155.7 |
| | — |
| |
Total long-term investments | 542.3 |
| | 127.4 |
| | 409.0 |
| | 5.9 |
| Total long-term investments | 279.1 | | | 82.8 | | | 196.3 | | | — | |
Other long-term assets: | | | | | | | | Other long-term assets: | |
Derivative assets | 24.4 |
| | — |
| | 24.4 |
| | — |
| Derivative assets | 156.2 | | | — | | | 156.2 | | | — | |
Total assets | $ | 3,271.0 |
| | $ | 2,748.1 |
| | $ | 517.0 |
| | $ | 5.9 |
| Total assets | $ | 3,693.3 | | | $ | 2,947.1 | | | $ | 746.2 | | | $ | — | |
Liabilities: | | | | | | | | Liabilities: | | | | | | | |
Accrued liabilities: | | | | | | | | Accrued liabilities: | |
Derivative liabilities | $ | 16.4 |
| | $ | 2.5 |
| | $ | 13.9 |
| | $ | — |
| Derivative liabilities | $ | 21.0 | | | $ | — | | | $ | 21.0 | | | $ | — | |
Other long-term liabilities: | | | | | | | | Other long-term liabilities: | |
Derivative liabilities | 22.1 |
| | — |
| | 22.1 |
| | — |
| Derivative liabilities | 34.0 | | | — | | | 34.0 | | | — | |
Total | $ | 38.5 |
| | $ | 2.5 |
| | $ | 36.0 |
| | $ | — |
| |
Total liabilities | | Total liabilities | $ | 55.0 | | | $ | — | | | $ | 55.0 | | | $ | — | |
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 investmentsavailable-for-sale debt securities, structured deposits and marketable equity securities were not material as of December 31, 2017January 1, 2023 and October 1, 2017.
2, 2022.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities recognized or disclosed at fair value on the condensed consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, ROU assets, goodwill and other intangible assets equity and cost method investments and other assets. These assets are measured at fair value if determined to be impaired. During the quarters ended December 31, 2017 and January 1, 2017, there were no material fair value adjustments.
The estimated fair value of our long-term debt based on the quoted market price (Level 2) is included at Note 78, Debt. There were no material fair value adjustments during the quarters ended January 1, 2023 and January 2, 2022. | |
Note 5: | Inventories (in millions)
|
|
| | | | | | | | | | | |
| Dec 31, 2017 | | Oct 1, 2017 | | Jan 1, 2017 |
Coffee: | | | | | |
Unroasted | $ | 559.9 |
| | $ | 541.0 |
| | $ | 550.5 |
|
Roasted | 283.9 |
| | 301.1 |
| | 255.7 |
|
Other merchandise held for sale | 260.6 |
| | 301.1 |
| | 256.2 |
|
Packaging and other supplies | 208.8 |
| | 220.8 |
| | 156.3 |
|
Total | $ | 1,313.2 |
| | $ | 1,364.0 |
| | $ | 1,218.7 |
|
Note 5: Inventories (in millions): | | | | | | | | | | | |
| Jan 1, 2023 | | Oct 2, 2022 |
Coffee: | | | |
Unroasted | $ | 1,015.1 | | | $ | 1,018.6 | |
Roasted | 293.2 | | | 310.3 | |
Other merchandise held for sale | 383.5 | | | 430.9 | |
Packaging and other supplies | 396.3 | | | 416.8 | |
Total | $ | 2,088.1 | | | $ | 2,176.6 | |
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 31, 2017,January 1, 2023, we had committed to purchasing green coffee totaling $762$333.3 million under fixed-price contracts and an estimated $369$773.2 million under price-to-be-fixed contracts. As of December 31, 2017, noneA portion of our price-to-be fixedprice-to-be-fixed contracts wereare effectively fixed through the use of futures contracts.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 established with our suppliers in the past,and continuous monitoring, the risk of non-delivery on these purchase commitments is remote. | |
Note 6: | Supplemental Balance Sheet Information (in millions)
|
Note 6: Supplemental Balance Sheet and Statement of Earnings Information(in millions):
Prepaid Expenses and Other Current Assets | | | | | | | | | | | |
| Jan 1, 2023 | | Oct 2, 2022 |
Income tax receivable | $ | 10.0 | | | $ | 27.7 | |
Government subsidies receivable | 28.4 | | | 69.4 | |
Other prepaid expenses and current assets | 335.1 | | | 386.6 | |
Total prepaid expenses and current assets | $ | 373.5 | | | $ | 483.7 | |
|
| | | | | | | |
| Dec 31, 2017 | | Oct 1, 2017 |
Receivable from Taiwan divestiture | $ | 177.1 |
| | $ | — |
|
Income tax receivable | 438.4 |
| | 68.0 |
|
Other prepaid expenses and current assets | 335.0 |
| | 290.1 |
|
Total prepaid expenses and current assets | $ | 950.5 |
| | $ | 358.1 |
|
Property, Plant and Equipment, net | | | | | | | | | | | |
| Jan 1, 2023 | | Oct 2, 2022 |
Land | $ | 46.1 | | | $ | 46.1 | |
Buildings | 566.6 | | | 555.4 | |
Leasehold improvements | 9,368.6 | | | 9,066.8 | |
Store equipment | 3,086.6 | | | 3,018.2 | |
Roasting equipment | 809.3 | | | 838.5 | |
Furniture, fixtures and other | 1,578.4 | | | 1,526.1 | |
Work in progress | 603.0 | | | 558.7 | |
Property, plant and equipment, gross | 16,058.6 | | | 15,609.8 | |
Accumulated depreciation | (9,359.1) | | | (9,049.3) | |
Property, plant and equipment, net | $ | 6,699.5 | | | $ | 6,560.5 | |
Accrued Liabilities | | | | | | | | | | | |
| Jan 1, 2023 | | Oct 2, 2022 |
Accrued occupancy costs | $ | 77.9 | | | $ | 84.6 | |
Accrued dividends payable | 608.6 | | | 608.3 | |
Accrued capital and other operating expenditures | 683.8 | | | 878.1 | |
Self-insurance reserves | 243.6 | | | 232.3 | |
Income taxes payable | 280.1 | | | 139.2 | |
Accrued business taxes | 195.6 | | | 194.6 | |
Total accrued liabilities | $ | 2,089.6 | | | $ | 2,137.1 | |
Store Operating Expenses
| | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | | | |
Wages and benefits | $ | 2,215.7 | | | $ | 2,010.7 | | | | | |
Occupancy costs | 671.5 | | | 665.3 | | | | | |
Other expenses | 778.1 | | | 724.0 | | | | | |
Total store operating expenses | $ | 3,665.3 | | | $ | 3,400.0 | | | | | |
Note 7: Other Intangible Assets and Goodwill
Indefinite-Lived Intangible Assets | | | | | | | | | | | |
(in millions) | Jan 1, 2023 | | Oct 2, 2022 |
Trade names, trademarks and patents | $ | 97.8 | | | $ | 97.5 | |
|
| | | | | | | |
| Dec 31, 2017 | | Oct 1, 2017 |
Land | $ | 46.9 |
| | $ | 46.9 |
|
Buildings | 487.2 |
| | 481.7 |
|
Leasehold improvements | 6,844.0 |
| | 6,401.0 |
|
Store equipment | 2,234.3 |
| | 2,110.7 |
|
Roasting equipment | 622.0 |
| | 619.8 |
|
Furniture, fixtures and other | 1,599.2 |
| | 1,514.1 |
|
Work in progress | 395.8 |
| | 409.8 |
|
Property, plant and equipment, gross | 12,229.4 |
| | 11,584.0 |
|
Accumulated depreciation | (6,850.7 | ) | | (6,664.5 | ) |
Property, plant and equipment, net | $ | 5,378.7 |
| | $ | 4,919.5 |
|
Finite-Lived Intangible Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jan 1, 2023 | | Oct 2, 2022 |
(in millions) | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Acquired and reacquired rights | $ | 1,030.4 | | | $ | (1,030.4) | | | $ | — | | | $ | 990.0 | | | $ | (990.0) | | | $ | — | |
Acquired trade secrets and processes | 27.6 | | | (27.6) | | | — | | | 27.6 | | | (27.3) | | | 0.3 | |
Trade names, trademarks and patents | 125.0 | | | (74.5) | | | 50.5 | | | 124.6 | | | (69.6) | | | 55.0 | |
Licensing agreements | 18.4 | | | (15.3) | | | 3.1 | | | 19.3 | | | (16.2) | | | 3.1 | |
Other finite-lived intangible assets | 21.0 | | | (21.0) | | | — | | | 20.6 | | | (20.6) | | | — | |
Total finite-lived intangible assets | $ | 1,222.4 | | | $ | (1,168.8) | | | $ | 53.6 | | | $ | 1,182.1 | | | $ | (1,123.7) | | | $ | 58.4 | |
Amortization expense for finite-lived intangible assets was $5.6 million for the quarter ended January 1, 2023 and $50.2 million for the quarter ended January 2, 2022, respectively.
Estimated future amortization expense as of January 1, 2023 (in millions): | | | | | |
Fiscal Year | Total |
2023 (excluding the quarter ended January 1, 2023) | $ | 15.2 | |
2024 | 20.0 | |
2025 | 14.0 | |
2026 | 1.3 | |
2027 | 1.0 | |
Thereafter | 2.1 | |
Total estimated future amortization expense | $ | 53.6 | |
Accrued LiabilitiesGoodwill
Changes in the carrying amount of goodwill by reportable operating segment (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | International | | Channel Development | | Corporate and Other | | Total |
Goodwill balance at October 2, 2022 | $ | 491.1 | | | $ | 2,756.7 | | | $ | 34.7 | | | $ | 1.0 | | | $ | 3,283.5 | |
| | | | | | | | | |
| | | | | | | | | |
Other(1) | 0.3 | | | 99.2 | | | — | | | — | | | 99.5 | |
Goodwill balance at January 1, 2023 | $ | 491.4 | | | $ | 2,855.9 | | | $ | 34.7 | | | $ | 1.0 | | | $ | 3,383.0 | |
(1)“Other” consists of changes in the goodwill balance resulting from foreign currency translation.
|
| | | | | | | |
| Dec 31, 2017 | | Oct 1, 2017 |
Accrued compensation and related costs | $ | 535.2 |
| | $ | 524.5 |
|
Accrued occupancy costs | 178.4 |
| | 151.3 |
|
Accrued taxes | 421.5 |
| | 226.6 |
|
Accrued dividends payable | 422.3 |
| | 429.5 |
|
Accrued capital and other operating expenditures | 772.7 |
| | 602.6 |
|
Payable for East China Acquisition | 1,431.0 |
| | — |
|
Total accrued liabilities | $ | 3,761.1 |
| | $ | 1,934.5 |
|
Revolving Credit Facility
Our $3.0 billion unsecured five-year revolving credit facility (the “2021 credit facility”), of which $150 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 will bear interest at a variable rate based on LIBOR, 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 2021 credit facility contains alternative interest rate provisions specifying rate calculations to be used at such time LIBOR ceases to be available as a benchmark due to reference rate reform. 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) the Eurocurrency Rate (as defined in the 2021 credit facility) plus 1.000%.
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 January 1, 2023, we were in compliance with all applicable covenants. No amounts were outstanding under our 2021 credit facility as of January 1, 2023 or October 2, 2022.
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$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. As of December 31, 2017,January 1, 2023, we had no borrowings outstanding under the program. As of October 2, 2022, we had $175.0 million in borrowings outstanding under this program.
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 billion, or $37.6 million, credit facility is currently set to mature on January 4, 2024. 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 billion, or $75.2 million, credit facility is currently set to mature on March 27, 2023. 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 0.350%.
As of January 1, 2023 and October 2, 2022, we had no borrowings outstanding under these Japanese yen-denominated 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): | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jan 1, 2023 | | Oct 2, 2022 | | Stated Interest Rate | Effective Interest Rate(1) |
Issuance | Amount | Estimated Fair Value | | Amount | Estimated Fair Value | |
March 2023 notes | $ | 1,000.0 | | $ | 996.6 | | | $ | 1,000.0 | | $ | 996.5 | | | 3.100 | % | 3.107 | % |
October 2023 notes(2) | 750.0 | | 745.0 | | | 750.0 | | 744.8 | | | 3.850 | % | 2.859 | % |
February 2024 notes(3) | 500.0 | | 496.8 | | | 500.0 | | 497.3 | | | 4.590 | % | 4.821 | % |
March 2024 notes(4) | 639.0 | | 653.5 | | | 588.4 | | 584.7 | | | 0.372 | % | 0.462 | % |
August 2025 notes | 1,250.0 | | 1,225.3 | | | 1,250.0 | | 1,209.6 | | | 3.800 | % | 3.721 | % |
June 2026 notes | 500.0 | | 465.6 | | | 500.0 | | 458.3 | | | 2.450 | % | 2.511 | % |
March 2027 notes | 500.0 | | 447.5 | | | 500.0 | | 437.9 | | | 2.000 | % | 2.058 | % |
March 2028 notes | 600.0 | | 565.2 | | | 600.0 | | 554.8 | | | 3.500 | % | 3.529 | % |
November 2028 notes | 750.0 | | 713.8 | | | 750.0 | | 704.7 | | | 4.000 | % | 3.958 | % |
August 2029 notes(2) | 1,000.0 | | 924.7 | | | 1,000.0 | | 900.3 | | | 3.550 | % | 3.840 | % |
March 2030 notes | 750.0 | | 625.2 | | | 750.0 | | 607.7 | | | 2.250 | % | 3.084 | % |
November 2030 notes | 1,250.0 | | 1,052.7 | | | 1,250.0 | | 1,017.9 | | | 2.550 | % | 2.582 | % |
February 2032 notes | 1,000.0 | | 857.8 | | | 1,000.0 | | 827.1 | | | 3.000 | % | 3.155 | % |
June 2045 notes | 350.0 | | 296.4 | | | 350.0 | | 281.5 | | | 4.300 | % | 4.348 | % |
December 2047 notes | 500.0 | | 381.5 | | | 500.0 | | 369.6 | | | 3.750 | % | 3.765 | % |
November 2048 notes | 1,000.0 | | 866.6 | | | 1,000.0 | | 824.6 | | | 4.500 | % | 4.504 | % |
August 2049 notes | 1,000.0 | | 857.0 | | | 1,000.0 | | 817.8 | | | 4.450 | % | 4.447 | % |
March 2050 notes | 500.0 | | 356.1 | | | 500.0 | | 342.0 | | | 3.350 | % | 3.362 | % |
November 2050 notes | 1,250.0 | | 906.3 | | | 1,250.0 | | 874.9 | | | 3.500 | % | 3.528 | % |
Total | 15,089.0 | | 13,433.6 | | | 15,038.4 | | 13,052.0 | | | | |
Aggregate debt issuance costs and unamortized premium/(discount), net | (114.0) | | | | (117.2) | | | | | |
Hedge accounting fair value adjustment(2) | (49.0) | | | | (52.3) | | | | | |
Total | $ | 14,926.0 | | | | $ | 14,868.9 | | | | | |
(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 our October 2023 notes and $350 million of our August 2029 notes. Refer to Note 3, Derivative Financial Instruments, for additional information on our interest rate swaps designated as fair value hedges. (3)Floating rate notes which bear interest at a rate equal to Compounded SOFR (as defined in the February 2024 notes) plus 0.420%, resulting in a stated interest rate of 4.590% at January 1, 2023.
(4)Japanese yen-denominated long-term debt.
|
| | | | | | | | | | | | | | | | | | |
| Dec 31, 2017 | | Oct 1, 2017 | | Stated Interest Rate | Effective Interest Rate (1) |
Issuance | Amount | Estimated Fair Value | | Amount | Estimated Fair Value | |
2018 notes | $ | 350.0 |
| $ | 350 |
| | $ | 350.0 |
| $ | 352 |
| | 2.000 | % | 2.012 | % |
2020 notes(2) | 500.0 |
| 500 |
| | — |
| — |
| | 2.200 | % | 2.228 | % |
2021 notes | 500.0 |
| 497 |
| | 500.0 |
| 501 |
| | 2.100 | % | 2.293 | % |
2021 notes | 250.0 |
| 248 |
| | 250.0 |
| 250 |
| | 2.100 | % | 1.600 | % |
2022 notes | 500.0 |
| 504 |
| | 500.0 |
| 508 |
| | 2.700 | % | 2.819 | % |
2023 notes | 750.0 |
| 796 |
| | 750.0 |
| 806 |
| | 3.850 | % | 2.859 | % |
2024 notes (3) | 755.3 |
| 762 |
| | 755.3 |
| 760 |
| | 0.372 | % | 0.462 | % |
2026 notes | 500.0 |
| 480 |
| | 500.0 |
| 481 |
| | 2.450 | % | 2.511 | % |
2045 notes | 350.0 |
| 387 |
| | 350.0 |
| 381 |
| | 4.300 | % | 4.348 | % |
2047 notes(2) | 500.0 |
| 509 |
| | — |
| — |
| | 3.750 | % | 3.765 | % |
Total | 4,955.3 |
| 5,033 |
| | 3,955.3 |
| 4,039 |
| | | |
Aggregate debt issuance costs and unamortized premium, net | (26.1 | ) | | | (17.5 | ) | | | | |
Hedge accounting fair value adjustment (4) | (12.8 | ) | | | (5.2 | ) | | | | |
Total | $ | 4,916.4 |
| | | $ | 3,932.6 |
| | | | |
| |
(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 the interest rate risk prior to the debt issuance. |
| |
(2)
| Issued in November 2017. |
| |
(3)
| Japanese yen-denominated long-term debt. |
| |
(4)
| Amount represents the change in fair value due to changes in benchmark interest rates related to our 2023 notes. Refer to Note 3, Derivative Financial Instruments, for additional information on our interest rate swap designated as a fair value hedge. |
The indentures under which the above notes were issued require us to maintain compliance with certain covenants, including limits on future liens and sale and leaseback transactions on certain material properties. As of December 31, 2017, we were in compliance with all applicable covenants.
The following table summarizes our long-term debt maturities as of December 31, 2017January 1, 2023 by fiscal year (in millions): | | | | | |
Fiscal Year | Total |
| |
2023 | $ | 1,750.0 | |
2024 | 1,139.0 | |
2025 | 1,250.0 | |
2026 | 500.0 | |
2027 | 500.0 | |
Thereafter | 9,950.0 | |
Total | $ | 15,089.0 | |
Note 9: Leases
The components of lease costs (in millions):
| | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | | | |
Operating lease costs(1) | $ | 384.8 | | | $ | 386.1 | | | | | |
Variable lease costs | 235.3 | | | 229.8 | | | | | |
Short-term lease costs | 7.0 | | | 7.1 | | | | | |
Total lease costs | $ | 627.1 | | | $ | 623.0 | | | | | |
(1)Includes immaterial amounts of sublease income and rent concessions.
The following table includes supplemental information (in millions): | | | | | | | | | | | |
| Quarter Ended |
| Jan 1, 2023 | | Jan 2, 2022 |
Cash paid related to operating lease liabilities | $ | 404.1 | | | $ | 410.0 | |
Operating lease liabilities arising from obtaining ROU assets | 367.3 | | | 346.8 | |
| | | |
| Jan 1, 2023 | | Jan 2, 2022 |
Weighted-average remaining operating lease term | 8.5 years | | 8.6 years |
Weighted-average operating lease discount rate | 2.7 | % | | 2.5 | % |
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. There were no material finance leases as of January 1, 2023 and October 2, 2022.
Minimum future maturities of operating lease liabilities (in millions): | | | | | |
Fiscal Year | Total |
2023 (excluding the quarter ended January 1, 2023) | $ | 1,511.5 | |
2024 | 1,472.9 | |
2025 | 1,332.8 | |
2026 | 1,177.8 | |
2027 | 975.4 | |
Thereafter | 3,600.2 | |
Total lease payments | 10,070.6 | |
Less imputed interest | (1,177.7) | |
Total | $ | 8,892.9 | |
As of January 1, 2023, we have entered into operating leases that have not yet commenced of $1.2 billion, primarily related to real estate leases. These leases will commence between fiscal year 2023 and fiscal year 2028 with lease terms ranging from three to twenty years.
|
| | | |
Fiscal Year | Total |
2019 | $ | 350.0 |
|
2020 | — |
|
2021 | 1,250.0 |
|
2022 | 500.0 |
|
2023 | — |
|
Thereafter | 2,855.3 |
|
Total | $ | 4,955.3 |
|
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 January 1, 2023, the current and long-term deferred revenue related to Nestlé was $177.0 million and $6.1 billion, respectively. As of October 2, 2022, the current and long-term deferred revenue related to the Nestlé up-front payment was $177.0 million and $6.2 billion, respectively. During the quarter ended January 1, 2023, we recognized $44.1 million of prepaid royalty revenue related to Nestlé. During the quarter ended January 2, 2022, we recognized $44.2 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): | | | | | |
Quarter Ended January 1, 2023 | Total |
Stored value cards and loyalty program at October 2, 2022 | $ | 1,503.0 | |
Revenue deferred - card activations, card reloads and Stars earned | 4,223.4 | |
Revenue recognized - card and Stars redemptions and breakage | (3,714.1) | |
Other(1) | 13.3 | |
Stored value cards and loyalty program at January 1, 2023(2) | $ | 2,025.6 | |
| |
Note 8:Quarter Ended January 2, 2022 | EquityTotal |
Stored value cards and loyalty program at October 3, 2021 | $ | 1,448.5 | |
Revenue deferred - card activations, card reloads and Stars earned | 3,917.5 | |
Revenue recognized - card and Stars redemptions and breakage | (3,410.8) | |
Other(1) | (2.7) | |
Stored value cards and loyalty program at January 2, 2022(2) | $ | 1,952.5 | |
| |
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| |
| |
| |
| |
| |
| |
Changes(1)“Other” primarily consists of changes in total equity (in millions):the stored value cards and loyalty program balances resulting from foreign currency translation.
(2)As of January 1, 2023 and January 2, 2022, approximately $1.9 billion and $1.8 billion of these amounts were current, respectively.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 |
| Attributable to Starbucks | | Noncontrolling interests | | Total Equity | | Attributable to Starbucks | | Noncontrolling interest | | Total Equity |
Beginning balance of total equity | $ | 5,450.1 |
| | $ | 6.9 |
| | $ | 5,457.0 |
| | $ | 5,884.0 |
| | $ | 6.7 |
| | $ | 5,890.7 |
|
Net earnings including noncontrolling interests | 2,250.2 |
| | (0.1 | ) | | 2,250.1 |
| | 751.8 |
| | (0.3 | ) | | 751.5 |
|
Translation adjustment and other, net of reclassifications and tax | 28.1 |
| | — |
| | 28.1 |
| | (171.8 | ) | | — |
| | (171.8 | ) |
Unrealized gains/(losses), net of reclassifications and tax | 2.2 |
| | — |
| | 2.2 |
| | 37.9 |
| | — |
| | 37.9 |
|
Other comprehensive income/(loss) | 30.3 |
| | — |
| | 30.3 |
| | (133.9 | ) | | — |
| | (133.9 | ) |
Stock-based compensation expense | 62.2 |
| | — |
| | 62.2 |
| | 55.7 |
| | — |
| | 55.7 |
|
Exercise of stock options/vesting of RSUs | (9.1 | ) | | — |
| | (9.1 | ) | | 8.8 |
| | — |
| | 8.8 |
|
Sale of common stock | 7.4 |
| | — |
| | 7.4 |
| | 7.0 |
| | — |
| | 7.0 |
|
Repurchase of common stock | (1,618.2 | ) | | — |
| | (1,618.2 | ) | | (413.7 | ) | | — |
| | (413.7 | ) |
Cash dividends declared | (420.8 | ) | | — |
| | (420.8 | ) | | (363.1 | ) | | — |
| | (363.1 | ) |
Ending balance of total equity | $ | 5,752.1 |
| | $ | 6.8 |
| | $ | 5,758.9 |
| | $ | 5,796.6 |
| | $ | 6.5 |
| | $ | 5,803.1 |
|
Note 11: Equity
Changes in AOCI by component, net of tax (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Quarter Ended | Available-for-Sale Debt Securities | | Cash Flow Hedges | | Net Investment Hedges | | Translation Adjustment and Other | | Total |
January 1, 2023 | | | | | | | | | |
Net gains/(losses) in AOCI, beginning of period | $ | (15.5) | | | $ | 199.0 | | | $ | 209.1 | | | $ | (855.8) | | | $ | (463.2) | |
Net gains/(losses) recognized in OCI before reclassifications | 1.5 | | | (151.2) | | | (48.3) | | | 208.9 | | | 10.9 | |
Net (gains)/losses reclassified from AOCI to earnings | 0.1 | | | (82.7) | | | (4.0) | | | — | | | (86.6) | |
Other comprehensive income/(loss) attributable to Starbucks | 1.6 | | | (233.9) | | | (52.3) | | | 208.9 | | | (75.7) | |
| | | | | | | | | |
| | | | | | | | | |
Net gains/(losses) in AOCI, end of period | $ | (13.9) | | | $ | (34.9) | | | $ | 156.8 | | | $ | (646.9) | | | $ | (538.9) | |
| | | | | | | | | |
January 2, 2022 | | | | | | | | | |
Net gains/(losses) in AOCI, beginning of period | $ | 1.5 | | | $ | 158.3 | | | $ | 48.6 | | | $ | (61.2) | | | $ | 147.2 | |
Net gains/(losses) recognized in OCI before reclassifications | (2.6) | | | 76.9 | | | 31.0 | | | 14.2 | | | 119.5 | |
Net (gains)/losses reclassified from AOCI to earnings | (0.1) | | | (10.6) | | | (2.5) | | | — | | | (13.2) | |
Other comprehensive income/(loss) attributable to Starbucks | (2.7) | | | 66.3 | | | 28.5 | | | 14.2 | | | 106.3 | |
| | | | | | | | | |
| | | | | | | | | |
Net gains/(losses) in AOCI, end of period | $ | (1.2) | | | $ | 224.6 | | | $ | 77.1 | | | $ | (47.0) | | | $ | 253.5 | |
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Quarter Ended
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| | | | | | | | | | | | | | | | | | | |
| Available-for-Sale Securities | | Cash Flow Hedges | | Net Investment Hedges | | Translation Adjustment and Other | | Total |
December 31, 2017 | | | | | | | | | |
Net gains/(losses) in AOCI, beginning of period | $ | (2.5 | ) | | $ | (4.1 | ) | | $ | 14.0 |
| | $ | (163.0 | ) | | $ | (155.6 | ) |
Net gains/(losses) recognized in OCI before reclassifications | (1.8 | ) | | (2.9 | ) | | (0.2 | ) | | 20.9 |
| | 16.0 |
|
Net (gains)/losses reclassified from AOCI to earnings | 1.3 |
| | 5.9 |
| | (0.1 | ) | | 7.2 |
| | 14.3 |
|
Other comprehensive income/(loss) attributable to Starbucks | (0.5 | ) | | 3.0 |
| | (0.3 | ) | | 28.1 |
| | 30.3 |
|
Net gains/(losses) in AOCI, end of period | $ | (3.0 | ) | | $ | (1.1 | ) | | $ | 13.7 |
| | $ | (134.9 | ) | | $ | (125.3 | ) |
| | | | | | | | | |
January 1, 2017 | | | | | | | | | |
Net gains/(losses) in AOCI, beginning of period | $ | 1.1 |
| | $ | 10.9 |
| | $ | 1.3 |
| | $ | (121.7 | ) | | $ | (108.4 | ) |
Net gains/(losses) recognized in OCI before reclassifications | (9.3 | ) | | 87.0 |
| | 25.9 |
| | (171.8 | ) | | (68.2 | ) |
Net (gains)/losses reclassified from AOCI to earnings | 0.6 |
| | (66.3 | ) | | — |
| | — |
| | (65.7 | ) |
Other comprehensive income/(loss) attributable to Starbucks | (8.7 | ) | | 20.7 |
| | 25.9 |
| | (171.8 | ) | | (133.9 | ) |
Net gains/(losses) in AOCI, end of period | $ | (7.6 | ) | | $ | 31.6 |
| | $ | 27.2 |
| | $ | (293.5 | ) | | $ | (242.3 | ) |
Impact of reclassifications from AOCI on the consolidated statements of earnings (in millions):
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AOCI Components | | Amounts Reclassified from AOCI | | Affected Line Item in the Statements of Earnings |
| Dec 31, 2017 | | Jan 1, 2017 | |
Gains/(losses) on available-for-sale securities | | $ | (1.7 | ) | | $ | (0.8 | ) | | Interest income and other, net |
Gains/(losses) on cash flow hedges | | | | | | |
Interest rate hedges | | 1.2 |
| | 1.2 |
| | Interest expense |
Cross-currency swaps | | (0.5 | ) | | 77.6 |
| | Interest income and other, net |
Foreign currency hedges | | (0.4 | ) | | 1.3 |
| | Revenues |
Foreign currency/coffee hedges | | (7.1 | ) | | 2.4 |
| | Cost of sales including occupancy costs |
Gains/(losses) on net investment hedges | | 0.1 |
| | — |
| | Interest income and other, net |
Translation adjustment | | | | | | |
East China joint venture | | (7.2 | ) | | — |
| | Gain resulting from acquisition of joint venture |
Taiwan joint venture | | (1.4 | ) | | — |
| | Gains resulting from divestiture of certain operations |
Other | | 1.9 |
| | — |
| | Interest income and other, net |
| | (15.1 | ) | | 81.7 |
| | Total before tax |
| | 0.8 |
| | (16.0 | ) | | Tax benefit |
| | $ | (14.3 | ) | | $ | 65.7 |
| | Net of tax |
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Quarter Ended | | | | | | |
AOCI Components | | Amounts Reclassified from AOCI | | Affected Line Item in the Statements of Earnings |
| Jan 1, 2023 | | Jan 2, 2022 | |
Gains/(losses) on available-for-sale debt securities | | $ | (0.2) | | | $ | 0.2 | | | Interest income and other, net |
Gains/(losses) on cash flow hedges | | 93.3 | | | 12.5 | | | Please refer to Note 3, Derivative Financial Instruments for additional information. |
Gains/(losses) on net investment hedges | | 5.3 | | | 3.4 | | | Interest expense |
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| | 98.4 | | | 16.1 | | | Total before tax |
| | (11.8) | | | (2.9) | | | Tax expense |
| | $ | 86.6 | | | $ | 13.2 | | | Net of tax |
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In addition to 2.4 billion shares of authorized common stock with $0.001 par value per share, the Company has authorized 7.5 million shares of preferred stock, none of which was outstanding as of December 31, 2017.January 1, 2023.
WeDuring the quarters ended January 1, 2023 and January 2, 2022, we repurchased 28.51.9 million and 31.1 million shares of common stock at a total cost of $1.6for $191.4 million and $3.5 billion, and 7.6 million shares at a total cost of $413.7 million for the quarters ended December 31, 2017 and January 1, 2017, respectively. As of December 31, 2017, 51.8January 1, 2023, 50.6 million shares remained available for repurchase under current authorizations.
During the first quarter of fiscal 2018,2023, our Board of Directors declaredapproved a quarterly cash dividend to shareholders of $0.30$0.53 per share to be paid on February 23, 201824, 2023 to shareholders of record as of the close of business on February 8, 2018.10, 2023.
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Note 9: | Employee Stock Plans |
Note 12: Employee Stock Plans
As of December 31, 2017,January 1, 2023, there were 58.691.8 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 13.210.7 million shares available for issuance under our employee stock purchase plan.
Stock-based compensation expense recognized in the consolidated statements of earnings (in millions): | | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | | | |
Restricted Stock Units (“RSUs”) | $ | 85.0 | | | $ | 95.7 | | | | | |
Options | 0.1 | | | 0.1 | | | | | |
Total stock-based compensation expense | $ | 85.1 | | | $ | 95.8 | | | | | |
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| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 |
Options | $ | 14.2 |
| | $ | 14.9 |
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Restricted Stock Units (“RSUs”) | 47.2 |
| | 40.1 |
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Total stock-based compensation expense | $ | 61.4 |
| | $ | 55.0 |
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Stock option and RSU transactions from October 1, 20172, 2022 throughDecember 31, 2017 (in millions):
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| Stock Options | | RSUs |
Options outstanding/Nonvested RSUs, October 1, 2017 | 31.4 |
| | 7.6 |
|
Granted | 3.6 |
| | 5.8 |
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Options exercised/RSUs vested | (2.5 | ) | | (2.8 | ) |
Forfeited/expired | (0.3 | ) | | (0.3 | ) |
Options outstanding/Nonvested RSUs, December 31, 2017 | 32.2 |
| | 10.3 |
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Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of December 31, 2017 | $ | 49.8 |
| | $ | 279.9 |
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Our tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events that may occur during the quarter. We recognize the effects of tax legislation in the period in which the law is enacted. Our deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years we estimate the related temporary differences to reverse.
On December 22, 2017, the President of the United States signed and enacted comprehensive tax legislation into law H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). Except for certain provisions, the Tax Act is effective for tax years beginning on or after January 1,
2018. As a fiscal year U.S. taxpayer, the majority of the provisions will apply to our fiscal 2019, such as eliminating the domestic manufacturing deduction, creating new taxes on certain foreign sourced income and introducing new limitations on certain business deductions. For fiscal 2018 and effective 2023 (in the first fiscal quarter, the most significant impacts include: lowering of the U.S. federal corporate income tax rate; remeasuring certain net deferred tax liabilities; and requiring the transition tax on the deemed repatriation of certain foreign earnings. The phase in of the lower corporate income tax rate resulted in a blended rate of 24.5% for fiscal 2018, as compared to the previous 35%. The tax rate will be reduced to 21% in subsequent fiscal years. In the first quarter of fiscal 2018, we recorded $77 million net income tax benefit for the provisional remeasurement of certain deferred taxes and related amounts. Additionally, we recorded a provisional $212 million of income tax expense for the estimated effects of the transition tax, net of adjustments related to uncertain tax positions.millions): | | | | | | | | | | | |
| Stock Options | | RSUs |
Options outstanding/Nonvested RSUs, October 2, 2022 | 4.1 | | | 7.0 | |
Granted | — | | | 4.0 | |
Options exercised/RSUs vested | (0.7) | | | (2.7) | |
Forfeited/expired | — | | | (0.2) | |
Options outstanding/Nonvested RSUs, January 1, 2023 | 3.4 | | | 8.1 | |
Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of January 1, 2023 | $ | — | | | $ | 345.3 | |
Based on our current interpretation of the Tax Act, we made reasonable estimates to record provisional adjustments during the first quarter of fiscal 2018, as described above. Collectively, these items did not have a material impact to our condensed consolidated financial statements. Since we are still accumulating and processing data to finalize the underlying calculations and expect regulators to issue further guidance, among other things, we believe our estimates may change during fiscal 2018. We continue to refine such amounts within the measurement period allowed, which will be completed no later than the first quarter of fiscal 2019.
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Note 11: | Earnings per Share |
Note 13: Earnings per Share
Calculation of net earnings per common share (“EPS”) — basic and diluted (in millions, except EPS):
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| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 |
Net earnings attributable to Starbucks | $ | 2,250.2 |
| | $ | 751.8 |
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Weighted average common shares outstanding (for basic calculation) | 1,421.0 |
| | 1,457.5 |
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Dilutive effect of outstanding common stock options and RSUs | 13.6 |
| | 13.0 |
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Weighted average common and common equivalent shares outstanding (for diluted calculation) | 1,434.6 |
| | 1,470.5 |
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EPS — basic | $ | 1.58 |
| | $ | 0.52 |
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EPS — diluted | $ | 1.57 |
| | $ | 0.51 |
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| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | | | |
Net earnings attributable to Starbucks | $ | 855.2 | | | $ | 815.9 | | | | | |
Weighted average common shares outstanding (for basic calculation) | 1,148.5 | | | 1,169.6 | | | | | |
Dilutive effect of outstanding common stock options and RSUs | 4.4 | | | 7.0 | | | | | |
Weighted average common and common equivalent shares outstanding (for diluted calculation) | 1,152.9 | | | 1,176.6 | | | | | |
EPS — basic | $ | 0.74 | | | $ | 0.70 | | | | | |
EPS — diluted | $ | 0.74 | | | $ | 0.69 | | | | | |
Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options (both vested and nonvested)non-vested) and unvested RSUs, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes out-of-the-moneyanti-dilutive stock options (i.e., such options’ exercise pricesor RSU's, which were greaterimmaterial in the periods presented.
Note 14: Commitments and Contingencies
Legal Proceedings
In 2010 and 2011, an organization named Council for Education and Research on Toxics (“Plaintiff”) filed lawsuits in the Superior Court of the State of California, County of Los Angeles, against the Company and other companies who manufacture, package, distribute or sell brewed coffee. The suits were later consolidated into a single action. Plaintiff alleged that the Company and the other defendants failed to provide warnings for their coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65. Plaintiff sought equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of two thousand five hundred dollars per day per alleged violation of Proposition 65, which the Plaintiff claimed was every day coffee is sold without a compliant warning. The Company denied the claims.
During the pendency of the litigation, the California Office of Environmental Health Hazard Assessment (“OEHHA”) proposed a new regulation clarifying that cancer warnings are not required for coffee under Proposition 65. The regulation was approved by the Office of Administrative Law and became effective on October 1, 2019. In 2020, the trial court granted the defendants’ motion for summary judgment, ruling that the coffee exemption regulation is a complete defense to the Plaintiff’s complaint. On October 26, 2022, the California Court of Appeal affirmed the trial court's dismissal of the case. The Plaintiff’s subsequent request for a rehearing before the California Court of Appeals was denied. On December 2, 2022 Plaintiff filed a petition for review in the California Supreme Court and Starbucks filed a response brief on December 22, 2022. Starbucks believes that the likelihood that the Company will ultimately incur a material loss in connection with this litigation is less than reasonably possible. Accordingly, as of January 1, 2023, no loss contingency has been recorded for this matter.
Starbucks is involved in various other legal proceedings arising in the average market priceordinary course of our common shares for the period) because their inclusion wouldbusiness, including certain employment litigation cases that have been antidilutive. Out-of-the-money stock options totaled approximately 5.0 million and 8.6 millioncertified as class or collective actions, but, except as noted above, 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 December 31, 2017 and January 1, 2017, respectively.operations or cash flows.
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Note 12: | Segment Reporting |
Our chief executive officer and executive chairman comprise the Company's Chief Operating Decision Maker function (“CODM”). Note 15: Segment Reporting
Segment information is prepared on the same basis that our CODMinterim 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): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | | | |
Beverage(1) | $ | 5,173.0 | | | 59 | % | | $ | 4,898.4 | | | 61 | % | | | | | | | | |
Food(2) | 1,565.9 | | | 18 | % | | 1,434.6 | | | 18 | % | | | | | | | | |
Other(3) | 1,975.0 | | | 23 | % | | 1,717.4 | | | 21 | % | | | | | | | | |
Total | $ | 8,713.9 | | | 100 | % | | $ | 8,050.4 | | | 100 | % | | | | | | | | |
(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, serveware, beverage-related ingredients and ready-to-drink beverages, among other items.
The tabletables below presentspresent financial information for our reportable operating segments and AllCorporate and Other Segments segment (in millions):
Quarter Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | International | | Channel Development | | Corporate and Other | | Total |
January 1, 2023 | | | | | | | | | |
Total net revenues | $ | 6,551.3 | | | $ | 1,680.1 | | | $ | 478.2 | | | $ | 4.3 | | | $ | 8,713.9 | |
Depreciation and amortization expenses | 216.9 | | | 81.5 | | | — | | | 28.7 | | | 327.1 | |
Income from equity investees | — | | | 0.5 | | | 57.3 | | | — | | | 57.8 | |
Operating income/(loss) | 1,212.4 | | | 240.4 | | | 226.3 | | | (426.0) | | | 1,253.1 | |
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January 2, 2022 | | | | | | | | | |
Total net revenues | $ | 5,732.3 | | | $ | 1,875.9 | | | $ | 417.1 | | | $ | 25.1 | | | $ | 8,050.4 | |
Depreciation and amortization expenses | 200.0 | | | 133.1 | | | — | | | 32.9 | | | 366.0 | |
Income from equity investees | — | | | 0.7 | | | 39.6 | | | — | | | 40.3 | |
Operating income/(loss) | 1,083.1 | | | 299.6 | | | 183.2 | | | (388.1) | | | 1,177.8 | |
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| Americas | | China/ Asia Pacific | | EMEA | | Channel Development | | All Other Segments | | Segment Total |
December 31, 2017 | | | | | | | | | | | |
Total net revenues | $ | 4,265.8 |
| | $ | 843.7 |
| | $ | 283.9 |
| | $ | 560.3 |
| | $ | 120.0 |
| | $ | 6,073.7 |
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Depreciation and amortization expenses | 158.0 |
| | 53.7 |
| | 7.7 |
| | 0.5 |
| | 0.7 |
| | 220.6 |
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Income from equity investees | — |
| | 50.7 |
| | — |
| | 38.7 |
| | — |
| | 89.4 |
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Operating income/(loss) | 979.4 |
| | 196.8 |
| | 39.1 |
| | 243.3 |
| | (30.0 | ) | | 1,428.6 |
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January 1, 2017 | | | | | | | | | | | |
Total net revenues | $ | 3,991.4 |
| | $ | 770.8 |
| | $ | 262.4 |
| | $ | 553.7 |
| | $ | 154.6 |
| | $ | 5,732.9 |
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Depreciation and amortization expenses | 152.4 |
| | 48.6 |
| | 7.6 |
| | 0.6 |
| | 2.9 |
| | 212.1 |
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Income from equity investees | — |
| | 42.5 |
| | — |
| | 41.9 |
| | — |
| | 84.4 |
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Operating income/(loss) | 958.5 |
| | 163.4 |
| | 44.1 |
| | 242.9 |
| | 9.6 |
| | 1,418.5 |
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Note 16: Subsequent EventAll Other Segments includes our Teavana business,On January 13, 2023, Starbucks finalized the sale of the Seattle's Best Coffee brand to Nestlé and fiscal 2018 results reflect the strategy to close Teavana-branded retail stores announced in fiscal 2017 to focus on saleswill recognize a pre-tax gain of premium TeavanaTM/MC tea products at Starbucks branded stores and, to a lesser extent, consumer product channels. The existing portfolio of Teavana stores are expected to be closed during fiscal 2018. Lease exit costs associated with our restructuring efforts will be recognized concurrently with either actual store closures or upon reaching a lease termination agreement with the landlord. Total lease exit costs are expected to be approximately $143.2$90 million of which $16.6 million and $0.0 million were recorded within restructuring expenses on the consolidated statement of earnings in the firstsecond quarter of 2018fiscal 2023. With the exception of recognizing the sale to Nestlé, we do not expect the transaction will have a material impact on our ongoing operations and 2017, respectively. Previously recorded lease exit costs recorded within restructuring expenses for fiscal year 2017 were $15.7 million.
Reconciliation of total segment operating income to consolidated earnings before income taxes (in millions):future financial results.
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| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 |
Total segment operating income | $ | 1,428.6 |
| | $ | 1,418.5 |
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Unallocated corporate operating expenses | (312.5 | ) | | (285.9 | ) |
Consolidated operating income | 1,116.1 |
| | 1,132.6 |
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Gain resulting from acquisition of joint venture | 1,326.3 |
| | — |
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Gains resulting from divestiture of certain operations | 501.2 |
| | — |
|
Interest income and other, net | 88.2 |
| | 24.1 |
|
Interest expense | (25.9 | ) | | (23.8 | ) |
Earnings before income taxes | $ | 3,005.9 |
| | $ | 1,132.9 |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained herein includingare “forward-looking” statements regardingwithin the meaning of applicable securities laws and regulations. Generally, these statements can be identified by the use of words such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “feel,” “forecast,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements include statements relating to trends in or expectations relating to the expected effects of our existing and any future initiatives, strategies, investments and plans, including our Reinvention Plan, as well as trends in or expectations regarding revenues, operating margins, comparable store sales, anticipated net new stores,our financial results and long-term growth model and drivers; our operations in the effectsU.S. and China; our environmental, social and governance efforts; our partners; economic and consumer trends, including the impact of inflationary pressures; impact of foreign currency translation,translation; strategic pricing actions; the purchaseconversion of certain market operations to fully licensed models; our plans for streamlining our operations, including store openings, closures and changes in store formats and models; the remaining 50% ownershipsuccess of our East China joint venture and other streamlining activities, earnings per share, tax rates, capital expenditures, sales leverage, other financial results, the health, strength and growthlicensing relationship with Nestlé, of our business overallconsumer packaged goods and of specific businesses or markets, benefits of recent initiatives, investments in ourfoodservice business and partners, includingits effects on our continued focus on operational excellence, product innovation and digital interactions with our customers,Channel Development segment results; tax rates; business opportunities, expansions and expansion,new initiatives, including Starbucks Odyssey; strategic acquisitions, expenses,acquisitions; our dividends share repurchases,programs; commodity costs and our mitigation strategies,strategies; our liquidity, cash flow from operations, use of cash and cash requirements,investments, borrowing capacity and use of proceeds,proceeds; continuing compliance with our covenants under our credit facilities and commercial paper program; repatriation of cash to the U.S.,; the potentiallikelihood of the issuance of additional debt and the applicable interest rate,rate; the continuing impact of the COVID-19 pandemic on our financial results and future availability of governmental subsidies for COVID-19 or other public health events; our ceo transition; our share repurchase program; our use of cash and cash requirements; the expected effects of new accounting pronouncements and the estimated impact of changes in U.S. tax law, including on tax rates, and investments funded by these changes constitute “forward-looking statements” within the meaningand potential outcomes; and effects of the Private Securities Litigation Reform Act of 1995.legal proceedings. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors, including, but not limited to: the continuing impact of COVID-19 on our business; regulatory measures or voluntary actions that may be put in place to limit the spread of COVID-19, including restrictions on business operations or social distancing requirements, and the duration and efficacy of such restrictions; the resurgence of COVID-19 infections and the circulation of novel variants of COVID-19; fluctuations in U.S. and international economies and currencies,currencies; our ability to preserve, grow and leverage our brands,brands; the ability of our business partners and third-party providers to fulfill their responsibilities and commitments; potential negative effects of incidents involving food or beverage-borne illnesses, tampering, adulteration, contamination or mislabeling,mislabeling; potential negative effects of material breaches of our information technology systems to the extent we experience a material breach,breach; material failures of our information technology systems,systems; costs associated with, and the successful execution of, the company'sCompany’s initiatives and plans; new initiatives and plans including the integration of Starbucks Japan, the recently completed purchase of the remaining 50% ownership ofor revisions to existing initiatives or plans; our East China joint venture and the closure of Teavana stores,ability to obtain financing on acceptable terms; the acceptance of the company'sCompany’s products by our customers, evolving consumer preferences and tastes and changes in consumer spending behavior; partner investments, changes in the availability and cost of labor including any union organizing efforts and our responses to such efforts; failure to attract or retain key executive or employee talent or successfully transition executives; significant increased logistics costs; inflationary pressures; the impact of competition,competition; inherent risks of operating a global business including any potential negative effects stemming from the Russian invasion of Ukraine; the prices and availability of coffee, dairy and other raw materials prices and availability,materials; the effect of legal proceedings,proceedings; and the effects of the Tax Cuts and Jobs Actchanges in tax laws and related guidance and regulations that may be promulgated,implemented, including the Inflation Reduction Act of 2022 and other risks detailed in our filings with the SEC, including in Part I Item IA “Riskthe "Risk Factors” inand “Management's Discussion and Analysis of Financial Condition and Results of Operations” sections of the 10-K.company’s most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings.
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. 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 condensed consolidated financial statements and the notes included in Item 1 of Part I of this 10-Q and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contained in the 10-K.10-K filed with the SEC on November 18, 2022.
GeneralIntroduction and Overview
Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 84 markets. As of January 1, 2023, Starbucks had more than 36,100 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. During the quarter ended January 1, 2023, our global comparable store sales
grew 5%, primarily driven by 10% growth in the U.S. market, partially offset by COVID-19 pandemic-related business conditions in China, leading to a 29% decrease in China comparable store sales.
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. Non-reportable operating segments and 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 growth 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 growth
•Operating margin
Comparable store sales growth 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 exclude the impact of foreign currency translation. We analyze comparable store sales growth 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 due to the COVID-19 pandemic 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 2023 and 2022 included 52 weeks. All references to store counts, including data for new store openings, are reported net of store closures, unless otherwise noted.
Overview
During the fourth quarter of fiscal 2017, Starbucks initiated streamlining efforts to focus on accelerating growth in high-returning businesses and remove non-core, slow growth activities. These efforts include acquisitions, divestitures and rationalizing portfolios of stores and products, among other things. The Company’s first quarter of fiscal 2018 reflects these and related restructuring activities, such as the acquisition of its East China joint venture, full conversion of the Singapore retail operations to licensed, ongoing closures of TeavanaTM/MC retail stores and the sale of the Tazo brand, which primarily impacted CAP, Channel Development and All Other Segments.
Overall, Starbucks delivered solid growth in net revenues of 6% to $6.1 billion in its first quarter of fiscal 2018. This was primarily driven by incremental revenues from 2,305 net new store openings over the last 12 months and global comparable store sales growth of 2%. Consolidated operating income decreased $16.5 million, or 1%, to $1.1 billion. Operating margin declined 140 basis points to 18.4%, primarily due to a food-related mix shift in the Americas segment and restructuring costs related to the certain streamlining efforts noted above, primarily the planned closure of our Teavana-branded retail stores in All Other Segments.
In December 2017, the U.S. government enacted comprehensive tax legislation into law H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), to reduce the U.S. federal corporate income tax rate and transition to a territorial from a worldwide tax system with deferral, among other changes. As a fiscal year taxpayer, the Company is not subject to the majority of the provisions until fiscal 2019. However, for its first quarter and full year fiscal 2018, the Company has applied a blended
corporate income tax rate of 24.5% from the previous 35%, and remeasured its U.S. federal net deferred tax liabilities to the newly enacted tax rates. These estimated tax benefits were partially offset by the provisional amount recorded for the one-time repatriation tax on accumulated undistributed earnings of foreign subsidiaries and certain equity investments that are indefinitely reinvested. Collectively, the Tax Act did not materially affect the Company’s net earnings during the quarter.
Earnings per share of $1.57 increased 208% over the prior year quarter earnings per share of $0.51. The results for the first quarter of fiscal 2018 included $0.792023 demonstrate the overall strength and resilience of our brand, despite continued COVID-19 pandemic related to the net gain from remeasuring our preexisting 50% ownership interestdisruptions in our East China joint venture to fair value upon acquisitionmarket and $0.23 for other streamlining efforts, primarily thecontinued inflationary pressures. Consolidated net gains from the divestitures of the Tazo brand and our Taiwan joint venture.
Americas revenue grew by 7% to $4.3 billion, primarily driven by incremental revenues from 979 net new store openings over the past 12 months and comparable store sales growth of 2%. Operating income increased $21 million and operating margin of 23.0% declined 100 basis points from a year ago, primarily due to a food-related mix shift.
In our China/Asia Pacific segment, revenues grew by 9% to $844 million, primarily driven by incremental revenues from 1,033 net new stores over the past 12 months and a 1% increase in comparable store sales. The increase was partially offset by the conversion of our Singapore retail business to fully licensed operations in the fourth quarter of fiscal 2017. Operating income grew 20% to $197 million, while operating margin expanded 210 basis points to 23.3%. The overall operating margin expansion was primarily due to sales leverage and favorable foreign currency translation.
In our EMEA segment, revenues increased $22 million, or 8%, primarily driven by favorable foreign currency translation and increased revenues from the opening of 365 net new licensed stores over the past 12 months. Partially offsetting the increase was a decrease in comparable store sales of 1%, which represents approximately 16% of the region's store portfolio. Operating margin declined 300 basis points to 13.8% primarily due to sales deleverage in our company-operated store portfolio.
Channel Development segment revenues grew by 1% to $560 million, primarily driven by higher foodservice, international and packaged coffee product sales, partially offset by lower revenues from competitive pricing on certain items. Operating income was flat and operating margin decreased 50 basis points to 43.4%$8.7 billion in the first quarter of fiscal 2018 primarily due to deleverage on cost of sales and lower income from our North American Coffee Partnership joint venture, partially offset by lower marketing expenses.
Fiscal 2018 — Financial Outlook for the Year
For fiscal 2018, we expect consolidated revenue growth in the range of 9% to 11% when2023 compared to fiscal 2017, with approximately 4% related to the acquisition of East China, offset by approximately 2% of other streamlining activities such as the sale of our Tazo brand and Taiwan joint venture, as well as the planned closure of our Teavana retail stores. Revenue growth for fiscal 2018 is expected to be driven by approximately 2,300 net new stores worldwide, comparable store sales and our continued focus on operational excellence, product innovation and enhancing our digital interactions with customers. Approximately 1,100 net new store openings will be in our China/Asia Pacific segment, approximately 900 net new stores coming from the Americas segment and the remaining store growth from the EMEA segment. Global comparable store sales growth for fiscal 2018 is expected to be near the low end of the targeted long-term 3% to 5% range.
Beginning$8.1 billion in the second quarter of fiscal 2018, East China’s operating results will be fully consolidated. While we expect significant revenue growth, the consolidated and CAP segment margins will decline for full fiscal year 2018. This is due to the change from a joint venture model to a company-operated model. Under the joint venture model, we recognized royalties and product sales within revenue and related product cost of goods sold as well as our proportionate share of East China’s net earnings, which we recorded within income from equity investees. This resulted in higher operating margin. Under the company-operated model, East China’s results are reflected in each income statement line item and therefore, the basis for its operating margin will be more consistent with our other company-operated markets. We will fully lap the transaction in the second quarter of fiscal 2019 and will begin reporting the comparable store sales growth as part of our China and CAP metrics after 13 months post acquisition in accordance with the Company's policy.
Earnings per share is expected to be in the range of $3.32 to $3.36 for full year fiscal 2018, which includes a $0.94 benefit from the East China acquisition gain, the largest portion of which was recognized in our first quarter of fiscal 2018. Revenue2022, primarily driven by strength in our U.S. business and growth in our International segment excluding China, partially offset by COVID-19 pandemic related disruptions in China and unfavorable foreign currency translation. Consolidated operating margin decreased 20 basis points from the prior year to 14.4%, primarily driven by previously committed investments in labor including enhanced store partner wages and benefits, inflationary pressures and sales deleverage in China, partially offset by strategic pricing in North America and sales leverage are expectedacross markets outside of China.
For both the North America segment and our U.S. market, comparable store sales increased 10% for the first quarter of fiscal 2023 compared to bean increase of 18% in the first quarter of fiscal 2022. Average ticket for both the North America segment and the U.S. market grew 9%, primarily driven by strategic pricing. The segment also experienced higher costs, primarily related to enhancements in retail store partner wages and benefits, as well as increased supply chain costs due to inflationary pressures.
For the International segment, comparable store sales declined 13% for the first quarter of fiscal 2023, driven by comparable store sales decline of 29% in our China market, which experienced suppressed customer mobility and store closures due to pandemic-related restrictions and a spike in infections. These contributed to a decline in both revenue and operating margin for the segment. The unfavorable impacts were partially offset by investmentsstrong growth in our partners (employees) and digital innovations. Savings generated frommajor international markets outside of China.
Net revenues for our Channel Development segment increased $61 million, or 15%, when compared with the lower U.S. corporate income tax rate are expected to fund the Company’s plans to increase returns to shareholders and accelerate certain investments.
We expect our fiscal 2018 consolidated effective tax rate to be approximately 23%, which includes a 5% benefit from the primarily non-taxable East China acquisition gain and approximately 5% benefit from the enacted Tax Act. The benefit from the Tax Act included 2% of net expense related to the required transition tax partially offset by a benefit from remeasuring our net deferred tax liabilities. We continue to assess the effects of the Tax Act on our consolidated financial statements, and because of our ongoing assessment, the actual effective tax rate for fiscal 2018 may differ from our initial estimate, primarily due to changes in interpretations of the Tax Act, any legislative or regulatory actions to address questions that arise, any related changes in accounting standards, or any updates or changes to estimates the Company has utilized to calculate the impacts.
Comparable Store Sales
Starbucks comparable store sales for the first quarter of fiscal 2018:
|
| | | | | |
| Quarter Ended Dec 31, 2017 |
| Sales Growth | | Change in Transactions | | Change in Ticket |
Consolidated | 2% | | —% | | 2% |
Americas | 2% | | —% | | 2% |
China/Asia Pacific | 1% | | 1% | | —% |
EMEA(1) | (1)% | | (4)% | | 3% |
(1)Company-operated stores represent 16% of2022. This was due to higher product sales to and royalty revenue from the EMEA segment store portfolio as of December 31, 2017.
Our comparable store sales represent theGlobal Coffee Alliance and growth in revenuesour ready-to-drink business.
Despite COVID-19 induced business interruptions in our China market, we have seen the strength and resilience of our brand as well as strong customer demand across our portfolio. While we anticipate continued inflationary pressure, albeit to a lesser extent than in fiscal 2022, and COVID-related interruptions in the China market, we expect improved financial performance in the second half of fiscal 2023, driven by sales leverage, pricing, productivity gains from Starbucks® company-operated stores open 13 monthsReinvention, as well as recovery in China. Absent significant and prolonged COVID-19 relapses or longer. Comparable store sales excludeglobal economic disruptions, we believe our strategy will result in sustainable and profitable growth over the effectlong-term.
Results of Operations (in millions)
Revenues
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | $ Change | | % Change | | | | | | | | |
Company-operated stores | $ | 7,083.5 | | | $ | 6,722.4 | | | $ | 361.1 | | | 5.4 | % | | | | | | | | |
Licensed stores | 1,119.5 | | | 850.8 | | | 268.7 | | | 31.6 | | | | | | | | | |
Other | 510.9 | | | 477.2 | | | 33.7 | | | 7.1 | | | | | | | | | |
Total net revenues | $ | 8,713.9 | | | $ | 8,050.4 | | | $ | 663.5 | | | 8.2 | % | | | | | | | | |
|
| | | | | | | | | | |
| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 | | % Change |
Company-operated stores | $ | 4,741.8 |
| | $ | 4,469.3 |
| | 6.1 | % |
Licensed stores | 682.4 |
| | 602.4 |
| | 13.3 |
|
CPG, foodservice and other | 649.5 |
| | 661.2 |
| | (1.8 | ) |
Total net revenues | $ | 6,073.7 |
| | $ | 5,732.9 |
| | 5.9 | % |
Quarter ended December 31, 2017 compared withFor the quarter ended January 1, 20172023 compared with the quarter ended January 2, 2022
Total net revenues for the first quarter of fiscal 20182023 increased $341$664 million, compared to a year ago, primarily due to increasedhigher revenues from company-operated stores ($273361 million). The growth inof company-operated store revenuesstores revenue was driven by a 5% increase in comparable store sales ($328 million), attributable to a 7% increase in average ticket offset by a 2% decrease in comparable transactions. Also contributing was incremental revenues from 8381,005 net new Starbucks®company-operated store openingsstores, or a 6% increase, over the past 12 months ($216259 million) and a 2% increase in comparable store sales ($72 million), attributable to a 2% increase in average ticket. Also contributing. Partially offsetting these increases was favorableunfavorable foreign currency translation ($25225 million), partially offset by the sale of our Singapore retail operations in the fourth quarter of fiscal 2017 ($31 million).
Licensed storestores revenue growth also contributedincreased $269 million contributing to the increase in total net revenues, ($80 million), primarily due to increaseddriven by higher product and equipment sales to and royalty revenues from our licensees ($74299 million), largely due to the opening of 1,534 net new Starbucks® licensed stores over the past 12 months and improved comparable store sales, and favorable. Partially offsetting this increase was unfavorable foreign currency translation ($735 million).
CPG (consumer packaged goods), foodservice and otherOther revenues decreased $12increased $34 million, primarily driven by the absence ofdue to higher product sales and royalty revenue from our e-commerce business ($19 million), lower revenues from competitive pricing on certain items ($8 million) and the absence of revenue from the sale of our Tazo brand late in the first quarter of fiscal 2018 ($7 million). Partially offsetting these decreases were higher foodservice sales ($10 million) and increased sales through our international channels, primarily associated with our Americas and European regions ($6 million).Global Coffee Alliance.
Operating Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | $ Change | | Jan 1, 2023 | | Jan 2, 2022 | | | | | | | | | | |
| | | | | | | As a % of Total Net Revenues | | | | | | | | |
Product and distribution costs | $ | 2,810.2 | | | $ | 2,526.9 | | | $ | 283.3 | | | 32.2 | % | | 31.4 | % | | | | | | | | | | |
Store operating expenses | 3,665.3 | | | 3,400.0 | | | 265.3 | | | 42.1 | | | 42.2 | | | | | | | | | | | |
Other operating expenses | 129.3 | | | 101.7 | | | 27.6 | | | 1.5 | | | 1.3 | | | | | | | | | | | |
Depreciation and amortization expenses | 327.1 | | | 366.0 | | | (38.9) | | | 3.8 | | | 4.5 | | | | | | | | | | | |
General and administrative expenses | 580.9 | | | 525.8 | | | 55.1 | | | 6.7 | | | 6.5 | | | | | | | | | | | |
Restructuring and impairments | 5.8 | | | (7.5) | | | 13.3 | | | 0.1 | | | (0.1) | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total operating expenses | 7,518.6 | | | 6,912.9 | | | 605.7 | | | 86.3 | | | 85.9 | | | | | | | | | | | |
Income from equity investees | 57.8 | | | 40.3 | | | 17.5 | | | 0.7 | | | 0.5 | | | | | | | | | | | |
Operating income | $ | 1,253.1 | | | $ | 1,177.8 | | | $ | 75.3 | | | 14.4 | % | | 14.6 | % | | | | | | | | | | |
Store operating expenses as a % of company-operated stores revenue | | | | | | 51.7 | % | | 50.6 | % | | | | | | | | | | |
|
| | | | | | | | | | | | | |
| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 | | Dec 31, 2017 | | Jan 1, 2017 |
| | | | | As a % of Total Net Revenues |
Cost of sales including occupancy costs | $ | 2,502.9 |
| | $ | 2,295.0 |
| | 41.2 | % | | 40.0 | % |
Store operating expenses | 1,737.0 |
| | 1,638.2 |
| | 28.6 |
| | 28.6 |
|
Other operating expenses | 141.6 |
| | 145.4 |
| | 2.3 |
| | 2.5 |
|
Depreciation and amortization expenses | 258.8 |
| | 249.7 |
| | 4.3 |
| | 4.4 |
|
General and administrative expenses | 379.1 |
| | 356.4 |
| | 6.2 |
| | 6.2 |
|
Restructuring expenses | 27.6 |
| | — |
| | 0.5 |
| | — |
|
Total operating expenses | 5,047.0 |
| | 4,684.7 |
| | 83.1 |
| | 81.7 |
|
Income from equity investees | 89.4 |
| | 84.4 |
| | 1.5 |
| | 1.5 |
|
Operating income | $ | 1,116.1 |
| | $ | 1,132.6 |
| | 18.4 | % | | 19.8 | % |
Store operating expenses as a % of company-operated store revenues | | | | | 36.6 | % | | 36.7 | % |
Other operating expenses as a % of non-company-operated store revenues | | | | | 10.6 | % | | 11.5 | % |
Quarter ended December 31, 2017 compared withFor the quarter ended January 1, 20172023 compared with the quarter ended January 2, 2022
Cost of sales including occupancyProduct and distribution costs as a percentage of total net revenues increased 12080 basis points for the first quarter of fiscal 2018,2023, primarily due to a food-related mix shift in the Americas segment (approximately 100 basis points).higher supply chain costs driven by inflationary pressures.
Store operating expenses as a percentage of total net revenues were flatdecreased 10 basis points for the first quarter of fiscal 2018.2023. Store operating expenses as a percentage of company-operated stores revenue increased 110 basis points, primarily due to enhancements in retail store revenues decreased 10partner wages and benefits (approximately 350 basis points.points) and increased spend on new partner training (approximately 60 basis points), partially offset by sales leverage.
Other operating expenses as a percentage of total revenues decreased 20 basis pointsincreased $28 million for the first quarter of fiscal 2018. Other operating expenses as a percentage of non-retail revenues decreased 90 basis points,2023, primarily driven by sales leverage (approximately 60 basis points)due to higher support costs for our growing licensed markets ($8 million) and lower marketing expenses (approximately 40 basis points)strategic investments in technology and other initiatives ($8 million).
GeneralDepreciation and administrativeamortization expenses as a percentage of total net revenues were flat.
Restructuring expenses negatively impacted our operating margin by 50decreased 70 basis points, primarily due to restructuringlapping amortization expenses of acquisition-related intangibles assets.
General and administrative expenses increased $55 million, primarily due to incremental investments in technology ($28 million) and increased support costs related to the Company's ongoing efforts to streamline business operations. We recorded $25.9 million in restructuring costs related to the strategy to close our TeavanaTM/MC retail stores, including expenses associated with the early closure of storesaddress labor market conditions and termination of agreements with franchisees. Additionally, we recorded $1.6 million in restructuring-related costs associated with the closure of certain North American Starbucks® company-operated stores.leadership training ($17 million).
Income from equity investees increased $5$18 million, primarily due to higher income from our CAPNorth American Coffee Partnership joint ventures.venture.
The combination of these changes resulted in an overall decrease in operating margin of 14020 basis points for the first quarter of fiscal 2018.2023.
Other Income and Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | $ Change | | Jan 1, 2023 | | Jan 2, 2022 | | | | | | | | | | |
| | | | | | | As a % of Total Net Revenues | | | | | | | | |
Operating income | $ | 1,253.1 | | | $ | 1,177.8 | | | $ | 75.3 | | | 14.4 | % | | 14.6 | % | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Interest income and other, net | 11.6 | | | (0.1) | | | 11.7 | | | 0.1 | | | — | | | | | | | | | | | |
Interest expense | (129.7) | | | (115.3) | | | (14.4) | | | (1.5) | | | (1.4) | | | | | | | | | | | |
Earnings before income taxes | 1,135.0 | | | 1,062.4 | | | 72.6 | | | 13.0 | | | 13.2 | | | | | | | | | | | |
Income tax expense | 279.8 | | | 246.3 | | | 33.5 | | | 3.2 | | | 3.1 | | | | | | | | | | | |
Net earnings including noncontrolling interests | 855.2 | | | 816.1 | | | 39.1 | | | 9.8 | | | 10.1 | | | | | | | | | | | |
Net earnings attributable to noncontrolling interests | — | | | 0.2 | | | (0.2) | | | — | | | — | | | | | | | | | | | |
Net earnings attributable to Starbucks | $ | 855.2 | | | $ | 815.9 | | | $ | 39.3 | | | 9.8 | % | | 10.1 | % | | | | | | | | | | |
Effective tax rate including noncontrolling interests | | | | | | | 24.6 | % | | 23.2 | % | | | | | | | | | | |
|
| | | | | | | | | | | | | |
| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 | | Dec 31, 2017 | | Jan 1, 2017 |
| | | | | As a % of Total Net Revenues |
Operating income | $ | 1,116.1 |
| | $ | 1,132.6 |
| | 18.4 | % | | 19.8 | % |
Gain resulting from acquisition of joint venture | 1,326.3 |
| | — |
| | 21.8 |
| | — |
|
Gains resulting from divestiture of certain operations | 501.2 |
| | — |
| | 8.3 |
| | — |
|
Interest income and other, net | 88.2 |
| | 24.1 |
| | 1.5 |
| | 0.4 |
|
Interest expense | (25.9 | ) | | (23.8 | ) | | (0.4 | ) | | (0.4 | ) |
Earnings before income taxes | 3,005.9 |
| | 1,132.9 |
| | 49.5 |
| | 19.8 |
|
Income tax expense | 755.8 |
| | 381.4 |
| | 12.4 |
| | 6.7 |
|
Net earnings including noncontrolling interests | 2,250.1 |
| | 751.5 |
| | 37.0 |
| | 13.1 |
|
Net earnings/(loss) attributable to noncontrolling interests | (0.1 | ) | | (0.3 | ) | | — |
| | — |
|
Net earnings attributable to Starbucks | $ | 2,250.2 |
| | $ | 751.8 |
| | 37.0 | % | | 13.1 | % |
Effective tax rate including noncontrolling interests | | | | | 25.1 | % | | 33.7 | % |
Quarter ended December 31, 2017 compared withFor the quarter ended January 1, 20172023 compared with the quarter ended January 2, 2022
Gain resulting from acquisition of joint venture was due to remeasuring our preexisting 50% ownership interest in our East China joint venture to fair value upon acquisition.
Gains resulting from divestiture of certain operations primarily includes the gains on the sales of our Tazo brand and our Taiwan joint venture.
Net interestInterest income and other, net increased $64$12 million, primarily due to recognizing breakage income on unredeemed stored value card balances outside of the United States and Canada for the first time.lower net losses from certain investments.
Interest expense increased $2$14 million, primarily relateddue to rising interest rates on floating rate debt and additional interest incurred on long-term debt issued in March 2017 and November 2017, partially offset by lower interest expense from the repayment of our December 2016 notes.February 2022.
The effective tax rate for the quarter ended December 31, 2017January 1, 2023 was 25.1%24.6% compared to 33.7%23.2% for the same quarterperiod in fiscal 2017.2022. The decreaseincrease was primarily due to the largely non-taxable gain on the purchase of our East China joint venturea decrease in the first quarter of fiscal 2018stock-based compensation excess tax benefits (approximately 500 basis points) and due to the Tax Act (approximately 350150 basis points). The impact from the Tax Act included favorability from the lower corporate income tax rate applied to our fiscal 2018 results (approximately 800 basis points) and the remeasurement
Segment Information
Results of operations by segment (in millions):
AmericasNorth America | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | $ Change | | Jan 1, 2023 | | Jan 2, 2022 | | | | | | | | | | |
| | | | | | | As a % of North America Total Net Revenues | | | | | | | | |
Net revenues: | | | | | | | | | | | | | | | | | | | |
Company-operated stores | $ | 5,870.6 | | | $ | 5,214.1 | | | $ | 656.5 | | | 89.6 | % | | 91.0 | % | | | | | | | | | | |
Licensed stores | 680.0 | | | 515.9 | | | 164.1 | | | 10.4 | | | 9.0 | | | | | | | | | | | |
Other | 0.7 | | | 2.3 | | | (1.6) | | | — | | | — | | | | | | | | | | | |
Total net revenues | 6,551.3 | | | 5,732.3 | | | 819.0 | | | 100.0 | | | 100.0 | | | | | | | | | | | |
Product and distribution costs | 1,917.6 | | | 1,629.4 | | | 288.2 | | | 29.3 | | | 28.4 | | | | | | | | | | | |
Store operating expenses | 3,031.4 | | | 2,702.4 | | | 329.0 | | | 46.3 | | | 47.1 | | | | | | | | | | | |
Other operating expenses | 65.6 | | | 48.2 | | | 17.4 | | | 1.0 | | | 0.8 | | | | | | | | | | | |
Depreciation and amortization expenses | 216.9 | | | 200.0 | | | 16.9 | | | 3.3 | | | 3.5 | | | | | | | | | | | |
General and administrative expenses | 102.3 | | | 76.7 | | | 25.6 | | | 1.6 | | | 1.3 | | | | | | | | | | | |
Restructuring and impairments | 5.1 | | | (7.5) | | | 12.6 | | | 0.1 | | | (0.1) | | | | | | | | | | | |
Total operating expenses | 5,338.9 | | | 4,649.2 | | | 689.7 | | | 81.5 | | | 81.1 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Operating income | $ | 1,212.4 | | | $ | 1,083.1 | | | $ | 129.3 | | | 18.5 | % | | 18.9 | % | | | | | | | | | | |
Store operating expenses as a % of company-operated stores revenue | | | | | | 51.6 | % | | 51.8 | % | | | | | | | | | | |
|
| | | | | | | | | | | | | |
| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 | | Dec 31, 2017 | | Jan 1, 2017 |
| | | | | As a % of Americas Total Net Revenues |
Net revenues: | | | | | | | |
Company-operated stores | $ | 3,787.0 |
| | $ | 3,561.0 |
| | 88.8 | % | | 89.2 | % |
Licensed stores | 466.7 |
| | 421.3 |
| | 10.9 |
| | 10.6 |
|
Foodservice and other | 12.1 |
| | 9.1 |
| | 0.3 |
| | 0.2 |
|
Total net revenues | 4,265.8 |
| | 3,991.4 |
| | 100.0 |
| | 100.0 |
|
Cost of sales including occupancy costs | 1,603.8 |
| | 1,440.3 |
| | 37.6 |
| | 36.1 |
|
Store operating expenses | 1,433.4 |
| | 1,356.3 |
| | 33.6 |
| | 34.0 |
|
Other operating expenses | 37.5 |
| | 31.9 |
| | 0.9 |
| | 0.8 |
|
Depreciation and amortization expenses | 158.0 |
| | 152.4 |
| | 3.7 |
| | 3.8 |
|
General and administrative expenses | 52.1 |
| | 52.0 |
| | 1.2 |
| | 1.3 |
|
Restructuring expenses | 1.6 |
| | — |
| | — |
| | — |
|
Total operating expenses | 3,286.4 |
| | 3,032.9 |
| | 77.0 |
| | 76.0 |
|
Operating income | $ | 979.4 |
| | $ | 958.5 |
| | 23.0 | % | | 24.0 | % |
Store operating expenses as a % of company-operated store revenues | | | | | 37.9 | % | | 38.1 | % |
Other operating expenses as a % of non-company-operated store revenues | | | | | 7.8 | % | | 7.4 | % |
Quarter ended December 31, 2017 compared withFor the quarter ended January 1, 20172023 compared with the quarter ended January 2, 2022
Revenues
AmericasNorth America total net revenues for the first quarter of fiscal 20182023 increased $274$819 million, or 7%14%, primarily due to higher revenues from company-operated stores ($226 million) and licensed stores ($45 million).
The increase in company-operated store revenues was driven by incremental revenues from 420 net new Starbucks® company-operated store openings over the past 12 months ($143 million) and a 2%10% increase in comparable store sales ($67498 million), primarily attributable to driven by a 2%9% increase in average ticket.
Theticket and a 1% increase in licensed store revenues was driven by increased product salestransactions. Also contributing to and royalty revenues from our licensees ($46 million), primarily resulting fromthese increases were the openingperformance of 559 net new licensed stores over the past 12 months and improved comparable store sales.
Operating Expenses
Cost of sales including occupancy costs as a percentage of total net revenues increased 150 basis points for the first quarter of fiscal 2018, primarily due to a food-related mix shift (approximately 130 basis points).
Store operating expenses as a percentage of total net revenues decreased 40 basis points for the first quarter of fiscal 2018. Store operating expenses as a percentage of company-operated store revenues decreased 20 basis points, primarily driven by sales leverage (approximately 60 basis points).
Other operating expenses as a percentage of total revenues increased 10 basis points for the first quarter of fiscal 2018. Other operating expenses as a percentage of non-retail revenues increased 40 basis points, primarily due to a settlement related to Target Canada store closures received this quarter at a lower amount than the related settlement received in the prior year quarter (approximately 30 basis points). The settlement payments are being received over the course of the liquidation proceedings.
Restructuring expenses of $1.6 million were recorded associated with the early closure of certain North American Starbucks® company-operated stores and their related obligations in fiscal 2018.
The combination of these changes resulted in an overall decrease in operating margin of 100 basis points for the first quarter of fiscal 2018.
China/Asia Pacific
|
| | | | | | | | | | | | | |
| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 | | Dec 31, 2017 | | Jan 1, 2017 |
| | | | | As a % of CAP Total Net Revenues |
Net revenues: | | | | | | | |
Company-operated stores | $ | 742.5 |
| | $ | 691.5 |
| | 88.0 | % | | 89.7 | % |
Licensed stores | 98.4 |
| | 78.0 |
| | 11.7 |
| | 10.1 |
|
Foodservice and other | 2.8 |
| | 1.3 |
| | 0.3 |
| | 0.2 |
|
Total net revenues | 843.7 |
| | 770.8 |
| | 100.0 |
| | 100.0 |
|
Cost of sales including occupancy costs | 371.7 |
| | 337.3 |
| | 44.1 |
| | 43.8 |
|
Store operating expenses | 218.6 |
| | 204.3 |
| | 25.9 |
| | 26.5 |
|
Other operating expenses | 21.2 |
| | 19.1 |
| | 2.5 |
| | 2.5 |
|
Depreciation and amortization expenses | 53.7 |
| | 48.6 |
| | 6.4 |
| | 6.3 |
|
General and administrative expenses | 32.4 |
| | 40.6 |
| | 3.8 |
| | 5.3 |
|
Total operating expenses | 697.6 |
| | 649.9 |
| | 82.7 |
| | 84.3 |
|
Income from equity investees | 50.7 |
| | 42.5 |
| | 6.0 |
| | 5.5 |
|
Operating income | $ | 196.8 |
| | $ | 163.4 |
| | 23.3 | % | | 21.2 | % |
Store operating expenses as a % of company-operated store revenues | | | | | 29.4 | % | | 29.5 | % |
Other operating expenses as a % of non-company-operated store revenues | | | | | 20.9 | % | | 24.1 | % |
Quarter ended December 31, 2017 compared with quarter ended January 1, 2017
Revenues
China/Asia Pacific total net revenues for the first quarter of fiscal 2018 increased $73 million, or 9% over the prior year period, primarily from higher company-operated store revenues ($51 million), driven by incremental revenues from 423 net new company-operated store openings over the past 12 months ($73183 million) and a 1% increase in comparable store sales ($6 million), partially offset by the conversion to fully licensed operations as a result of selling our Singapore retail business in the fourth quarter of fiscal 2017 ($31 million).
Licensed store revenues increased $20 million due to increasedhigher product sales to and royalty revenues from licensees ($19 million), primarily resulting from the opening of 610 net new licensed stores over the past 12 months.
Operating Expenses
Store operating expenses as a percentage of total net revenues decreased 60 basis points for the first quarter of fiscal 2018. As a percentage of company-operated store revenues, store operating expenses decreased 10 basis points, primarily due to the absence of Singapore retail operations (approximately 10 basis points).
Other operating expenses as a percentage of total net revenues was flat for the first quarter of fiscal 2018. Excluding the impact of company-operated store revenues, other operating expenses decreased 320 basis points in the first quarter, primarily due to the timing of certain business taxes (approximately 240 basis points) and sales leverage.
General and administrative expenses as a percentage of total net revenues decreased 150 basis points for the first quarter of fiscal 2018, primarily due to sales leverage on salaries and benefits.
Income from equity investees increased $8 million due to higher income from our joint venture operations, primarily in China and South Korea and favorable foreign currency exchange. Favorability in both regions was attributable to comparable store sales growth and the addition of net new licensed stores over the past 12 months.
The combination of these changes and favorable foreign currency translation (approximately 90 basis points or $9 million) resulted in an overall increase in operating margin of 210 basis points for the first quarter of fiscal 2018.
|
| | | | | | | | | | | | | |
| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 | | Dec 31, 2017 | | Jan 1, 2017 |
| | | | | As a % of EMEA Total Net Revenues |
Net revenues: | | | | | | | |
Company-operated stores | $ | 151.6 |
| | $ | 145.9 |
| | 53.4 | % | | 55.6 | % |
Licensed stores | 116.2 |
| | 102.2 |
| | 40.9 |
| | 38.9 |
|
Foodservice | 16.1 |
| | 14.3 |
| | 5.7 |
| | 5.4 |
|
Total net revenues | 283.9 |
| | 262.4 |
| | 100.0 |
| | 100.0 |
|
Cost of sales including occupancy costs | 152.1 |
| | 136.1 |
| | 53.6 |
| | 51.9 |
|
Store operating expenses | 54.7 |
| | 46.9 |
| | 19.3 |
| | 17.9 |
|
Other operating expenses | 16.3 |
| | 16.0 |
| | 5.7 |
| | 6.1 |
|
Depreciation and amortization expenses | 7.7 |
| | 7.6 |
| | 2.7 |
| | 2.9 |
|
General and administrative expenses | 14.0 |
| | 11.7 |
| | 4.9 |
| | 4.5 |
|
Total operating expenses | 244.8 |
| | 218.3 |
| | 86.2 |
| | 83.2 |
|
Operating income | $ | 39.1 |
| | $ | 44.1 |
| | 13.8 | % | | 16.8 | % |
Store operating expenses as a % of company-operated store revenues | | | | | 36.1 | % | | 32.1 | % |
Other operating expenses as a % of non-company-operated store revenues | | | | | 12.3 | % | | 13.7 | % |
Quarter ended December 31, 2017 compared with quarter ended January 1, 2017
Revenues
EMEA total net revenues increased $22 million, or 8%, for the first quarter of fiscal 2018. The increase was primarily due to increased company-operated store revenues ($6 million) and driven by favorable foreign currency translation ($9 million), partially offset by a decrease in comparable store sales ($2 million).
Licensed store revenues increased $14 million, or 14%, due to higher productequipment sales to and royalty revenues from our licensees ($8 million), primarily resulting from the opening of 365 net new licensed stores over the past 12 months, and favorable foreign currency translation ($5160 million).
Operating ExpensesMargin
Cost of sales including occupancy costs as a percentage of total net revenues increased 170 basis pointsNorth America operating income for the first quarter of fiscal 2018,2023 increased 12% to $1.2 billion, compared to $1.1 billion in the first quarter of fiscal 2022. Operating margin decreased 40 basis points to 18.5%, primarily due to sales deleverageinvestments in labor, including enhancements in retail store partner wages and benefits (approximately 390 basis points), inflationary pressures on company-operated storescommodities and our supply chain (approximately 100210 basis points), as well as increased spend on new partner training (approximately 70 basis points). These were partially offset by strategic pricing (approximately 510 basis points) and unfavorable foreign currency exchange (approximately 80 basis points).sales leverage.
Store operating expenses as a percentage
International | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | $ Change | | Jan 1, 2023 | | Jan 2, 2022 | | | | | | | | | | |
| | | | | | | As a % of International Total Net Revenues | | | | | | | | |
Net revenues: | | | | | | | | | | | | | | | | | | | |
Company-operated stores | $ | 1,212.9 | | | $ | 1,508.3 | | | $ | (295.4) | | | 72.2 | % | | 80.4 | % | | | | | | | | | | |
Licensed stores | 439.5 | | | 334.9 | | | 104.6 | | | 26.2 | | | 17.9 | | | | | | | | | | | |
Other | 27.7 | | | 32.7 | | | (5.0) | | | 1.6 | | | 1.7 | | | | | | | | | | | |
Total net revenues | 1,680.1 | | | 1,875.9 | | | (195.8) | | | 100.0 | | | 100.0 | | | | | | | | | | | |
Product and distribution costs | 593.6 | | | 615.8 | | | (22.2) | | | 35.3 | | | 32.8 | | | | | | | | | | | |
Store operating expenses | 633.9 | | | 697.6 | | | (63.7) | | | 37.7 | | | 37.2 | | | | | | | | | | | |
Other operating expenses | 50.7 | | | 39.2 | | | 11.5 | | | 3.0 | | | 2.1 | | | | | | | | | | | |
Depreciation and amortization expenses | 81.5 | | | 133.1 | | | (51.6) | | | 4.9 | | | 7.1 | | | | | | | | | | | |
General and administrative expenses | 80.5 | | | 91.3 | | | (10.8) | | | 4.8 | | | 4.9 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total operating expenses | 1,440.2 | | | 1,577.0 | | | (136.8) | | | 85.7 | | | 84.1 | | | | | | | | | | | |
Income from equity investees | 0.5 | | | 0.7 | | | (0.2) | | | — | | | — | | | | | | | | | | | |
Operating income | $ | 240.4 | | | $ | 299.6 | | | $ | (59.2) | | | 14.3 | % | | 16.0 | % | | | | | | | | | | |
Store operating expenses as a % of company-operated stores revenue | | | | 52.3 | % | | 46.3 | % | | | | | | | | | | |
For the quarter ended January 1, 2023 compared with the quarter ended January 2, 2022
Revenues
International total net revenues increased 140 basis points for the first quarter of fiscal 2018. As a percentage of company-operated store revenues, store operating expenses increased 400 basis points,2023 decreased $196 million, or 10%, primarily due to sales deleverage on salaries and benefits in certain company-operated stores, primarily due to increased minimum wage in certain markets.
Other operating expensesunfavorable foreign currency translation ($236 million), as well as a percentage of total13% decline in comparable store sales ($170 million), driven by a 12% decrease in customer transactions and a 1% decrease in average ticket, primarily attributable to COVID-19 pandemic related disruptions in China. These decreases were partially offset by higher product and equipment sales to and royalty revenues from our licensees ($139 million), as well as 649 net revenues decreased 40 basis pointsnew company-operated store openings, or 9% increase, over the past 12 months ($76 million).
Operating Margin
International operating income for the first quarter of fiscal 2018. Excluding the impact of company-operated store revenues, other operating expenses2023 decreased 140 basis points, primarily due20% to sales leverage.
Depreciation and amortization expense as a percentage of total net revenue decreased 20 basis points, primarily due$240 million, compared to the shift$300 million in the portfolio towards more licensed stores.
General and administrative expenses as a percentage of total net revenues increased 40 basis points, primarily due to higher salaries and benefits.
The combination of these changes resulted in an overall decrease in operating margin of 300 basis points for the first quarter of fiscal 2018.2022. Operating margin decreased 170 basis points to 14.3%, primarily due to sales deleverage related to COVID-19 pandemic related impacts in our China market (approximately 650 basis points) and higher commodity and supply chain costs due to inflationary pressures (approximately 70 basis points). These decreases were partially offset by sales leverage across markets outside of China (approximately 240 basis points) the resulting business mix (approximately 140 basis points), as well as lapping amortization expenses of acquisition-related intangibles assets that are now fully amortized (approximately 230 basis points).
Channel Development
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | $ Change | | Jan 1, 2023 | | Jan 2, 2022 | | | | | | | | | | |
| | | | | | | As a % of Channel Development Total Net Revenues | | | | | | | | |
Net revenues | $ | 478.2 | | | $ | 417.1 | | | $ | 61.1 | | | | | | | | | | | | | | | |
Product and distribution costs | 294.2 | | | 258.8 | | | 35.4 | | | 61.5 | % | | 62.0 | % | | | | | | | | | | |
Other operating expenses | 13.0 | | | 11.4 | | | 1.6 | | | 2.7 | | | 2.7 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
General and administrative expenses | 2.0 | | | 3.3 | | | (1.3) | | | 0.4 | | | 0.8 | | | | | | | | | | | |
Total operating expenses | 309.2 | | | 273.5 | | | 35.7 | | | 64.7 | | | 65.6 | | | | | | | | | | | |
Income from equity investees | 57.3 | | | 39.6 | | | 17.7 | | | 12.0 | | | 9.5 | | | | | | | | | | | |
Operating income | $ | 226.3 | | | $ | 183.2 | | | $ | 43.1 | | | 47.3 | % | | 43.9 | % | | | | | | | | | | |
|
| | | | | | | | | | | | | |
| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 | | Dec 31, 2017 | | Jan 1, 2017 |
| | | | | As a % of Channel Development Total Net Revenues |
Net revenues: | | | | | | | |
CPG | $ | 435.8 |
| | $ | 437.1 |
| | 77.8 | % | | 78.9 | % |
Foodservice | 124.5 |
| | 116.6 |
| | 22.2 |
| | 21.1 |
|
Total net revenues | 560.3 |
| | 553.7 |
| | 100.0 |
| | 100.0 |
|
Cost of sales | 296.3 |
| | 288.5 |
| | 52.9 |
| | 52.1 |
|
Other operating expenses | 55.6 |
| | 60.4 |
| | 9.9 |
| | 10.9 |
|
Depreciation and amortization expenses | 0.5 |
| | 0.6 |
| | 0.1 |
| | 0.1 |
|
General and administrative expenses | 3.3 |
| | 3.2 |
| | 0.6 |
| | 0.6 |
|
Total operating expenses | 355.7 |
| | 352.7 |
| | 63.5 |
| | 63.7 |
|
Income from equity investees | 38.7 |
| | 41.9 |
| | 6.9 |
| | 7.6 |
|
Operating income | $ | 243.3 |
| | $ | 242.9 |
| | 43.4 | % | | 43.9 | % |
Quarter ended December 31, 2017 compared withFor the quarter ended January 1, 20172023 compared with the quarter ended January 2, 2022
Revenues
Channel Development total net revenues for the first quarter of fiscal 20182023 increased $7$61 million, or 1% when15%, primarily due to higher Global Coffee Alliance product sales and royalty revenue ($43 million) and growth in our ready-to-drink business ($26 million).
Operating Margin
Channel Development operating income for the first quarter of fiscal 2023 increased 24% to $226 million, compared to the prior year period primarily driven by our foodservice, international and packaged coffee channels ($17 million), partially offset by competitive pricing on certain items ($8 million) and the absence of revenue from the sale of our Tazo brand late$183 million in the first quarter of fiscal 2018 ($7 million).
2022. Operating Expenses
Cost of sales as a percentage of total net revenuesmargin increased 80340 basis points for the first quarter,to 47.3%, primarily driven by deleverage on cost of sales (approximately 90 basis points).
Other operating expenses as a percentage of total net revenues decreased 100 basis points, primarily driven by lower marketing expenses (approximately 80 basis points).
Income from equity investees decreased $3 million due to lower income fromgrowth in our North American Coffee Partnership joint venture income.
Corporate and Other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended | | |
| Jan 1, 2023 | | Jan 2, 2022 | | $ Change | | % Change | | | | | | | | |
Net revenues: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other | $ | 4.3 | | | $ | 25.1 | | | $ | (20.8) | | | (82.9) | % | | | | | | | | |
Total net revenues | 4.3 | | | 25.1 | | | (20.8) | | | (82.9) | | | | | | | | | |
Product and distribution costs | 4.8 | | | 22.9 | | | (18.1) | | | (79.0) | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other operating expenses | — | | | 2.9 | | | (2.9) | | | nm | | | | | | | | |
Depreciation and amortization expenses | 28.7 | | | 32.9 | | | (4.2) | | | (12.8) | | | | | | | | | |
General and administrative expenses | 396.1 | | | 354.5 | | | 41.6 | | | 11.7 | | | | | | | | | |
Restructuring and impairments | 0.7 | | | — | | | 0.7 | | | nm | | | | | | | | |
Total operating expenses | 430.3 | | | 413.2 | | | 17.1 | | | 4.1 | | | | | | | | | |
| | | | | | | | | | | | | | | |
Operating loss | $ | (426.0) | | | $ | (388.1) | | | $ | (37.9) | | | 9.8 | % | | | | | | | | |
Corporate and Other primarily drivenconsists of our unallocated corporate expenses and Evolution Fresh, prior to its sale in the fourth quarter of fiscal 2022. Unallocated corporate expenses include corporate administrative functions that support the operating segments but are not specifically attributable to or managed by decreased salesany segment and are not included in the reported financial results of both Frappuccino®the operating segments.
For the quarter ended January 1, 2023 compared with the quarter ended January 2, 2022
Corporate and Iced Coffee beverages.
The combination of these changes resulted in an overall decrease inOther operating margin of 50 basis pointsloss increased to $426 million for the first quarter of fiscal 2018.
All Other Segments
|
| | | | | | | | | | |
| Quarter Ended |
| Dec 31, 2017 | | Jan 1, 2017 | | % Change |
Net revenues: | | | | | |
Company-operated stores | $ | 60.7 |
| | $ | 70.9 |
| | (14.4 | )% |
Licensed stores | 1.1 |
| | 0.9 |
| | 22.2 |
|
CPG, foodservice and other | 58.2 |
| | 82.8 |
| | (29.7 | ) |
Total net revenues | 120.0 |
| | 154.6 |
| | (22.4 | ) |
Cost of sales including occupancy costs | 79.1 |
| | 90.4 |
| | (12.5 | ) |
Store operating expenses | 30.3 |
| | 30.7 |
| | (1.3 | ) |
Other operating expenses | 11.2 |
| | 17.5 |
| | (36.0 | ) |
Depreciation and amortization expenses | 0.7 |
| | 2.9 |
| | (75.9 | ) |
General and administrative expenses | 2.7 |
| | 3.5 |
| | (22.9 | ) |
Restructuring expenses | 26.0 |
| | — |
| | nm |
|
Total operating expenses | 150.0 |
| | 145.0 |
| | 3.4 |
|
Operating income/ (loss) | $ | (30.0 | ) | | $ | 9.6 |
| | nm |
|
All Other Segments primarily includes Teavana-branded stores, Seattle’s Best Coffee, as well as Starbucks Reserve® and Roastery businesses. The operating loss2023, or 10%, compared to $388 million for the first quarter of fiscal 2022. This increase was primarily duedriven by incremental investments in technology ($28 million) and increased support costs to restructuring costs related to our strategy to close TeavanaTM/MC retail stores and focus on Teavana within the Starbucks® stores. We recorded $25.9 million in restructuring-related costs, including expenses associated with the early closureaddress labor market conditions ($9 million). These increases were partially offset by lower performance based compensation ($12 million).
Quarterly Store Data
Our store data for the periods presented is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net stores opened/(closed) and transferred during the period | | | | | | | | |
| Quarter Ended | | | | Stores open as of |
| Jan 1, 2023 | | Jan 2, 2022 | | | | | | Jan 1, 2023 | | Jan 2, 2022 |
North America | | | | | | | | | | | |
Company-operated stores | 40 | | | 39 | | | | | | | 10,256 | | | 9,900 | |
Licensed stores | 46 | | | 23 | | | | | | | 7,125 | | | 6,988 | |
Total North America | 86 | | | 62 | | | | | | | 17,381 | | | 16,888 | |
International | | | | | | | | | | | |
Company-operated stores | 97 | | | 213 | | | | | | | 8,134 | | | 7,485 | |
Licensed stores | 276 | | | 209 | | | | | | | 10,655 | | | 9,944 | |
Total International | 373 | | | 422 | | | | | | | 18,789 | | | 17,429 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total Company | 459 | | | 484 | | | | | | | 36,170 | | | 34,317 | |
|
|
|
| | | | | | | | | | | |
| Net stores opened/(closed) and transferred during the period | | | | |
| Quarter Ended | | Stores open as of |
| Dec 31, 2017 | | Jan 1, 2017 | | Dec 31, 2017 | | Jan 1, 2017 |
Americas | | | | | | | |
Company-operated stores | 112 |
| | 75 |
| | 9,525 |
| | 9,094 |
|
Licensed stores | 166 |
| | 176 |
| | 7,312 |
| | 6,764 |
|
Total Americas | 278 |
| | 251 |
| | 16,837 |
| | 15,858 |
|
China/Asia Pacific (1) | | | | | | | |
Company-operated stores | 1,612 |
| | 104 |
| | 4,682 |
| | 2,915 |
|
Licensed stores | (1,312 | ) | | 199 |
| | 3,097 |
| | 3,831 |
|
Total China/Asia Pacific | 300 |
| | 303 |
| | 7,779 |
| | 6,746 |
|
EMEA | | | | | | | |
Company-operated stores | 1 |
| | (18 | ) | | 503 |
| | 505 |
|
Licensed stores | 122 |
| | 113 |
| | 2,594 |
| | 2,232 |
|
Total EMEA | 123 |
| | 95 |
| | 3,097 |
| | 2,737 |
|
All Other Segments (2) | | | | | | | |
Company-operated stores | (1 | ) | | (2 | ) | | 289 |
| | 356 |
|
Licensed stores | — |
| | 2 |
| | 37 |
| | 37 |
|
Total All Other Segments | (1 | ) | | — |
| | 326 |
| | 393 |
|
Total Company | 700 |
| | 649 |
| | 28,039 |
| | 25,734 |
|
(1) China/Asia Pacific store data includes the transfer of 1,477 licensed stores in East China to company-operated retail stores as a result of the purchase of our East China joint venture in the first quarter of fiscal 2018. |
(2) As of December 31, 2017, All Other Segments included 323 Teavana-branded stores, of which 286 stores were company-operated. |
Financial Condition, Liquidity and Capital Resources
Cash and Investment Overview
Our cash and investments totaled $4.1$3.6 billion as of December 31, 2017January 1, 2023 and $3.2$3.5 billion as of October 1, 2017.2, 2022. We actively manage our cash and investments in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, make acquisitions and return cash to shareholders through common stock cash dividend payments and share repurchases. Our investment portfolio primarily includes highly liquid available-for-sale securities, including corporate debt securities, government treasury securities (foreign and domestic), mortgage and asset-backed securities and agency obligations.commercial paper as well as principal-protected structured deposits. As of December 31, 2017,January 1, 2023, approximately $2.5$2.7 billion of our cash and investmentsshort-term investment were held in foreign subsidiaries.
Borrowing Capacity
Revolving Credit Facility
Our $2.0$3.0 billion unsecured 5-yearfive-year revolving credit facility (the “2018“2021 credit facility”) and our $1.0 billion unsecured 364-Day credit facility (the “364-day credit facility”) are available for working capital, capital expenditures and other corporate purposes, including acquisitions and share repurchases.
The 2018 credit facility,, of which $150 million may be used for issuances of letters of credit, is currently set to mature on October 25, 2022.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 $500 million. $1.0 billion.
Borrowings under the 2021 credit facility will bear interest at a variable rate based on LIBOR, 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 better of (i) the Company'sCompany’s long-term credit ratings assigned by Moody'sthe Moody’s and Standard & Poor'sPoor’s rating agencies and (ii) the Company's fixed charge coverage ratio, pursuant to a pricing grid set forth in the five-year credit agreement.agencies. The current applicable margin is 0.910% for Eurocurrency Rate Loans and 0.00% (nil) for Base Rate Loans.
The 364-day2021 credit facility of which no amount maycontains alternative interest rate provisions specifying rate calculations to be used for issuancesat such time LIBOR ceases to be available as a benchmark due to reference rate reform. The “Base Rate” is the highest of letters of credit, is currently set to mature on October 25, 2018. We have(i) the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $500 million. Borrowings under the credit facility will bear interest at a variable rate based on LIBOR, and, for U.S. dollar-denominated loans under certain circumstances, a BaseFederal Funds Rate (as defined in the 2021 credit facility) plus 0.500%, in each case plus an applicable margin. The applicable margin is 0.585% for(ii) Bank of America’s prime rate and (iii) the Eurocurrency Rate Loans and 0.00% (nil) for Base Rate Loans.(as defined in the 2021 credit facility) plus 1.000%.
BothThe 2021 credit facilities containfacility 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 31, 2017,January 1, 2023, we were in compliance with all applicable covenants. No amounts were outstanding under our 2021 credit facility covenants.as of January 1, 2023 or October 2, 2022.
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$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 ourthe 2021 credit facility discussed above. The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock and share repurchases. As of December 31, 2017,January 1, 2023, we had no borrowings outstanding borrowings under theour commercial paper program.
The indentures under which all of our Senior Notes were issued, as detailed in Note 7, Debt, to the condensed consolidated financial statements included in Item 1 of Part I of this 10-Q, require us to maintain compliance with certain covenants, including limits on future liens and sale and leaseback transactions on certain material properties. As of December 31, 2017,October 2, 2022, we werehad $175.0 million in compliance with all applicable covenants.borrowings outstandingOn November 22, 2017, we issued long-term debt in an underwritten registered public offering, which consisted
under this program. Our total contractual borrowing capacity for general corporate purposes including repurchaseswas $3.0 billion as of Starbucks common stockthe end of our first quarter of fiscal 2023.
Credit facilities in Japan
Additionally, we hold Japanese yen-denominated credit facilities for the use of our Japan subsidiary. These are available for working capital needs and capital expenditures within our Japanese market.
•A ¥5 billion, or $37.6 million, credit facility is currently set to mature on January 4, 2024. Borrowings under our ongoing share repurchase programthis credit facility are subject to terms defined within the facility and paymentwill bear interest at a variable rate based on TIBOR plus an applicable margin of dividends. Interest0.400%.
•A ¥10 billion, or $75.2 million, credit facility is currently set to mature on March 27, 2023. Borrowings under this credit facility are subject to terms defined within the 2020 notes is payable semi-annuallyfacility and will bear interest at a variable rate based on May 22TIBOR plus an applicable margin of 0.350%.
As of January 1, 2023 and November 22, commencing on May 22, 2018 and interest on the 2047 notes is payable semi-annually on June 1 and December 1, commencing on June 1, 2018. October 2, 2022, we had no borrowings outstanding under these Japanese yen-denominated credit facilities.
See Note 78,, Debt, to the condensed 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 January 1, 2023, 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 capital expenditures,investing in new product innovations, related marketing supportways to serve our customers and partner and digital investments, returnsupporting our store partners, repaying maturing debts, as well as returning cash to shareholders through common stock cash dividend payments and discretionary share repurchases as well as otherand investing in new business opportunities related to our core and developing businesses such as Siren Retail. Further,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 in support of our growth agenda.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. On December 31, 2017, we acquired the remaining 50% interest of our East China joint venture for approximately $1.4 billion in the form of a payable to UPG. Approximately $1.3 billion had been settled as of the date of this filing, primarily through the use of cash and investments held in foreign subsidiaries.
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 foreseeable future. Significant new joint ventures, acquisitions and/next 12 months. We are currently not aware of any trends or other new business opportunities may require additional outside funding.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.
We consider the majority of undistributed earnings In this regard, we may incur additional debt, within targeted levels, as part of our foreign subsidiariesplans to fund our capital programs, including cash returns to shareholders through future dividends and equity investeesdiscretionary share repurchases as well as investing in new business opportunities. If necessary, we may pursue additional sources of December 31, 2017 to be indefinitely reinvestedfinancing, including both short-term and accordingly no foreign withholding taxes have been provided on such earnings. We have not, nor do we anticipate the need for, repatriated funds to the U.S. to satisfy domestic liquidity needs. However, the Tax Act requires a one-time transition tax for deemed repatriation of accumulated undistributed earnings of certain foreign investments. This one-time transition tax is payable over eight years, with most of the cash outlay expected to be made in the later years. In connection with our initial analysis, we have estimated a provisional amount of $241 million, of which $233 million of income taxes payable was included in other long-term liabilities on the condensed consolidated balance sheet, as of December 31, 2017. See Note 10, Income Taxes, for further discussion.
borrowings and debt issuances.
We regularly review our cash positions and our determination of permanentindefinite reinvestment of foreign earnings. In the event we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the Tax Act's one-time transition tax, which could be material. WeWhile we do not believe it is practicableanticipate the need for repatriated funds to calculate the amount of unrecognized deferred income taxes as there is a significant amount of uncertainty around the calculation.U.S. to satisfy domestic liquidity requirements, any foreign earnings which are not indefinitely reinvested may be repatriated at management’s discretion.
During the first quarter of fiscal 2018,2023, our Board of Directors declaredapproved a quarterly cash dividend to shareholders of $0.30$0.53 per share to be paid on February 23, 201824, 2023 to shareholders of record as of the close of business on February 8, 2018.10, 2023.
WeDuring the first quarter of fiscal 2023, we resumed our share repurchase program which was temporarily suspended in April 2022. During the quarter ended January 1, 2023, we repurchased 28.51.9 million shares of common stock or $1.6 billion, during the first quarterfor $191.4 million. As of fiscal 2018 under our ongoing share repurchase program. The number of remainingJanuary 1, 2023, 50.6 million shares authorizedremained available for repurchase as of December 31, 2017 totaled 51.8 million.under current authorizations.
Other than normal operating expenses, cash requirements for the remainder of fiscal 20182023 are expected to consist primarily of capital expenditures for investments in our new and existing stores, our developing Siren Retail business and our supply chain and corporate facilities. Total capital expenditures for fiscal 20182023 are expected to be approximately $2$2.5 billion.
Cash provided by operating activities was $1.8 billion forIn the first quarter of fiscal 2018, compared to $1.5 billion for the same period in fiscal 2017. The change was primarily due to increased earnings.
Cash provided by investing activities for the first quarter of fiscal 2018 totaled $395 million, compared to cash used by investing activities of $402 million for the same period in fiscal 2017. The change was primarily due to proceeds from the sale of Tazo and lower purchases of investments.
Cash used by financing activities for the first quarter of fiscal 2018 totaled $1.0 billion, compared to $1.2 billion for the same period in fiscal 2017. The change was primarily due to higher proceeds from issuances of long-term debt, lapping the repayment of the 2016 notes, partially offset by an increase in share repurchases.
Contractual Obligations
In Management’s Discussion and Analysis of Financial Condition and Results of OperationsMD&A included in the 10-K, we disclosed that we had $14.9$33.2 billion in total contractual obligationsof current and long-term material cash requirements as of October 1, 2017. Other than the issuance of our 2020 notes and our 2047 notes and the payable related to the acquisition of East China in the first quarter of fiscal 2018, as described in Note 7, Debt, and Note 2,, Acquisitions and Divestitures, respectively to the condensed consolidated financial statements included in Item 1 of Part I of this 10-Q, there 2022. There have been no material changes to our total obligationsmaterial cash requirements during the period covered by this 10-Q outside of the normal course of our business. Approximately $1.3Cash Flows
Cash provided by operating activities was $1.6 billion for the first quarter of fiscal 2023, compared to $1.9 billion for the East China payable has been settled assame period in fiscal 2022. The change was primarily due to the timing of payments, lower non-cash depreciation and amortization expenses in current year, and net cash used by changes in other operating assets and liabilities.
Cash used in investing activities for the datefirst quarter of this filing.fiscal 2023 totaled $279 million, compared to cash used in investing activities of $401 million for the same period in fiscal 2022. The change was primarily due to an increase in maturities and calls of investments, partially offset by higher spend on capital expenditures.
Cash used in financing activities for the first quarter of fiscal 2023 totaled $1.0 billion compared to cash used in financing activities of $4.0 billion for the same period in fiscal 2022. The change is primarily due to a decrease in share repurchase activities. Off-Balance Sheet Arrangements
There has been no material change in our off-balance sheet arrangements discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 10-K.
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 directly impact our results of operations, and we expect commodity prices, particularly coffee, to impact future results of operations. For additional details, see Product Supply in Item 1 of the 10-K, as well as Risk Factors in 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. However, the COVID-19 pandemic may have an impact on consumer behaviors and customer traffic that result in changes in the seasonal fluctuations of our business. Additionally, as Starbucks Cardsour stored value 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 Cardsour stored value cards are recognized upon redemption and not when cash is loaded, onto the Card, 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.
RECENT ACCOUNTING PRONOUNCEMENTSCritical Accounting Estimates
See 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 condensedconsolidated 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. | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
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.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
During the first quarter of fiscal 2018,2023, we carried out an evaluation, under the supervision and with the participation of our management, including our interim chief executive officer and our chief financial officer, of the effectiveness of the design and operation of the disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our interim chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this report (December 31, 2017)(January 1, 2023).
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The certifications required by Section 302
PART II — OTHER INFORMATION
Starbucks is partyItem 1.Legal Proceedings
See Note 14, Commitments and Contingencies, to variousthe consolidated financial statements included in Item 1 of Part I of this 10-Q for information regarding certain legal proceedings arising in the ordinary course of business, including, at times, 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.which we are involved. Item 1A.Risk Factors
In addition to the other information set forth in this 10-Q, you should carefully consider the risks and uncertainties discussed in Part I, Item 1A. Risk Factors in our 10-K and Part II, Item 1A. There have been no material changes to the risk factors previously disclosed in theour 10-K.
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Information regarding repurchases of our common stock during the quarter ended December 31, 2017:January 1, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(3) |
Period (1) | | | | | | | | |
October 3, 2022 - October 30, 2022 | | | | | | — | | | 52,572,178 | |
October 31, 2022 - November 27, 2022 | | 826,522 | | | $ | 95.83 | | | 826,522 | | | 51,745,656 | |
November 28, 2022 - January 1, 2023 | | 1,107,480 | | | 101.32 | | | 1,107,480 | | | 50,638,176 | |
Total | | 1,934,002 | | | $ | 98.97 | | | 1,934,002 | | | |
(1)Monthly information is presented by reference to our fiscal months during the first quarter of fiscal 2023.
(2)Share repurchases are conducted under our ongoing share repurchase program announced in September 2001, which has no expiration date, and for which the authorized number of shares has been increased by our Board numerous times, with our Board most recently authorizing the repurchase of up to an additional 40 million shares in March 2022.
(3)This column includes the total number of shares available for repurchase under the Company's ongoing share repurchase program. Shares under our ongoing share repurchase program may be repurchased in open market transactions, including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, or through privately negotiated transactions. The timing, manner, price and amount of repurchases will be determined at our discretion and the share repurchase program may be suspended, terminated or modified at any time for any reason.
Item 3.Defaults upon Senior Securities
None.
Item 4.Mine Safety Disclosures
Not applicable.
Item 5.Other Information
None.
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| | | | | | | | | | | | | |
| | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
Period(1) | | | | | | | | |
October 2, 2017 — October 29, 2017 | | 4,853,039 |
| | $ | 54.58 |
| | 4,853,039 |
| | 75,464,372 |
|
October 30, 2017 — November 26, 2017 | | 11,661,314 |
| | 56.82 |
| | 11,661,314 |
| | 63,803,058 |
|
November 27, 2017 — December 31, 2017 | | 11,959,889 |
| | 57.75 |
| | 11,959,889 |
| | 51,843,169 |
|
Total | | 28,474,242 |
| | $ | 56.83 |
| | 28,474,242 |
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(1)
| Monthly information is presented by reference to our fiscal months during the first quarter of fiscal 2018. |
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(2)
| Share repurchases are conducted under our ongoing share repurchase program announced in September 2001, which has no expiration date. |
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| | | | Incorporated by Reference | | |
Exhibit No. | | Exhibit Description | | Form | | File No. | | Date of Filing | | Exhibit Number | | Filed Herewith |
| | | | 10-Q | | 0-20322 | | 4/28/2015 | | 3.1 | | |
| | | | 8-K | | 0-20322 | | 9/16/2016 | | 3.1 | | |
| | | | 8-K | | 0-20322 | | 11/22/2017 | | 4.2 | | |
| | | | 8-K | | 0-20322 | | 11/22/2017 | | 4.3 | | |
| | | | 8-K | | 0-20322 | | 11/22/2017 | | 4.4 | | |
| | Credit Agreement, dated October 25, 2017, among Starbucks Corporation, Bank of America, N.A., in its capacity as Administrative Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, N.A., Citibank, N.A. and U.S. Bank National Association, as L/C Issuers, and the other Lenders from time to time a party thereto. | | 8-K | | 0-20322 | | 10/30/2017 | | 10.1 | | |
| | | | 8-K | | 0-20322 | | 10/30/2017 | | 10.2 | | |
| | | | — | | — | | — | | — | | X |
| | | | — | | — | | — | | — | | X |
| | | | — | | — | | — | �� | — | | — |
101 | | The following financial statements from the Company's 10-Q for the fiscal quarter ended December 31, 2017, formatted in XBRL: (i) Condensed Consolidated Statements of Earnings, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements | | — | | — | | — | | — | | X |
Item 6.Exhibits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference | | |
Exhibit No. | | Exhibit Description | | Form | | File No. | | Date of Filing | | Exhibit Number | | Filed Herewith |
| | | | 10-Q | | 000-20322 | | 04/28/2015 | | 3.1 | | |
| | | | 8-K | | 000-20322 | | 03/19/2021 | | 3.1 | | |
| | | | — | | — | | — | | — | | X |
| | | | — | | — | | — | | — | | X |
| | | | — | | — | | — | | — | | — |
101 | | The following financial statements from the Company's 10-Q for the fiscal quarter ended January 1, 2023, formatted in iXBRL: (i) Consolidated Statements of Earnings, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Equity and (vi) Notes to Consolidated Financial Statements | | — | | — | | — | | — | | X |
104 | | Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101) | | — | | — | | — | | — | | X |
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* Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
January 31, 2018February 2, 2023
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| STARBUCKS CORPORATION |
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| By: | | /s/ Scott MawRachel Ruggeri |
| | | Scott MawRachel Ruggeri |
| | | executive vice president, chief financial officer |
| | | Signing on behalf of the registrant and as principal financial officer |