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What changed in Starbucks's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Starbucks's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+299 added−300 removedSource: 10-K (2023-11-17) vs 10-K (2022-11-18)

Top changes in Starbucks's 2023 10-K

299 paragraphs added · 300 removed · 236 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

57 edited+10 added−10 removed52 unchanged
Biggest changeIn the U.S., our largest and most mature market, these include: • Comprehensive health insurance coverage is offered to partners working an average of 20 hours or more each week. • 100% upfront tuition coverage is offered through the Starbucks College Achievement Plan for partners to earn a first-time bachelor's degree online at Arizona State University. • 100% paid parental leave is available to new parents that welcome a child through birth, adoption or foster placement and work an average of 20 hours or more each week. • A Partner and Family Sick Time program is provided and allows partners to accrue paid sick time based on hours worked and use that time for themselves or family members in need of care. • Care@Work benefit provides partners with backup care benefits for children and adults at a small cost to partners, as well as free unlimited senior care planning services.
Biggest changeIn the U.S., our largest and most mature market, these include: • Comprehensive health insurance coverage is offered to partners working an average of 20 hours or more each week. • 100% upfront tuition coverage through the Starbucks College Achievement Plan for partners to earn a first-time bachelor's degree online at Arizona State University is offered to partners working an average of 20 hours or more each week. • Our Future Roast 401(k) savings plan helps partners save for their financial goal through convenient payroll deductions.
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 Caribbean; and 3) Channel Development. Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.
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 and Africa, Latin America and Caribbean; and 3) Channel Development. Non-reportable operating segments and unallocated corporate expenses are reported within Corporate and Other.
Store growth in specific existing markets will vary due to many factors, including expected financial returns, the maturity of the market, economic conditions, consumer behavior and local business environment.
Store growth in specific existing markets will vary due to many factors, including expected financial returns, the maturity of the market, economic conditions, consumer behavior and the local business environment.
In addition, changes to such laws, regulations, rules, reporting obligations and related compliance obligations could result in significant costs but are not expected to have a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods. 9 Table of Contents Available Information Starbucks Annual Report on Form 10-K reports, along with all other reports and amendments filed with or furnished to the Securities and Exchange Commission (the “SEC”), are publicly available free of charge on the Investor Relations section of our website at investor.starbucks.com as soon as reasonably practicable after these materials are filed with or furnished to the SEC.
In addition, changes to such laws, regulations, rules, reporting obligations and related compliance obligations could result in significant costs but are not expected to have a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods. 10 Table of Contents Available Information Starbucks Annual Report on Form 10-K reports, along with all other reports and amendments filed with or furnished to the Securities and Exchange Commission (the “SEC”), are publicly available free of charge on the Investor Relations section of our website at investor.starbucks.com as soon as reasonably practicable after these materials are filed with or furnished to the SEC.
Our management and cross-functional teams also work closely to evaluate human capital management issues such as partner retention, workplace safety, harassment and bullying, as well as to implement measures to mitigate these risks. Diversity, Equity and Inclusion We are committed to creating a welcoming and inclusive environment.
Our management and cross-functional teams also work closely to evaluate human capital management issues such as partner retention, workplace safety, harassment and bullying, as well as to implement measures to mitigate these risks. Diversity, Equity and Inclusion We are committed to creating a welcoming, supportive and inclusive environment.
Stored value cards are issued to customers when they initially load them with an account balance. They can be obtained in our company-operated and most licensed stores in North America, China, Japan and many of our markets in our International segment.
Stored value cards are issued to customers when they initially load them with an account balance. They can be obtained in our company-operated and most licensed stores in North America, China, Japan and many of our other markets in our International segment.
A large portion of our Channel Development business operates under a licensed model of the Global Coffee Alliance with Nestlé, while our global ready-to-drink businesses operate under collaborative relationships with PepsiCo, Inc., Tingyi-Ashi Beverages Holding Co., Ltd., Arla Foods amba, Nestlé and others. 5 Table of Contents Revenue Components We generate the majority of our revenues through company-operated stores and licensed stores.
A large portion of our Channel Development business operates under a licensed model of the Global Coffee Alliance with Nestlé, while our global ready-to-drink businesses operate under collaborative relationships with PepsiCo, Inc., Tingyi-Ashi Beverages Holding Co., Ltd., Arla Foods amba, Nestlé and others. 6 Table of Contents Revenue Components We generate the majority of our revenues through company-operated stores and licensed stores.
She also served as vice president of Finance from December 2010 to September 2016 supporting Corporate Financial Planning & Analysis and the U.S. Retail business. Segment Financial Information Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes.
She also served as vice president of Finance from 2010 to 2016 supporting Corporate Financial Planning & Analysis and the U.S. Retail business. Segment Financial Information Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes.
In addition to our flagship Starbucks Coffee ® brand, we sell goods and services under the following brands: Teavana ® , Seattle’s Best Coffee ® , Ethos ® , Starbucks Reserve ® and Princi ® . Our primary objective is to maintain Starbucks standing as one of the most recognized and respected brands in the world.
In addition to our flagship Starbucks Coffee ® brand, we sell goods and services under the following brands: Teavana ® , Ethos ® , Starbucks Reserve ® and Princi ® . Our primary objective is to maintain Starbucks standing as one of the most recognized and respected brands in the world.
Prior to her promotion in 2021, she served as senior vice president of Americas with responsibility for the retail portfolio across the segment, including company-operated and licensed stores from June 2020 to January 2021.
Prior to her promotion in 2021, she served as senior vice president of Americas with responsibility for the retail portfolio across the segment, including company-operated and licensed stores from 2020 to 2021.
Our Channel Development segment includes roasted whole bean and ground coffees, Seattle’s Best Coffee, Starbucks- and Teavana-branded single-serve products, a variety of ready-to-drink beverages, such as Frappuccino ® and Starbucks Doubleshot ® , foodservice products and other branded products sold worldwide outside of our company-operated and licensed stores.
Our Channel Development segment includes roasted whole bean and ground coffees, Starbucks- and Teavana-branded single-serve products, a variety of ready-to-drink beverages, such as Frappuccino ® and Starbucks Doubleshot ® , foodservice products and other branded products sold worldwide outside of our company-operated and licensed stores.
We regularly conduct anonymous surveys to seek feedback from our partners on a variety of topics, including confidence in company leadership, competitiveness of our compensation and benefits package, career growth opportunities and recommendations on how we can remain an employer of choice.
We regularly conduct anonymous surveys to seek feedback from our partners on a variety of topics, including confidence in company leadership, competitiveness of our compensation and benefits package, career growth opportunities and 3 Table of Contents recommendations on how we can remain an employer of choice.
The results are shared with our partners and reviewed by 2 Table of Contents senior leadership, who analyze areas of progress or deterioration and prioritize actions and activities in response to this feedback to drive meaningful improvements in partner engagement.
The results are shared with our partners and reviewed by senior leadership, who analyze areas of progress or deterioration and prioritize actions and activities in response to this feedback to drive meaningful improvements in partner engagement.
We also hold patents on certain products, systems and designs which have an average remaining useful life of approximately seven years.
We also hold patents on certain products, systems and designs which have an average remaining useful life of approximately five years.
Refer to Note 1 , Summary of Significant Accounting Policies and Estimates, included in Item 8 of Part II of this 10-K, for further discussion of our stored value cards and loyalty program. Licensed Stores Revenues from our licensed stores accounted for 11% of total net revenues in fiscal 2022.
Refer to Note 1 , Summary of Significant Accounting Policies and Estimates, included in Item 8 of Part II of this 10-K, for further discussion of our stored value cards and loyalty program. Licensed Stores Revenues from our licensed stores accounted for 13% of total net revenues in fiscal 2023.
From September 2016 to June 2020, she held various leadership roles in finance both internal and external to Starbucks, including Chief Financial Officer of Continental Mills from July 2018 to May 2020 and prior to that she was senior vice president of Finance at Starbucks in support of the Americas and Global Retail from September 2016 to June 2018.
From 2016 to 2020, she held various leadership roles in finance both internal and external to Starbucks, including Chief Financial Officer of Continental Mills from 2018 to 2020 and prior to that she was senior vice president of Finance at Starbucks in support of the Americas and Global Retail from 2016 to 2018.
Although most coffee trades in the commodity market, high-altitude arabica coffee of the quality sought by Starbucks tends to trade on a negotiated basis at a premium above the “C” coffee commodity price. Both the premium and the commodity price depend upon the supply and demand at the time of purchase.
The price of coffee is subject to significant volatility. Although most coffee trades in the commodity market, high-altitude arabica coffee of the quality sought by Starbucks tends to trade on a negotiated basis at a premium above the “C” coffee commodity price. Both the premium and the commodity price depend upon the supply and demand at the time of purchase.
We announced plans to invest in a digital third place that will offer members access to new benefits, a digital community and immersive coffee experiences, giving our customers new ways to experience and connect with Starbucks. We believe our continued efforts to transform our store portfolio and elevate technology will enhance the customer experience and position Starbucks for long-term growth.
Our investments in a digital third place offer members access to new benefits, a digital community and immersive coffee experiences, giving our customers new ways to experience and connect with Starbucks. We believe our continued efforts to transform our store portfolio and elevate technology will enhance the customer experience and position Starbucks for long-term growth.
Prior to this, he served as executive vice president and president, International Licensed Markets, from March 2020 to June 2021.
Prior to this, he served as executive vice president and president, International Licensed Markets, from 2020 to 2021.
Retail sales mix by product type for company-operated stores: Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Sep 27, 2020 Beverages 74 % 74 % 75 % Food 22 % 21 % 20 % Other (1) 4 % 5 % 5 % Total 100 % 100 % 100 % (1) “Other” primarily consists of sales of packaged and single-serve coffees and teas, serveware and ready-to-drink beverages, among other items.
Retail sales mix by product type for company-operated stores: Fiscal Year Ended Oct 1, 2023 Oct 2, 2022 Oct 3, 2021 Beverages 74 % 74 % 74 % Food 22 % 22 % 21 % Other (1) 4 % 4 % 5 % Total 100 % 100 % 100 % (1) “Other” primarily consists of sales of serveware, packaged and single-serve coffees and teas and ready-to-drink beverages, among other items.
Item 1. Business General In this Annual Report on Form 10-K (“10-K” or “Report”) for the fiscal year ended October 2, 2022 (“fiscal 2022”), Starbucks Corporation (together with its subsidiaries) is referred to as “Starbucks,” the “Company,” “we,” “us” or “our.” Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 83 markets.
Item 1. Business General In this Annual Report on Form 10-K (“10-K” or “Report”) for the fiscal year ended October 1, 2023 (“fiscal 2023”), Starbucks Corporation (together with its subsidiaries) is referred to as “Starbucks,” the “Company,” “we,” “us” or “our.” Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 86 markets.
Company-operated Stores Revenue from company-operated stores accounted for 82% of total net revenues during fiscal 2022.
Company-operated Stores Revenue from company-operated stores accounted for 82% of total net revenues during fiscal 2023.
In addition to coffee, we also purchase significant amounts of dairy and plant-based dairy-free alternative products, particularly fluid milk, oat milk and almond milk to support the needs of our company-operated stores.
In addition to coffee, we also purchase significant amounts of dairy, particularly fluid milk, and to a lesser degree, plant-based dairy-free alternative products, such as oat milk and almond milk, to support the needs of our company-operated stores.
Product Supply Starbucks is committed to selling the finest whole bean coffees and coffee beverages. To help ensure compliance with our rigorous coffee standards, we generally control substantially all coffee purchasing, roasting and packaging and the global distribution of coffee used in our operations. Nestlé controls distribution of certain finished goods through the Global Coffee Alliance.
Product Supply Starbucks is committed to selling the finest whole bean coffees and coffee beverages. To help ensure compliance with our rigorous coffee standards, we generally control substantially all coffee purchasing, roasting and packaging and the global distribution of coffee used in our operations.
Revenues from our reportable operating segments as a percentage of total net revenues for fiscal 2022 were as follows: North America (72%), International (22%) and Channel Development (6%). Our North America and International segments include both company-operated and licensed stores. Our North America segment is our most mature business and has achieved significant scale.
Revenues from our reportable operating segments as a percentage of total net revenues for fiscal 2023 were as follows: North America (74%), International (21%) and Channel Development (5%). Our North America and International segments include both company-operated and licensed stores. Our North America segment is our most mature business and has achieved significant scale.
Narasimhan spent 19 years at McKinsey & Company, where he focused on its consumer, retail and technology practices in the U.S., Asia and India. Mr. Narasimhan currently serves on the Board of Directors of Verizon Communications, Inc., a NYSE-listed telecommunications company. Mr.
Narasimhan spent 19 years at McKinsey & Company, where he focused on its consumer, retail, and technology practices in the U.S., Asia, and India. Mr. Narasimhan currently serves on the Board of Directors of Verizon Communications, Inc., a NYSE-listed telecommunications company. Mr. Narasimhan is a trustee of the Brookings Institution and a member of the Council on Foreign Relations .
Narasimhan is a trustee of the Brookings Institution and a member of the Council on Foreign Relations. 4 Table of Contents Michael Conway joined Starbucks in March 2013 and was named group president, International and Channel Development in June 2021, where he is responsible for leading Starbucks retail growth and operations in over 80 markets across Asia Pacific, Europe, Middle East and Africa, Latin America and the Caribbean and growth for the Global Channel Development business, which consists of consumer packaged goods, ready-to-drink businesses and strategic partnerships, including those with Nestlé, PepsiCo and other key business partners.
Michael Conwa y joined Starbucks in 2013 and was named group president, International and Channel Development in 2021, where he is responsible for leading Starbucks retail growth and operations in over 80 markets across Asia Pacific, Europe, Middle East and Africa, Latin America and the Caribbean and growth for the Global Channel Development business, which consists of consumer packaged goods, ready-to-drink businesses and strategic partnerships, including those with Nestlé, 5 Table of Contents PepsiCo, and other key business partners.
He also served as executive vice president and president, Starbucks Canada, executive vice president and president for Starbucks Licensed Stores business for the United States and Latin America and executive vice president and president of Starbucks Global Channel Development from December 2014 to March 2020.
He also served as executive vice president and president of Starbucks Canada from 2018 to 2020, president of Starbucks Licensed Stores Operations for the United States and Latin America from 2016 to 2018, and president of Starbucks Global Channel Development from 2013 to 2016.
Narasimhan served as Chief Executive Officer of Reckitt Benckiser Group Plc (“Reckitt”), a FTSE 12 listed British multinational consumer health, hygiene and nutrition company, since September 2019. Prior to joining Reckitt, Mr. Narasimhan held various roles at PepsiCo from 2012 to 2019.
Prior to joining Starbucks, Mr. Narasimhan served as Chief Executive Officer of Reckitt Benckiser Group Plc (“Reckitt”), a FTSE 12 listed British multinational consumer health, hygiene, and nutrition company, from 2019 to 2022. Prior to joining Reckitt, Mr.
We believe the investments in partner wages and trainings will increase retention and 6 Table of Contents productivity while the acceleration of purpose-built store concepts and innovations in technologies will provide additional convenience and connection with our customers.
We believe the company-operated market investments in partner wages and trainings have 7 Table of Contents increased retention and productivity while the acceleration of purpose-built store concepts and innovations in technologies have provided additional convenience and connection with our customers.
We previously achieved and currently maintain 100 percent pay equity in the U.S. for women and men and people of all races for partners performing similar work.
We previously achieved and currently maintain 100 percent pay equity in the U.S. for women and men and people of all races for partners performing similar work. We have made a commitment to achieve gender pay equity in all company-operated markets.
Our goal is for at least 30% of all corporate roles and at least 40% of all retail and manufacturing roles to be held by BIPOC partners in the U.S. by 2025. • Holding ourselves accountable at the highest levels of the organization. ◦ Incorporating metrics focused on building inclusive and diverse teams into our executive compensation programs. ◦ Joining the Board Diversity Action Alliance to act alongside other companies similarly committed to increasing racially and ethnically diverse representation on corporate boards. ◦ Publicizing self-identified race/ethnicity/gender of each member of our Board.
Our goal is to achieve racial and ethnic diversity of at least 30% of all corporate roles and at least 40% of all retail and manufacturing roles in the U.S. by 2025, by setting broad recruiting parameters and through inclusive and legally compliant employment practices. • Holding ourselves accountable at the highest levels of the organization. ◦ Incorporating our efforts to build and retain inclusive and diverse teams into our executive compensation programs. ◦ Joining the Board Diversity Action Alliance to act alongside other companies similarly committed to increasing diverse representation on corporate boards. ◦ Publicizing self-identified race/ethnicity/gender of each member of our Board.
Total purchase commitments, together with existing inventory, are expected to provide an adequate supply of green coffee through fiscal 2023. We depend upon our relationships with coffee producers, outside trading companies and exporters for our supply of green coffee. We believe, based on relationships established with our suppliers, the risk of non-delivery on such purchase commitments is remote.
Total purchase commitments, together with existing inventory, are expected to provide an adequate supply of green coffee through fiscal 2024. We depend upon our relationships with coffee producers, outside trading companies and exporters for our supply of green coffee.
To help ensure the future supply of high-quality green coffee and to reinforce our leadership role in the coffee industry, Starbucks operates ten farmer support centers, including our China Farmer Support Center located in the Yunnan Province of 8 Table of Contents this high-growth market.
We believe, based on relationships established with our suppliers, the risk of non-delivery on such purchase commitments is remote. 9 Table of Contents To help ensure the future supply of high-quality green coffee and to reinforce our leadership role in the coffee industry, Starbucks operates ten farmer support centers, including our China Farmer Support Center located in the Yunnan Province of this high-growth market.
With coffee at our core, we pursue ambitious goals for our partners (employees), our communities and our planet because we believe it is our role and responsibility to create a thriving business powered by thriving people for a thriving planet and communities.
With coffee at our core, we pursue ambitious goals for our partners (employees), our communities and our planet, which we believe also contributes to the long-term sustainability of our business to create a thriving business powered by thriving people for a thriving planet and communities.
We believe it is our responsibility to advance racial and social equity, and we are committed to furthering that work with intention, transparency and accountability. We continue to welcome our partners, customers, civil rights and community leaders, along with our chief inclusion and diversity officer, to advise us along this journey.
We are committed to advancing inclusion and racial and social equity, and we seek to further that work with intention, transparency and accountability. We continue to welcome our partners, customers, civil rights and community leaders, along with our senior vice president, talent and inclusion, to advise us along this journey.
He served as PepsiCo’s Group Chief Commercial Officer until July 2019, and prior to that beginning in 2012 served as Chief Executive Officer - Latin America, Europe and Sub-Saharan Africa, Chief Executive Officer - Latin America and Chief Financial Officer of PepsiCo Americas Foods. Prior to joining PepsiCo, Mr.
Narasimhan held various executive roles at PepsiCo from 2012 to 2019 including as PepsiCo’s Group Chief Commercial Officer and as Chief Executive Officer - Latin America, Europe, and Sub-Saharan Africa, Chief Executive Officer - Latin America, and Chief Financial Officer of PepsiCo Americas Foods. Prior to joining PepsiCo, Mr.
In our major international markets, we also continue to invest in technology and establish partnerships with third parties with relevant expertise to increase digital adoption to provide convenience and elevate the customer experience. In China, we leverage platforms such as Starbucks Now TM stores to enable a seamless integration of physical and digital customer touchpoints.
In our major international markets, we also continue to invest in technology and establish partnerships with third parties with relevant expertise to increase digital adoption to provide convenience and elevate the customer experience.
Company-operated and Licensed Store Summary as of October 2, 2022: North America As a % of Total North America Stores International As a % of Total International Stores Total As a % of Total Stores Company-operated stores 10,216 59 % 8,037 44 % 18,253 51 % Licensed stores 7,079 41 % 10,379 56 % 17,458 49 % Total 17,295 100 % 18,416 100 % 35,711 100 % The mix of company-operated versus licensed stores in a given market generally varies based on several factors, including our ability to access desirable local retail space, the complexity, profitability and expected ultimate size of the market for Starbucks and our ability to leverage the support infrastructure within a geographic region.
Company-operated and Licensed Store Summary as of October 1, 2023: North America As a % of Total North America Stores International As a % of Total International Stores Total As a % of Total Stores Company-operated stores 10,628 60 % 8,964 44 % 19,592 52 % Licensed stores 7,182 40 % 11,264 56 % 18,446 48 % Total 17,810 100 % 20,228 100 % 38,038 100 % The mix of company-operated versus licensed stores in a given market generally varies based on several factors, including our ability to access desirable local retail space, the complexity, profitability and expected ultimate size of the market for Starbucks and our ability to leverage the support infrastructure within a geographic region.
And we are hard at work uplifting our communities and building environments in our stores that are welcoming and safe. We believe the strength of our workforce is one of the significant contributors to our success as a global brand that leads with purpose.
We believe the strength of our workforce is one of the significant contributors to our success as a global brand that leads with purpose.
As of October 2, 2022, Starbucks employed approximately 402,000 people worldwide. In the U.S., Starbucks employed approximately 258,000 people, with approximately 248,000 in company-operated stores and the remainder in corporate support, store development, roasting, manufacturing, warehousing and distribution operations.
In the U.S., Starbucks employed approximately 228,000 people, with approximately 219,000 in company-operated stores and the remainder in corporate support, store development, roasting, manufacturing, warehousing and distribution operations. Approximately 153,000 employees were employed outside of the U.S., with approximately 148,000 in company-operated stores and the remainder in regional support operations.
These include a free subscription to Headspace, an online application that enables guided mediation, and 20 free mental health therapy or coaching sessions annually with Lyra. 3 Table of Contents Outside of the U.S., we have provided other innovative benefits to help address market-specific needs, such as providing interest-free loans to our U.K. partners to help cover rental deposits, mental health services in Canada, and in China, a monthly housing subsidy for full-time Starbucks baristas and shift supervisors, as well as comprehensive health insurance coverage for parents of partners.
Outside of the U.S., we have provided other innovative benefits to help address market-specific needs, such as providing interest-free loans to our U.K. partners to help cover rental deposits, mental health services in Canada, and in China, an extra 14th Month Pay initiative, giving retail partners an additional month’s salary as a bonus on top of the 13th month pay that is customary in China, as well as a monthly housing subsidy for full-time Starbucks baristas and shift supervisors, and comprehensive health insurance coverage for parents of partners.
Orders may be placed in advance through the Starbucks Mobile App or Starbucks Delivers TM and can be conveniently picked up by customers and delivery providers in these express retail format locations.
Orders may be placed in advance through the Starbucks Mobile App or Starbucks Delivers TM and can be conveniently picked up by customers and delivery providers in these express retail format locations. These strategies align closely with rapidly evolving customer preferences, including higher levels of mobile ordering, more contactless pick-up experiences and reduced in-store congestion.
In a limited number of international markets, we also use traditional franchising and include these stores in the results of operations from our other licensed stores. 7 Table of Contents Licensed store data for the fiscal year-ended October 2, 2022: Stores Open as of Stores Open as of Oct 3, 2021 Opened Closed Transfers Net Oct 2, 2022 North America: U.S. 6,497 217 (109) 3 111 6,608 Canada 468 27 (24) — 3 471 Total North America 6,965 244 (133) 3 114 7,079 International: Korea 1,611 168 (29) — 139 1,750 Latin America 1,437 115 (3) — 112 1,549 U.K. 791 74 (30) 3 47 838 Turkey 559 50 (5) — 45 604 Taiwan 523 30 (9) — 21 544 Indonesia 487 48 (12) — 36 523 Thailand 425 27 (6) — 21 446 Philippines 401 19 (2) — 17 418 All Other 3,501 394 (188) — 206 3,707 Total International 9,735 925 (284) 3 644 10,379 Total licensed 16,700 1,169 (417) 6 758 17,458 Other Revenues Other revenues primarily are recorded in our Channel Development segment and include sales of packaged coffee, tea and ready-to-drink beverages to customers outside of our company-operated and licensed stores, as well as royalties received from Nestlé under the Global Coffee Alliance and other collaborative partnerships.
In a limited number of international markets, we also use traditional franchising and include these stores in the results of operations from our other licensed stores. 8 Table of Contents Licensed store data for the fiscal year-ended October 1, 2023: Stores Open as of Stores Open as of Oct 2, 2022 Opened Closed Transfers Net Oct 1, 2023 North America: U.S. 6,608 206 (113) — 93 6,701 Canada 471 17 (7) — 10 481 Total North America 7,079 223 (120) — 103 7,182 International: Korea 1,750 153 (33) — 120 1,870 Latin America 1,549 108 (8) — 100 1,649 U.K. 838 77 (4) — 73 911 Turkey 604 81 (9) — 72 676 Taiwan 544 30 (11) — 19 563 Indonesia 523 58 — — 58 581 Thailand 446 29 (1) — 28 474 Philippines 418 29 — — 29 447 All Other 3,707 469 (82) (1) 386 4,093 Total International 10,379 1,034 (148) (1) 885 11,264 Total licensed 17,458 1,257 (268) (1) 988 18,446 Other Revenues Other revenues primarily are recorded in our Channel Development segment and include sales of packaged coffee, tea and ready-to-drink beverages to customers outside of our company-operated and licensed stores, as well as royalties received from Nestlé under the Global Coffee Alliance and other collaborative partnerships.
Our Audit and Compliance Committee works closely with the Risk Management Committee, led by Starbucks cfo and general counsel, to monitor and mitigate current and emerging labor and human capital management risks.
Our Audit and Compliance Committee works closely with the Risk Management Committee, led by Starbucks cfo and general counsel, to monitor and mitigate current and emerging labor and human capital management risks. Furthermore, our Nominating and Corporate Governance Committee, in consultation with management, annually evaluates the effectiveness of our social responsibility policies, goals and programs, which also include partner-related issues.
We purchase green coffee beans from multiple coffee-producing regions around the world and custom roast them to our exacting standards for our many blends and single-origin coffees. The price of coffee is subject to significant volatility.
Nestlé controls distribution of Starbucks packaged coffee products outside of Starbucks stores through the Global Coffee Alliance, and in some cases, also roasts and packages these products. We purchase green coffee beans from multiple coffee-producing regions around the world and custom roast them to our exacting standards for our many blends and single-origin coffees.
Human Capital Management We invest in the well-being – the mental, physical and financial health – of every partner through our practices, policies and benefits. This work is grounded in the belief that we are at our best when we create inclusive and welcoming environments, where we uplift one another with dignity, respect and kindness.
This work is grounded in the belief that we are at our best when we create inclusive, supportive and welcoming environments, where we uplift one another with dignity, respect and kindness. And we are hard at work uplifting our communities and building environments in our stores that are welcoming and safe.
Company-operated store data for the fiscal year-ended October 2, 2022: Stores Open as of Stores Open as of Oct 3, 2021 Opened Closed Transfers Net Oct 2, 2022 North America: U.S. 8,947 437 (116) (3) 318 9,265 Canada 908 44 (6) — 38 946 Siren Retail 6 — (1) — (1) 5 Total North America 9,861 481 (123) (3) 355 10,216 International: China 5,358 724 (63) — 661 6,019 Japan 1,546 102 (18) — 84 1,630 U.K. 298 29 (6) (3) 20 318 All Other 65 2 (2) — — 65 Siren Retail 5 — — — — 5 Total International 7,272 857 (89) (3) 765 8,037 Total company-operated 17,133 1,338 (212) (6) 1,120 18,253 Starbucks company-operated stores are typically located in high-traffic, high-visibility locations.
Company-operated store data for the fiscal year-ended October 1, 2023: Stores Open as of Stores Open as of Oct 2, 2022 Opened Closed Transfers Net Oct 1, 2023 North America: U.S. 9,265 483 (103) — 380 9,645 Canada 946 43 (12) — 31 977 Siren Retail 5 1 — — 1 6 Total North America 10,216 527 (115) — 412 10,628 International: China 6,019 857 (72) — 785 6,804 Japan 1,630 110 (8) 1 103 1,733 U.K. 318 42 (5) — 37 355 All Other 65 3 (1) — 2 67 Siren Retail 5 — — — — 5 Total International 8,037 1,012 (86) 1 927 8,964 Total company-operated 18,253 1,539 (201) 1 1,339 19,592 Starbucks company-operated stores are typically located in high-traffic, high-visibility locations.
Starbucks work to uplift one another extends well beyond our partners to the communities where we do business around the world.
Our work to uplift one another extends well beyond our partners to the communities where we do business around the world. We are committed to responsible and ethical sourcing led by Coffee and Farmer Equity Practices (C.A.F.E.
Information about our Executive Officers Name Age Position Howard Schultz 69 interim chief executive officer Laxman Narasimhan 55 chief executive officer-elect Michael Conway 56 group president, International and Channel Development Zabrina Jenkins 52 acting executive vice president and general counsel Rachel Ruggeri 53 executive vice president, chief financial officer Howard Schultz is the founder of Starbucks Corporation and has served as interim chief executive officer and a member of the Starbucks Board since April 2022.
Information about our Executive Officers Name Age Position Laxman Narasimhan 56 chief executive officer Michael Conway 57 group president, International and Channel Development Sara Kelly 44 executive vice president and chief partner officer Brad Lerman 67 executive vice president and general counsel Rachel Ruggeri 54 executive vice president and chief financial officer Laxman Narasimhan joined Starbucks as its chief executive officer-elect in 2022 and has served as chief executive officer and has been a Starbucks director since March 2023.
We have also achieved gender pay equity in China and Canada, two of our largest markets outside of the U.S., and we made a commitment to achieve gender pay equity in all company-operated markets. Further, we have formulated pay-equity principles which provide equal footing, transparency and accountability as best practices that help address known, systemic barriers to global pay equity.
Further, we have formulated pay-equity principles which provide equal footing, transparency and accountability as best practices that help address known, systemic barriers to global pay equity. As of October 1, 2023, Starbucks employed approximately 381,000 people worldwide.
She serves as an independent board director for Retail Opportunity Investments Corp., a Nasdaq-listed national manager of retail shopping centers, and is a member of the Board of Trustees for Central Washington University. Rachel Ruggeri joined Starbucks in 2001 as a member of the accounting team and was named executive vice president and chief financial officer in February 2021.
Lerman currently serves on the Board of Directors of McKesson Corporation, a NYSE-listed health care, pharmaceutical, and medical supply company. Rachel Ruggeri joined Starbucks in 2001 as a member of the accounting team and was named executive vice president and chief financial officer in 2021.
He currently serves on the Board of Directors of McCormick & Company, Incorporated, a NYSE-listed spice and extract manufacturing company. Zabrina Jenkins joined the Starbucks legal department in 2005 and was named acting executive vice president and general counsel in April 2022, where she leads legal and regulatory affairs, global security and ethics and compliance for the company.
He currently serves on the Board of Directors of McCormick & Company, Incorporated, a NYSE-listed a spice and extract manufacturing company.
Starbucks has made specific racial equity commitments based on our principles of being intentional, transparent and accountable at all levels: • Being intentional in cultivating a culture of inclusion, with a focus on partner retention and development. ◦ Expanding our mentorship program designed to foster and deepen understanding of inclusion, diversity, equity and accessibility and provide partners in corporate and retail roles, including Black, Indigenous and people of color (“BIPOC”) and lesbian, gay, bisexual, transgender, queer and/or questioning (“LGBTQ+”) partners, development opportunities and connections with senior leaders. • Being transparent in our approach to Inclusion and Diversity goal setting and progress. ◦ Publicly sharing workforce diversity data. ◦ Setting annual Inclusion and Diversity goals based on retention rates and progress towards achieving BIPOC representation.
Starbucks has made specific equity commitments based on our principles of being intentional, transparent and accountable at all levels: • Being intentional in cultivating a culture of inclusion, with a focus on partner retention and development. ◦ Expanding our mentorship program designed to prioritize our partners’ sense of belonging by creating an inclusive and supportive environment.
We are committed to responsible and ethical sourcing led by Coffee and Farmer Equity (C.A.F.E.) Practices, the company’s third-party verification program and the cornerstone of our approach to ethical sourcing coffee, as well as a more sustainable, resilient future for our planet and for our communities.
Practices), the Company’s third-party verification program and the cornerstone of our approach to ethical sourcing of coffee with over 98% of our coffee having been historically verified through C.A.F.E. Practices as ethically sourced. Human Capital Management We invest in the well-being – the mental, physical and financial health – of every partner through our practices, policies and benefits.
We believe, based on relationships established with these suppliers and manufacturers, that the risk of non-delivery of sufficient amounts of these items generally is remote. During fiscal 2021 and continuing into fiscal 2022, we experienced certain supply shortages and transportation delays largely attributable to impacts of the COVID-19 pandemic as well as changes in customer demand and behaviors.
We believe, based on relationships established with these suppliers and manufacturers, that the risk of non-delivery of sufficient amounts of these items generally is remote. Competition Our primary competitors for coffee beverage sales are specialty coffee retailers and shops.
We believe our efforts in managing our workforce have been effective, evidenced by a strong Starbucks culture and a good relationship between the company and our partners.
Approximately 3.6% of Starbucks partners in U.S. company-operated stores are represented by unions. We believe our efforts in managing our workforce have been effective, evidenced by improved retention, lower turnover, and employee satisfaction during fiscal 2023.
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Furthermore, our Nominating and Corporate Governance Committee, in consultation with management, including our chief partner officer and chief inclusion and diversity officer, annually evaluates the effectiveness of our social responsibility policies, goals and programs, which also include partner-related issues.
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Mentors offer guidance, encouragement and a safe space for partners to share their experiences, challenges and aspirations.
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This benefit includes up to 30 days of backup care services through the end of fiscal 2022, in light of the COVID-19 pandemic. • We view mental health as a fundamental part of our humanity and provide a comprehensive suite of related programs and benefits.
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As of 2023, the program has welcomed nearly 1,400 partners and was expanded to include U.S. based store and district managers in 2023. • Being transparent in our approach to Inclusion and Diversity goal setting and progress. ◦ Publicly sharing workforce diversity data. ◦ Setting aspirational Inclusion and Diversity goals based on retention rates and progress towards achieving racial and ethnic diversity.
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Approximately 144,000 employees were employed outside of the U.S., with approximately 140,000 in company-operated stores and the remainder in regional support operations. Some Starbucks partners in company-operated stores are represented by unions, though it is an immaterial portion of our total workforce.
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Partners can contribute pre-tax or Roth after-tax dollars, and Starbucks matches 5% of eligible contributions with immediate vesting in those matching contributions. • 100% paid parental leave is available to new parents that welcome a child through birth, adoption or foster placement and work an average of 20 hours or more each week. • A Partner and Family Sick Time program is provided and allows partners to accrue paid sick time based on hours worked and use that time for themselves or family members in need of care. 4 Table of Contents • We view mental health as a fundamental part of our humanity and provide a comprehensive suite of related programs and benefits.
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Mr. Schultz previously served as chairman of the Board of Starbucks since its inception in 1985 and until June 2018, and since 2018 has held the role of founder and chairman emeritus of Starbucks.
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These include a free subscription to Headspace, an online application that enables guided meditation, and 20 free mental health therapy or coaching sessions annually with Lyra.
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He also previously served as chief executive officer from January 2008 to April 2017 and from November 1985 to June 2000, and as president from January 2008 until March 2015 and from November 1985 to June 1994. From June 2000 to February 2005, Mr. Schultz also held the title of chief global strategist. Mr.
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Sara Kelly joined Starbucks in 2001 and was named executive vice president and chief partner officer in 2022, where she is responsible for helping partners realize their career potential and building global partner capability to enable growth and deliver on the Company’s strategic plan. Prior to her current role, Ms.
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Schultz also held leadership and director roles with Il Giornale Coffee Company and Starbucks Coffee Company, which were predecessors to Starbucks. Laxman Narasimhan joined Starbucks as its chief executive officer-elect on October 1, 2022. Prior to joining Starbucks, Mr.
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Kelly was senior vice president, Talent & Partner Experience from 2021 to 2022, where she was responsible for advancing Starbucks talent and organizational leadership agenda and was focused on amplifying the strategic work being led by the talent acquisition, talent management, partner experience, learning and development, and organization and leadership effectiveness teams. From 2014 to 2021, Ms.
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Prior to being named acting executive vice president, she served as senior vice president, deputy general counsel from February 2020 to April 2022. She previously held roles as senior vice president, deputy general counsel, interim chief ethics and compliance officer, lead legal advisor for Teavana and was a member of the Starbucks 2018 Philadelphia incident crisis management response team.
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Kelly served as vice president, Partner Resources, supporting partners in our global markets. Brad Lerman joined Starbucks in April 2023 as executive vice president and general counsel. In this role, he leads the Company’s Legal and Corporate Affairs organization. Prior to Starbucks, Mr.
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These strategies align closely with rapidly evolving customer preferences, including higher levels of mobile ordering, more contactless pick-up experiences and reduced in-store congestion, all of which naturally allow for greater physical distancing.
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Lerman served as senior vice president, general counsel and corporate secretary of Medtronic plc from 2014 to 2022; and prior to that he was an executive vice president, general counsel and corporate secretary for the Federal National Mortgage Association (Fannie Mae) from 2012 to 2014. Mr.
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While we expect these shortages and delays may continue into fiscal 2023, we view them to be temporary and do not believe they will have a material impact to our long-term growth and profitability. Competition Our primary competitors for coffee beverage sales are specialty coffee retailers and shops.
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Lerman has also served as chief litigation counsel for Pfizer and has worked in private practice as a partner at Winston & Strawn LLP in Chicago. He also served as an Assistant United States Attorney in the Northern District of Illinois. Mr.
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The COVID-19 pandemic has had an impact on consumer behaviors and customer traffic; however, it is not yet certain that these changes will sustain and cause other than temporary changes in the seasonal fluctuations of our business.
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Additionally, as our business has evolved, we have built an omni-channel business to meet more occasions as we serve a more diverse customer base through growth in online, e-commerce, delivery, mobile ordering and the in-store experience. In China, we leverage platforms such as Starbucks Now TM stores to enable a seamless integration of physical and digital customer touchpoints.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny material interruption in our supply chain, such as material interruption of roasted coffee supply due to the casualty loss of any of our roasting plants, interruptions in service by our third-party logistic service providers or common carriers that ship goods within our distribution channels, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, pandemics, social or labor unrest, labor shortages, natural disasters or political disputes and military conflicts that cause a material disruption in our supply chain could have a negative material impact on our business and our profitability.
Biggest changeSimilarly, increases in the cost of, or lack of availability, whether due to supply shortages, delays or interruptions in the processing of plant-based alternatives could have a material adverse impact on our profitability. • Interruption of our supply chain could affect our ability to produce or deliver our products and could negatively impact our business and profitability. 16 Table of Contents Any material interruption in our supply chain, such as material interruption of roasted coffee supply due to the casualty loss of any of our roasting plants, interruptions in service by our third-party logistic service providers or common carriers that ship goods within our distribution channels, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, pandemics, social or labor unrest, labor shortages, natural disasters or political disputes and military conflicts that cause a material disruption in our supply chain could have a negative material impact on our business and our profitability.
Our success also depends substantially on the contributions and abilities of our retail store employees on whom we rely to give customers a superior in-store experience and elevate our brand. Accordingly, our performance depends on our ability to recruit and retain high-quality management personnel and other employees to work in and manage our stores, both domestically and internationally.
Our success also depends substantially on the contributions and abilities of our retail store employees upon whom we rely to give customers a superior in-store experience and elevate our brand. Accordingly, our performance depends on our ability to recruit and retain high-quality management personnel and other employees to work in and manage our stores, both domestically and internationally.
If they are not able to access sufficient funds or financing, or are otherwise unable or unwilling to successfully operate and grow their businesses it could have a material adverse effect on our results in the markets.
If they are not able to access sufficient funds or financing, or are otherwise unable or unwilling to successfully operate and grow their businesses, it could have a material adverse effect on our results in the applicable markets.
Much of our future success depends on the continued availability and service of senior management personnel. The loss of any of our executive officers or other key senior management personnel could harm our business.
Much of our future success depends on the continued availability and service of key personnel and employees. The loss of any of our executive officers or other key senior management personnel could harm our business.
Many of our information technology systems (whether cloud-based or hosted in proprietary servers), including those used for our point-of-sale, web and mobile platforms, online and mobile payment systems, delivery services and rewards programs and administrative functions, contain personal, financial or other information that is entrusted to us by our customers and employees.
Many of our information technology systems (whether cloud-based or hosted in proprietary servers), including those used for our point-of-sale, web and mobile platforms, online and mobile payment systems, delivery services and rewards programs and administrative functions, contain personal, financial or other information that is entrusted to us by our customers, business partners and employees.
Our marketing, promotional and advertising programs may not be successful in reaching our customers in the way we intend. Our success depends in part on whether the allocation of our advertising, promotional and marketing resources across different channels, including digital marketing, allows us to reach our customers effectively and efficiently, and in ways that are meaningful to them.
Our marketing, promotional and advertising programs may not be successful in reaching consumers in the way we intend. Our success depends in part on whether the allocation of our advertising, promotional and marketing resources across different channels, including digital, allows us to reach consumers effectively and efficiently, and in ways that are meaningful to them.
Because many of our international operations are in an early phase of development, operating expenses as a percentage of related revenues are often higher compared to more developed operations. • We face risks as a global business that could adversely affect our financial performance. We operate in 83 markets globally.
Because many of our international operations are in an early phase of development, operating expenses as a percentage of related revenues are often higher compared to more developed operations. • We face risks as a global business that could adversely affect our financial performance. We operate in 86 markets globally.
Any one or more of the factors listed below or described elsewhere in this risk factors section could have a material adverse impact on our business, financial condition and/or results of operations: • increases in real estate costs in certain domestic and international markets; • inflationary pressures; • disruptions to our supply chain; • changes in governmental rules and approaches to taxation; • fluctuations in foreign currency exchange rates; • adverse outcomes of litigation; • severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily but significantly affect our retail business in such markets; • changes in climate, including changes to the frequency of severe weather events, that impact the price and availability or cost of goods and services, energy and other materials throughout our supply chain; and • especially in our largest markets, including the U.S. and China, labor discord or disruption, geopolitical events, war, terrorism (including incidents targeting us), political instability, acts of public violence, boycotts, increasing anti-American sentiment in certain markets, hostilities and social unrest and other health pandemics that lead to avoidance of public places or restrictions on public gatherings such as in our stores. • Economic conditions in the U.S. and international markets could adversely affect our business and financial results.
Any one or more of the factors listed below or described elsewhere in this risk factors section could have a material adverse impact on our business, financial condition and/or results of operations: • increases in real estate costs in certain domestic and international markets; • inflationary pressures and changes in prevailing interest rates; • disruptions to our supply chain; • changes in governmental rules and approaches to taxation; • fluctuations in foreign currency exchange rates; • adverse outcomes of litigation; • severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily but significantly affect our retail business in such markets; • changes in climate, including changes to the frequency or severity of extreme weather events, that impact the price and availability or cost of goods and services, energy and other materials throughout our supply chain; and • especially in our largest markets, including the U.S. and China, labor discord or disruption, geopolitical events, war, terrorism (including incidents targeting us), political instability, acts of public violence, boycotts, increasing anti-American sentiment in certain markets, hostilities and social unrest and health pandemics that lead to avoidance of public places or restrictions on public gatherings such as in our stores.
Effectively managing growth can be challenging, particularly as we expand in international markets where we must balance the need for flexibility and a degree of autonomy for local management against the need for consistency with our goals, policies and standards.
Effectively managing growth can be challenging, particularly as we continue to expand in international markets where we must balance the need for flexibility and a degree of autonomy for local management against the need for consistency with our goals, policies and standards.
Further, statements about our ESG related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
Further, statements about our ESG-related initiatives and goals, and progress toward those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
And because the North America segment is relatively mature and produces the 19 Table of Contents large majority of our operating cash flows, such a slowdown or decline could result in reduced cash flows for funding the expansion of our international businesses and other initiatives and for returning cash to shareholders. • We are increasingly dependent on the success of certain international markets in order to achieve our growth targets.
And because the North America segment is relatively mature and produces the large majority of our operating cash flows, such a slowdown or decline could result in reduced cash flows for funding the expansion of our international businesses and other initiatives and for returning cash to shareholders. • We are increasingly dependent on the success of certain international markets in order to achieve our growth targets.
Additionally, our food, beverage and other products are sourced from a wide variety of domestic and international business partners in our supply chain operations, and in certain cases are produced or sourced by our licensees directly. We rely on these 17 Table of Contents suppliers to provide high-quality products and to comply with applicable laws.
Additionally, our food, beverage and other products are sourced from a wide variety of domestic and international business partners in our supply chain operations, and in certain cases are produced or sourced by our licensees directly. We rely on these suppliers to provide high-quality products and to comply with applicable laws.
Our business could be adversely impacted by increases in labor costs, including wages and benefits, which, in a retail business such as ours, are two of our most significant costs, both domestically and internationally, including those increases triggered by state and federal legislation and regulatory actions regarding wages, scheduling and benefits; increased healthcare and workers’ compensation insurance costs; increased wages and costs of other benefits necessary to attract and retain high-quality employees with the right skill sets and increased wages, benefits and costs related to the COVID-19 pandemic.
Our business could be adversely impacted by increases in labor costs, including wages and benefits, which, in a retail business such as ours, are two of our most significant costs, both domestically and internationally, including those increases triggered by state and federal legislation and regulatory actions regarding wages, scheduling and benefits; increased healthcare and workers’ compensation insurance costs; and increased wages and costs of other benefits necessary to attract and retain high-quality employees with the right skill sets.
These costs, which could be material, could adversely impact our results of operations in the period in which they are incurred, 15 Table of Contents including by interfering with the pursuit of other important business strategies and initiatives, and may not meaningfully limit the success of future attempts to breach our information technology systems.
These costs, which could be material, could adversely impact our results of operations in the period in which they are incurred, including by interfering with the pursuit of other important business strategies and initiatives, and may not meaningfully limit the success of future attempts to breach our information technology systems.
In addition to other factors listed in this risk factors section, factors that may adversely affect the successful implementation of these initiatives, which could have a material adverse impact on our business and financial results, include the following: • imposition of additional taxes by jurisdictions, such as on certain types of beverages or based on number of employees; • construction cost increases associated with new store openings and remodeling of existing stores; delays in store openings for reasons beyond our control, such as potential shortages of materials and labor and delays in permits, or a lack of desirable real estate locations available for lease at reasonable rates, either of which could keep us from meeting annual store opening targets in the U.S. and internationally; • governmental regulations or other health guidelines concerning operations of stores, including due to the COVID-19 pandemic or other public health emergencies; • not successfully scaling our supply chain infrastructure as our product offerings increase and as we continue to expand, including our emphasis on a broad range of high-quality food offerings; • not successfully adapting to customer or market factors affecting our supply chain as we work to address sustainability and climate change; and • the deterioration in our credit ratings, which could limit the availability of additional financing and increase the cost of obtaining financing to fund our initiatives.
In addition to other factors listed in this risk factors section, factors that may adversely affect the successful implementation of these initiatives, which could have a material adverse impact on our business and financial results, include the following: • imposition of additional taxes by jurisdictions, such as on certain types of beverages or based on number of employees; • construction cost increases associated with new store openings and remodeling of existing stores; delays in store openings for reasons beyond our control, such as potential shortages of materials and labor and delays in permits, or a lack of desirable real estate locations available for lease at reasonable rates, either of which could keep us from meeting annual store opening targets in the U.S. and internationally; • governmental regulations or other health guidelines concerning operations of stores, including due to public health emergencies; • not successfully scaling our supply chain infrastructure as our product offerings increase and as we continue to expand, including our emphasis on a broad range of high-quality food offerings; 13 Table of Contents • not successfully adapting to customer or market factors affecting our supply chain as we work to address sustainability and climate change; • the deterioration in our credit ratings, which could limit the availability of additional financing and increase the cost of obtaining financing to fund our initiatives; and • geopolitical instability and international conflicts.
These strategic initiatives, which includes our Reinvention Plan, are designed to create growth, improve our results of operations and drive long-term shareholder value, and include: • being an employer of choice and investing in employees to deliver a superior customer experience; • building our leadership position around coffee; • driving convenience, brand engagement and digital relationships through our mobile, loyalty, delivery and digital capabilities both domestically and internationally; • simplifying store administrative tasks to allow store partners to better engage with customers; • increasing the scale of the Starbucks store footprint with disciplined global expansion and introducing flexible and unique store formats, including the accelerated development of alternative store formats (such as Starbucks Pickup stores, Starbucks Now stores and curbside pickup) especially in light of the COVID-19 pandemic; • adjusting rapidly to changing customer preferences and behaviors in light of the COVID-19 pandemic, inflation and changing economic conditions; • moving to a more licensed store model in some markets and a more company-operated model in certain markets; 12 Table of Contents • creating new occasions in stores across all dayparts with new product offerings, including our growing lunch food and beverage product lineup; • continuing the global growth of our Channel Development business through our supply, distribution and licensing agreements with Nestlé and other Channel Development business partners; • delivering continued growth in our cold beverage business; • working to address the potential effects of climate change and the sustainability of our business; and • reducing our operating costs, particularly general and administrative expenses.
These strategic initiatives, which include our Reinvention Plan, are designed to create growth, improve our results of operations and drive long-term shareholder value, and include: • being an employer of choice and investing in employees to deliver a superior customer experience; • building our leadership position around coffee; • driving convenience, brand engagement and digital relationships through our mobile, loyalty, delivery and digital capabilities both domestically and internationally; • simplifying store administrative tasks to allow store partners to better engage with customers; • increasing the scale of the Starbucks store footprint with disciplined global expansion and introducing flexible and unique store formats, including the accelerated development of alternative store formats (such as Starbucks Pickup stores, Starbucks Now stores and curbside pickup); • adjusting rapidly to changing customer preferences and behaviors as a result of the COVID-19 pandemic, changing economic conditions, increased global interest rates and inflation; • moving to a more licensed store model in certain markets and a more company-operated model in other markets; • creating new occasions in stores across all dayparts with new product offerings, including our growing lunch food and beverage product lineup; • continuing the global growth of our Channel Development business through our supply, distribution and licensing agreements with Nestlé and other Channel Development business partners; • delivering continued growth in our cold beverage business; • working to address the potential effects of climate change and the sustainability of our business; and • reducing our operating costs, particularly general and administrative expenses.
Furthermore, due to the COVID-19 pandemic, there are stricter health regulations and guidelines and increased public concern over food safety standards and controls. Potential food safety incidents, whether at our stores or involving our business partners, could lead to wide public exposure, which could materially harm our business.
Furthermore, stemming from the COVID-19 pandemic, there are stricter health regulations and guidelines and increased public concern over food safety standards and controls. Potential food safety incidents, whether at our stores or involving our business partners, could lead to wide public exposure, which could materially harm our business.
The growth of our business relies on the ability of our licensee partners to implement our growth platforms and product innovations as well as on the degree to which we are able to enter into, maintain, develop and negotiate appropriate terms and 16 Table of Contents conditions of, and enforce, commercial and other agreements and the performance of our business partners under such agreements.
The growth of our business relies on the ability of our licensee partners to implement our growth platforms and product innovations as well as on the degree to which we are able to enter into, maintain, develop and negotiate appropriate terms and conditions of, and enforce, commercial and other agreements and the performance of our business partners under such agreements.
Our international operations are also subject to additional inherent risks of conducting business abroad, such as: • foreign currency exchange rate fluctuations, or requirements to transact in specific currencies; • changes or uncertainties in economic, legal, regulatory, social and political conditions in our markets, as well as negative effects on U.S. businesses due to increasing anti-American sentiment in certain markets; • interpretation and application of laws and regulations, including tax, tariffs, labor, merchandise, anti-bribery and privacy laws and regulations; • restrictive actions of foreign or U.S. governmental authorities affecting trade and foreign investment, especially during periods of heightened tension between the U.S. and such foreign governmental authorities, including protective measures such as export and customs duties and tariffs, government intervention favoring local competitors and restrictions on the level of foreign ownership; • import or other business licensing requirements; • the enforceability of intellectual property and contract rights; • limitations on the repatriation of funds and foreign currency exchange restrictions due to current or new U.S. and international regulations; 20 Table of Contents • in developing economies, the growth rate in the portion of the population achieving sufficient levels of disposable income may not be as fast as we forecast; • difficulty in staffing, developing and managing foreign operations and supply chain logistics, including ensuring the consistency of product quality and service, due to governmental actions affecting supply chain logistics, distance, language and cultural differences, as well as challenges in recruiting and retaining high-quality employees in local markets; • local laws that make it more expensive and complex to negotiate with, retain or terminate employees; • local regulations, health guidelines and safety protocols related to the COVID-19 pandemic affecting our operations; and • delays in store openings for reasons beyond our control, competition with locally relevant competitors or a lack of desirable real estate locations available for lease at reasonable rates, any of which could keep us from meeting annual store opening targets and, in turn, negatively impact net revenues, operating income and earnings per share.
Our international operations are also subject to additional inherent risks of conducting business abroad, such as: • foreign currency exchange rate fluctuations, or requirements to transact in specific currencies; • changes or uncertainties in economic, legal, regulatory, social and political conditions in our markets, as well as negative effects on U.S. businesses due to increasing anti-American sentiment in certain markets; • interpretation and application of laws and regulations, including tax, tariffs, labor, merchandise, anti-bribery and privacy laws and regulations; • restrictive actions of foreign or U.S. governmental authorities affecting trade and foreign investment, especially during periods of heightened tension between the U.S. and such foreign governmental authorities, including protective measures such as export and customs duties and tariffs, government intervention favoring local competitors and restrictions on the level of foreign ownership; • import or other business licensing requirements; • the enforceability of intellectual property and contract rights; • limitations on the repatriation of funds and foreign currency exchange restrictions due to current or new U.S. and international regulations; • in developing economies, the growth rate in the portion of the population achieving sufficient levels of disposable income may not be as fast as we forecast; • difficulty in staffing, developing and managing foreign operations and supply chain logistics, including ensuring the consistency of product quality and service, due to governmental actions affecting supply chain logistics, distance, language and cultural differences, as well as challenges in recruiting and retaining high-quality employees in local markets; • local laws that make it more expensive and complex to negotiate with, retain or terminate employees; • local regulations, health guidelines and safety protocols affecting our operations; and • delays in store openings for reasons beyond our control, competition with locally relevant competitors or a lack of desirable real estate locations available for lease at reasonable rates, any of which could keep us from meeting annual store opening targets and, in turn, negatively impact net revenues, operating income and earnings per share. 15 Table of Contents Moreover, many of the foregoing risks are particularly acute in developing countries, which are important to our long-term growth prospects.
For example, developing and acting on initiatives within the scope of ESG, and 18 Table of Contents collecting, measuring and reporting ESG related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s recently proposed climate-related reporting requirements, and similar proposals by other international regulatory bodies.
For example, developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s proposed climate-related reporting requirements, and similar proposals by other international regulatory bodies.
In addition, we provide some customer and employee data, as well as Starbucks proprietary information and other confidential information important to our business, to third parties where necessary to conduct our business, including licensees and business partners. Individuals performing work for Starbucks and such third parties also may possess some of this data, including on personally-owned digital devices.
In addition, we provide some customer and employee data, as well as Starbucks proprietary information and other confidential information important to our business, to third parties to conduct our business, including licensees and business partners. Individuals performing work for Starbucks and such third parties also may access some of this data, including on personally-owned digital devices.
Consumer demand for our products and our brand equity could diminish significantly if we, our employees, licensees or other business partners fail to preserve the quality of our products, act or are perceived to act in an unethical, illegal, racially-biased, unequal or socially irresponsible manner, including with respect to the sourcing, content or sale of our products, service and treatment of customers at Starbucks stores, treatment of employees or the use of customer data for general or direct marketing or other purposes.
Consumer demand for our products and our brand value could diminish significantly if we, our employees, licensees or other business partners fail to preserve the quality of our products, act or are perceived to act in an unethical, illegal, racially-biased, unequal, inequitable or socially irresponsible manner, including with respect to the sourcing, content or sale of our products, service and treatment of customers at Starbucks stores, treatment of employees, including our responses to unionization efforts, or the use of customer data for general or direct marketing or other purposes.
In addition, our legal and regulatory obligations in jurisdictions outside the U.S. are subject to unexpected changes, including the potential for regulatory or other governmental entities to enact new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations or to increase penalties 14 Table of Contents significantly.
In addition, our legal and regulatory obligations in jurisdictions outside the U.S. are subject to unexpected changes, including the potential for regulatory or other governmental entities to enact new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations or to increase penalties significantly.
For example, as we noted above, the supply and price of coffee we purchase can also be affected by multiple factors in the producing countries, such as weather and water supply quality and availability, which factors may be caused by or exacerbated by climate change. We operate in 83 markets globally.
For example, as we noted above, the supply and price of coffee we purchase can also be affected by multiple factors in the producing countries, such as weather and water supply quality and availability, which factors may be caused by or exacerbated by climate change.
Any report linking us to such instances could severely hurt our sales and could possibly lead to product liability claims, litigation (including class actions) and/or temporary store closures.
Any report linking us to such instances could severely hurt our sales and could possibly lead to product liability claims, litigation (including class actions), temporary store closures, or other adverse consequences.
We rely heavily on information technology systems across our operations for numerous purposes including for administrative functions, point-of-sale processing and payment in our stores and online, management of our supply chain, Starbucks Cards, online business, delivery services, mobile technology, including mobile payments and ordering apps, reloads and loyalty functionality and various other processes and transactions, and many of these systems are interdependent on one another for their functionality.
We rely heavily on information technology systems across our operations for numerous purposes including for administrative functions, point-of-sale processing and payment in our stores and online, management of our supply chain, Starbucks Cards, online business, delivery services, mobile technology, including mobile payments and ordering apps, reloads and loyalty functionality and various other processes and transactions, including providing Starbucks Digital Solutions to participating licensees, and many of these systems are interdependent on one another for their functionality.
While we monitor the operations of certain of these business partners, the product quality and service they deliver may be diminished by any number of factors beyond our control and it may be difficult to detect contamination or other defects in these products. There is greater risk from those we do not monitor, or do not monitor as closely.
The product quality and service they deliver may be diminished by any number of factors beyond our control and it may be difficult to detect contamination or other defects in these products. There is greater risk from those we do not monitor, or do not monitor as closely.
Such reductions and volatility may be caused by, among other things: store closures or modified operating hours and business model, reduced customer traffic due to illness, quarantine or government or self-imposed 10 Table of Contents restrictions placed on our stores’ operations, impacts caused by precautionary measures such as those related to face coverings and vaccinations and changes in consumer spending behaviors, including those caused by social distancing, a decrease in consumer confidence in general macroeconomic conditions and a decrease in consumer discretionary spending.
For example, in China, reductions and continuing volatility in that market may be caused by, among other things: store closures or modified operating hours and business model, reduced customer traffic due to illness, quarantine or government or self-imposed restrictions placed on our stores’ operations, impacts 17 Table of Contents caused by precautionary measures such as those related to face coverings and vaccinations and changes in consumer spending behaviors, including those caused by social distancing, a decrease in consumer confidence in general macroeconomic conditions and a decrease in consumer discretionary spending.
Due to the significance of our China market for our profit and growth, we are exposed to risks in China, including the risks mentioned elsewhere and the following: • the effects of current U.S.-China relations, including rounds of tariff increases and retaliations and increasing restrictive regulations, potential boycotts and increasing anti-Americanism; • escalating U.S.-China tension and increasing political sensitivities in China; • the effects of the COVID-19 pandemic and related governmental regulations and restrictions on our operations in China, including China's “zero COVID” policy; • entry of new competitors to the specialty coffee market in China; • changes in economic conditions in China and potential negative effects to the growth of its middle class, wages, labor, inflation, discretionary spending and real estate and supply chain costs; • ongoing government regulatory reform, including relating to public health, food safety, tariffs and tax, sustainability and responses to climate change, which result in regulatory uncertainty as well as potential significant increases in compliance costs; and • food-safety related matters, including compliance with food-safety regulations and ability to ensure product quality and safety.
Due to the significance of our China market for our profit and growth, we are exposed to risks in China, including the risks mentioned elsewhere and the following: 14 Table of Contents • the effects of current U.S.-China relations, including rounds of tariff increases and retaliations and increasing restrictive regulations, potential boycotts and increasing anti-Americanism; • escalating U.S.-China tension and increasing political sensitivities in China; • the lingering effects of the COVID-19 pandemic and related governmental regulations and restrictions on our operations in China; • entry of new competitors to the specialty coffee market in China; • changes in economic conditions in China and potential negative effects to the growth of its middle class, wages, labor, inflation, discretionary spending and real estate and supply chain costs; • ongoing government regulatory reform, including relating to public health, food safety, tariffs and tax, sustainability and responses to climate change, which result in regulatory uncertainty as well as potential significant increases in compliance costs; • data-privacy and cybersecurity risks unique to the conduct of business in China; and • food-safety related matters, including compliance with food-safety regulations and ability to ensure product quality and safety.
These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations.
These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or 19 Table of Contents meeting such regulations and expectations.
These risks include any increased public focus, including by governmental and nongovernmental organizations, on these and other environmental sustainability matters, including packaging and waste, animal health and welfare, deforestation and land use.
These risks include any increased public focus, including by governmental 11 Table of Contents and nongovernmental organizations, on these and other environmental sustainability matters, including packaging and waste, animal health and welfare, deforestation and land use.
Risks Related to Operating a Global Business We are highly dependent on the financial performance of our North America operating segment. Our financial performance is highly dependent on our North America operating segment, which comprised approximately 72% of consolidated total net revenues in fiscal 2022.
Risks Related to Operating a Global Business • We are highly dependent on the financial performance of our North America operating segment. Our financial performance is highly dependent on our North America operating segment, which comprised approximately 74% of consolidated total net revenues in fiscal year 2023.
If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected. • Climate change may have an adverse impact on our business.
If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.
The International segment is a significant profit center driving our global returns, along with our North America segment. In particular, our China MBU contributes meaningfully to both consolidated and International net revenues and operating income. China is currently our fastest growing market, our second largest market overall and 100% company-owned.
The International segment is a significant profit center driving our global returns, along with our North America segment. In particular, our China MBU contributes meaningfully to both consolidated and International net revenues and operating income. China is expected to be our fastest growing market in terms of percentage growth, our second largest market overall and 100% company-owned.
Furthermore, declines in general consumer demand for specialty coffee products for any reason, including due to consumer preference for other products, flattening demand for our products, changed customer daily routines or traffic to stores as a result of the COVID-19 pandemic, or changed customer spending behaviors due to challenging economic conditions, could have a negative effect on our business.
Furthermore, declines in general consumer demand for specialty coffee products for any reason, including due to consumer preference for other products, flattening demand for our products, changed customer daily routines or traffic to stores, or changed customer spending behaviors due to challenging economic conditions, could have a negative effect on our business.
These responses could also expose us to legal risk, causing us to incur costs to defend legal and regulatory actions, potential penalties and restrictions or reputational harm. • The loss of key personnel or difficulties recruiting and retaining qualified personnel could adversely impact our business and financial results.
These positions could also expose us to legal risk, causing us to incur costs to defend legal and regulatory actions, potential penalties and restrictions, and reputational harm. • The loss of key personnel or difficulties recruiting and retaining qualified personnel or effectively managing changes in our workforce could adversely impact our business and financial results.
Such security breaches also could result in a violation of applicable U.S. and international privacy, cyber and other laws or trigger U.S. state data breach notification laws, and subject us to private consumer, business partner or licensee or securities litigation and governmental investigations and proceedings, any of which could result in our exposure to material civil or criminal liability.
Such security breaches also could result in a violation of applicable U.S. and international privacy, cyber and other laws or trigger data breach notification laws, including new disclosure rules promulgated by the SEC, and subject us to private consumer, business partner or licensee or securities litigation and governmental investigations and proceedings, any of which could result in our exposure to material civil or criminal liability.
Our customers may have or in the future have less money for discretionary purchases and may stop or reduce their purchases of our products or switch to Starbucks or competitors’ lower-priced products as a result of various factors, including job losses, inflation, higher taxes, reduced access to credit, changes in federal economic policy, the COVID-19 pandemic and recent international trade disputes.
Our customers may have or in the future have less money for discretionary purchases and may stop or reduce their purchases of our products or switch to Starbucks or competitors’ lower-priced products as a result of various factors, including job losses, inflation, changes in prevailing interest rates, higher taxes, reduced access to credit, changes in federal economic policy, a global health pandemic, international trade disputes or geopolitical instability.
Additionally, and although less significant to our operations than coffee or dairy, other commodities, including tea and those related to food and beverage inputs, such as cocoa, produce, baking ingredients, meats, eggs and energy, as well as the processing of these inputs, are important to our operations.
Additionally, other commodities, including tea and those related to food and beverage inputs, such as cocoa, produce, baking ingredients, meats, eggs and energy, as well as the processing of these inputs, are important to our operations.
Additionally, the techniques and sophistication used to conduct cyber-attacks and compromise information technology systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period of time.
Additionally, the techniques and sophistication used to conduct cyber-attacks and compromise information technology systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period of time. The rapid evolution and increased adoption of artificial intelligence technologies amplifies these concerns.
Furthermore, if we are not effective in addressing our social and environmental program goals, executing on our Reinvention Plan, or achieving relevant sustainability goals, consumer trust in our brand may suffer, and this perception could result in negative publicity or litigation.
Furthermore, if we are not effective in making sufficient progress toward our social and environmental program goals or in executing on our Reinvention Plan, consumer trust in our brand may suffer, and this perception could result in negative publicity or litigation.
In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals.
In addition, we could be criticized by ESG detractors for the scope or nature of our ESG initiatives or goals or for any revisions to these goals.
And although foodservice operators are authorized to use our logos and provide branded products as part of their foodservice business, we do not monitor the quality of non-Starbucks products served in those locations.
We do not monitor the quality of non-Starbucks products served by foodservice operators we have authorized to use our logos and provide branded products as part of their foodservice business.
While we have a variety of beverage and food items, including items that are coffee-free and have reduced calories, an unfavorable report on the health effects of caffeine or other compounds present in our products, whether accurate or not, imposition of additional taxes on certain types of food and beverage components, or negative publicity or litigation arising from certain health risks could significantly reduce the demand for our beverages and food products and could materially harm our business and results of operations.
An unfavorable report on the health effects of caffeine or other compounds present in our products, whether accurate or not, imposition of additional taxes on certain types of food and beverage components, or negative publicity or litigation arising from certain health risks could significantly reduce the demand for our beverages and food products and could materially harm our business and results of operations.
There is also a risk that if negative economic conditions or uncertainty, as a result of the COVID-19 pandemic or any other public health emergency, persist for a long period of time or worsen, consumers may make long-lasting changes to their discretionary purchasing behavior, including less frequent discretionary purchases on a more permanent basis or there may be a general downturn in the restaurant industry.
There is also a risk that if negative economic conditions or uncertainty persist for a long period of time or worsen, consumers may make long-lasting changes to their discretionary purchasing behavior, including less frequent discretionary purchases on a more permanent basis or enduring changes in behavior that precipitate a more general downturn in the restaurant industry.
Our financial results could be adversely affected by a shift in consumer spending away from outside-the-home food and beverages (such as the disruption caused by online commerce that results in reduced foot traffic to “brick & mortar” retail stores); lack of customer acceptance of new products (including due to price increases necessary to cover the costs of new products or higher input costs), brands (such as the global expansion of the Starbucks brand) and platforms (such as features of our mobile technology, changes in our loyalty rewards programs, the Starbucks Odyssey experience and our delivery services initiatives); or customers reducing their demand for our current offerings as new products are introduced.
Our financial results could be adversely affected by a shift in consumer spending away from outside-the-home food and beverages (such as a reduction in discretionary spending as a result of the resumption of student loan payments); lack of customer acceptance of new products (including due to price increases necessary to cover the costs of new products or higher input costs), brands (such as the global expansion of the Starbucks brand) and platforms (such as features of our mobile technology, changes in our loyalty rewards programs and our delivery services initiatives); or customers reducing their demand for our current offerings as new products are introduced.
Such incidents include actual or perceived breaches of privacy or violations of domestic or international privacy laws, contaminated food, product recalls, store employees or other food handlers infected with communicable diseases, such as COVID-19, safety-related incidents or other potential incidents discussed in this risk factors section.
Incidents that can erode trust in our brand value include actual or perceived breaches of privacy or violations of domestic or international privacy laws, contaminated food, product recalls, store employees or other food handlers infected with communicable diseases, safety-related incidents or other potential incidents discussed in this risk factors section.
The ongoing relevance of our brand may depend on the success of our social and environmental program goals as well as the success of the Reinvention Plan, which requires company-wide coordination and alignment.
The ongoing relevance of our brand may depend on making sufficient progress toward our social and environmental program goals as well as the successful execution of the Reinvention Plan, each of which requires company-wide coordination and alignment.
Our failure to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from unauthorized access, use or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines, damage to our brand reputation, any of which could have a material adverse effect on our operations, financial performance and business. • The unauthorized access, use, theft or destruction of customer or employee personal, financial or other data or of Starbucks proprietary or confidential information that is stored in our information systems or by third parties on our behalf could impact our reputation and brand and expose us to potential liability and loss of revenues.
Our failure to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from unauthorized access, use or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines and damage to our brand reputation, any of which could have a material adverse effect on our operations, financial performance and business.
The CCPA also provides for civil penalties for violations as well as a private right of action for data breaches that may increase data breach litigation. Further, the California Privacy Rights Act, which was passed in November 2020 and is fully effective in January 2023, significantly modifies the CCPA.
The CCPA also provides for civil penalties for violations as well as a private right of action for data breaches that may increase data breach litigation. Further, the California Privacy Rights Act, which became effective in January 2023, significantly modified the CCPA and includes additional compliance obligations.
If the advertising, promotional and marketing programs or our pricing strategies are not successful, or are not as successful as those of our competitors, our sales and market share could decrease. Finally, customers are focusing more on sustainability and the environmental impacts of operations.
If the advertising, promotional and marketing programs or our pricing strategies are not successful, or are not as successful as those of our competitors, our sales and market share could decrease. Finally, consumers are focusing more on sustainability and the environmental impacts of operations, as well as the alignment of Starbucks actions with its stated mission, values and promises.
In addition, remediation of any problems with our systems could result in significant, unplanned expenses. Risks Related to Intellectual Property • We may not be able to adequately protect our intellectual property or adequately ensure that we are not infringing the intellectual property of others, which could harm the value of our brand and our business.
Risks Related to Intellectual Property • We may not be able to adequately protect our intellectual property or adequately ensure that we are not infringing the intellectual property of others, which could harm the value of our brand and our business.
We are also continuing to incorporate more products in our food and beverage lineup that require freezing or refrigeration, which increases the risk of food safety related incidents if correct temperatures are not maintained due to mechanical malfunction or human error.
We are also continuing to incorporate more products in our food and beverage lineup that require freezing or refrigeration, which increases the risk of food safety related incidents if correct temperatures are not maintained due to mechanical malfunction or human error. 12 Table of Contents We also face risk by relying on third-party food suppliers to provide and transport ingredients and finished products to our stores.
Additionally, California enacted legislation, the California Consumer Privacy Act (“CCPA”). The CCPA requires, among other things, covered companies to provide new disclosures to California consumers and allows such consumers new abilities to opt-out of certain sales of personal data.
In the United States, the California Consumer Privacy Act (“CCPA”) requires, among other things, covered companies to provide new disclosures to California consumers and allows such consumers new abilities such as the right to opt-out of certain sales of personal information.
The number and frequency of these attempts varies from year to year but could be exacerbated to some extent by an increase in our digital operations, including our efforts to comply with state and local mandates in response to COVID‑19.
The number and frequency of these attempts varies from year to year but could be exacerbated to some extent by an increase in our digital operations.
The success of our business depends on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our branded products in both domestic and international markets.
Our brand names, trademarks and related intellectual property rights are critical assets, and our success depends on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our branded products in both domestic and international markets.
Business incidents, whether isolated or recurring and whether originating from us or our business partners, that erode consumer trust can significantly reduce brand value, potentially trigger boycotts of our stores or result in civil or criminal liability and can have a negative impact on our financial results.
Erosion of trust in our brand value can be caused by isolated or recurring incidents originating both from us or our business partners, or from external events. Such incidents can potentially trigger boycotts of our stores or result in civil or criminal liability and can have a negative impact on our financial results.
Risks Related to Our Business If our business partners and third-party providers do not satisfactorily fulfill their responsibilities and commitments, it could damage our brand and our financial results could suffer.
An inability to meet consumer expectations with respect to these issues could adversely affect our financial results. Risks Related to Our Business • If our business partners and third-party providers do not satisfactorily fulfill their responsibilities and commitments, it could damage our brand and our financial results could suffer.
We do not have direct control over our business partners and may not have visibility into their practices. 11 Table of Contents We also source our food, beverage and other products from a wide variety of domestic and international business partners, and in certain cases such products are produced or sourced by our licensees directly.
We also source our food, beverage and other products from a wide variety of domestic and international business partners, and in certain cases such products are produced or sourced by our licensees directly.
This premium depends upon the supply and demand at the time of purchase and the amount of the premium can vary significantly. Increases in the “C” coffee commodity price increase the price of high-quality arabica coffee and also impact our ability to enter into fixed-price purchase commitments.
Increases in the “C” coffee commodity price increase the price of high-quality arabica coffee and also impact our ability to enter into fixed-price purchase commitments.
These risks may also include any increased pressure to make commitments, set targets or establish additional goals and take actions to meet them, which could expose us to market, operational and execution costs or risks. • We may not be successful in our marketing, promotional and advertising plans and pricing strategies.
These risks may also include any increased pressure to make commitments or set goals and take actions to meet them, which could expose us to market, operational and execution costs or risks.
We also purchase significant amounts of dairy products, particularly fluid milk, to support the needs of our company-operated retail stores.
We also purchase significant amounts of dairy products, particularly fluid milk, and to a lesser degree, plant-based dairy-free alternative products, such as oat milk and almond milk, to support the needs of our company-operated retail stores.
The availability and prices of coffee beans and other commodities are subject to significant volatility. We purchase, roast and sell high-quality whole bean arabica coffee beans and related coffee products. The high-quality arabica coffee of the quality we seek tends to trade on a negotiated basis at a premium above the “C” price.
We purchase, roast and sell high-quality whole bean arabica coffee beans and related coffee products. The high-quality arabica coffee of the quality we seek tends to trade on a negotiated basis at a premium above the “C” price. This premium depends upon the supply and demand at the time of purchase and the amount of the premium can vary significantly.
However, the product quality and service they deliver may still be diminished by any number of factors beyond our control, including financial constraints, adherence to sanitation protocols and guidance (including those resulting from the COVID-19 pandemic), labor shortages and other factors.
However, the product quality and service they deliver may still be diminished by any number of factors beyond our control, including financial constraints or solvency, adherence to sanitation protocols and guidance, labor shortages and other factors. We do not have direct control over our business partners and may not have visibility into their practices.
Such events have the potential to disrupt our operations, cause store closures, disrupt the business of our third-party suppliers and impact our customers, all of which may cause us to suffer losses and additional costs to maintain or resume operations.
Such events have the potential to disrupt our operations, cause store closures, disrupt the business of our third-party suppliers and impact our customers, all of which may cause us to suffer losses and additional costs to maintain or resume operations. • Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance matters, that could expose us to numerous risks.
Due to the COVID-19 pandemic or other global health events, we may experience a reduction and increased volatility in demand for our products.
We may also experience a reduction and increased volatility in demand for our products in connection with a global health pandemic.
While we believe this geographic diversity is likely to lessen the impact of individual climate change related events on our financial results, our properties and operations may nonetheless be vulnerable to the adverse effects of climate change, which are predicted to increase the frequency and severity of weather events and other natural cycles such as wildfires and droughts.
We operate in 86 markets globally. Our properties and operations may be vulnerable to the adverse effects of climate change, which are predicted to increase the frequency and severity of extreme weather events and other natural cycles such as wildfires and droughts.
Additionally, the success of several of our initiatives to drive growth, including our ability to increase digital relationships with our customers to drive incremental traffic and spend, is highly dependent on our technology systems.
Many of our non-store employees continue to work on a remote or hybrid basis, which has resulted in increased demand on our information technology infrastructure. Additionally, the success of several of our initiatives to drive growth, including our ability to increase digital relationships with our customers to drive incremental traffic and spend, is highly dependent on our technology systems.
Furthermore, our financial results have been and could continue to be adversely affected by the impact of the COVID-19 pandemic, which has resulted in a disruption of customer routines, changes to employer “work-from-home” policies, reduced business and recreational travel and changes in consumer behavior and the ability or willingness to spend discretionary income on our products. 13 Table of Contents Risks Related to Brand Relevance and Brand Execution • Our success depends substantially on the value of our brands and failure to preserve their value could have a negative impact on our financial results.
Furthermore, our financial results have been and could continue to be adversely affected by the persisting impacts of the COVID-19 pandemic, including the disruption of customer routines, changes to employer “work-from-home” policies and changes in consumer behavior and the ability or willingness to spend discretionary income on our products.
Climate change may further exacerbate many of these factors. Speculative trading in coffee commodities can also influence coffee prices. For example, drought conditions in Brazil have and, given continued drought conditions, are predicted to continue to impact coffee prices.
Climate change may further exacerbate many of these factors. Speculative trading in coffee commodities can also influence coffee prices.
In addition, price and volume fluctuations in the stock market as a whole may affect the market price of our stock in ways that may be unrelated to our financial performance. Risks Related to COVID-19 • Our financial condition and results of operations have been and are expected to continue to be adversely affected by the COVID-19 pandemic.
In addition, price and volume fluctuations in the stock market as a whole may affect the market price of our stock in ways that may be unrelated to our financial performance. Risks Related to Human Capital • Changes in the availability of and the cost of labor could adversely affect our business.
Moreover, many of the foregoing risks are particularly acute in developing countries, which are important to our long-term growth prospects. Risks Related to Governmental and Regulatory Changes • Failure to comply with applicable laws and changing legal and regulatory requirements could harm our business and financial results.
Risks Related to Governmental and Regulatory Changes 22 Table of Contents • Failure to comply with applicable laws and changing legal and regulatory requirements could harm our business and financial results .
An inability to meet customer expectations with respect to these issues could adversely affect our financial results. Risks Related to Cybersecurity and Data Privacy • Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations may subject us to substantial negative financial consequences and civil or criminal penalties.
In addition, we cannot ensure that licensees will not take actions that adversely affect the value of our intellectual property. Risks Related to Cybersecurity and Data Privacy • Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations may subject us to substantial negative financial consequences, reputational harm and civil or criminal penalties.
Significant capital investments and other expenditures could also be required to investigate security incidents, remedy cybersecurity problems, recuperate lost data, prevent future compromises and adapt systems and practices to react to the changing threat environment.
These risks also exist in acquired businesses, joint ventures or companies we invest in or partner with that use separate information systems or that have not yet been fully integrated into our information systems. 21 Table of Contents Significant capital investments and other expenditures could also be required to investigate security incidents, remedy cybersecurity problems, recuperate lost data, prevent future compromises and adapt systems and practices to react to the changing threat environment.
Colorado, Connecticut, Utah and Virginia recently enacted similar data privacy legislation that will also take effect in 2023, and several other states and countries are considering expanding or passing privacy laws in the near term. These modifications and new laws will require us to incur additional costs and expenses in our efforts to comply.
Colorado, Connecticut and Virginia recently enacted similar data privacy legislation that has also gone into effect in 2023, and a new privacy law in Utah will go into effect at the end of 2023. In addition, a number of other states have passed or are considering additional privacy laws that are expected to take effect in the near future.
Furthermore, we have experienced, and could continue to experience, a shortage of labor for store positions, including due to market trends and conditions such as continued concerns around COVID-19, the availability of new telecommuting employment options and other factors, which could decrease the pool of available qualified talent for key functions.
Furthermore, we have experienced, and could continue to experience, a shortage of labor for store positions, and the increased availability of alternative telecommuting employment options by other employers could decrease the pool of available qualified talent for key functions. In addition, our wages and benefits programs may be insufficient to attract and retain the best talent.
Furthermore, due to the social distancing measures put in place as a result of the COVID-19 pandemic, we accelerated the transformation of our store portfolio by expanding convenience-led formats, which depend heavily on our mobile ordering capabilities. We also rely on third-party providers and platforms for some of these information technology systems and support.
Furthermore, we continue to expand convenience-led formats, which depend heavily on our mobile ordering capabilities. We also rely on third-party providers and platforms for some of these information technology systems and support. Additionally, our systems hardware, software and services provided by third-party service providers are not fully redundant within a market or across our markets.
Additionally, our systems hardware, software and services provided by third-party service providers are not fully redundant within a market or across our markets. Although we have operational safeguards in place, they may not be effective in preventing the failure of these systems or platforms to operate effectively and be available.
Our contractual and operational safeguards may not be effective in preventing the failure of these systems or platforms to operate effectively and be available.
Starting in December 2021, Starbucks partners at company-operated stores in multiple jurisdictions across the U.S. began filing for unionization elections and a number of these stores have now successfully unionized, with potentially more to follow.
Starting in September 2021, Starbucks partners at a number of company-operated stores sought union representation through elections conducted by the authorities. Unions have secured representation rights at a number of these stores, with potentially more to follow.
Unauthorized access, theft, use, destruction or other compromises may occur through a variety of methods, including attacks using malicious code, those taking advantage of vulnerabilities in software, hardware or other infrastructure (including systems used by our supply chain), those using techniques aimed at convincing those with access to such data or information to share passwords or otherwise allow access through deceit or otherwise and those taking advantage of inadequate account security practices.
Unauthorized access, theft, use, destruction or other compromises are becoming increasingly sophisticated and may occur through a variety of methods, including attacks using malicious code, vulnerabilities in software, hardware or other infrastructure (including systems used by our supply chain), system misconfigurations, phishing or social engineering. The rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties The material properties used by Starbucks in connection with its roasting, manufacturing, warehousing, distribution and corporate administrative operations, serving all segments, are as follows: Location Approximate Size in Square Feet Purpose York, PA 1,957,000 Roasting, warehousing and distribution Seattle, WA 1,145,000 Corporate administrative Minden, NV (Carson Valley) 1,080,000 Roasting, warehousing and distribution Lebanon, TN 680,000 Warehousing and distribution Kent, WA 510,000 Roasting and distribution Auburn, WA 491,000 Warehousing and distribution Shanghai, China 225,000 Corporate administrative We own most of our roasting facilities and lease the majority of our warehousing and distribution locations.
Biggest changeProperties The material properties used by Starbucks in connection with its roasting, manufacturing, warehousing, distribution and corporate administrative operations, serving all segments, are as follows: Location Approximate Size in Square Feet Purpose York, PA 1,957,000 Roasting, warehousing and distribution Seattle, WA 1,294,000 Corporate administrative Minden, NV (Carson Valley) 1,080,000 Roasting, warehousing and distribution Lebanon, TN 680,000 Warehousing and distribution Kunshan, China 630,000 Roasting, warehousing and distribution Kent, WA 510,000 Roasting and distribution Auburn, WA 491,000 Warehousing and distribution Shanghai, China 225,000 Corporate administrative We own most of our roasting facilities and lease the majority of our warehousing and distribution locations.
As of October 2, 2022, Starbucks h ad 18,253 company-operated stores, almost all of which are leased. We also lease space in various locations worldwide for regional, district and other administrative offices, training facilities and storag e. In addition to the locations listed above, we hold inventory at various locations managed by third-party warehouses.
As of October 1, 2023, Starbucks h ad 19,592 company-operated stores, almost all of which are leased. We also lease space in various locations 23 Table of Contents worldwide for regional, district and other administrative offices, training facilities and storag e. In addition to the locations listed above, we hold inventory at various locations managed by third-party warehouses.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe have resumed our share repurchase program in the first quarter of fiscal 2023. 23 Table of Contents Performance Comparison Graph The following graph depicts the total return to shareholders from October 1, 2017, through October 2, 2022, relative to the performance of the Standard & Poor’s 500 Index, the Nasdaq Composite Index and the Standard & Poor’s 500 Consumer Discretionary Sector, a peer group that includes Starbucks.
Biggest changeThe 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. 25 Table of Contents Performance Comparison Graph The following graph depicts the total return to shareholders from September 30, 2018, through October 1, 2023, relative to the performance of the Standard & Poor’s 500 Index, the Nasdaq Composite Index and the Standard & Poor’s 500 Consumer Discretionary Sector, a peer group that includes Starbucks.
Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities SHAREHOLDER INFORMATION MARKET INFORMATION AND DIVIDEND POLICY Starbucks common stock is traded on Nasdaq, under the symbol “SBUX.” As of November 11, 2022, we had approximately 18,000 shareholders of record.
Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities SHAREHOLDER INFORMATION MARKET INFORMATION AND DIVIDEND POLICY Starbucks common stock is traded on Nasdaq, under the symbol “SBUX.” As of November 10, 2023, we had approximately 18,000 shareholders of record.
All indices shown in the graph have been reset to a base of 100 as of October 1, 2017, and assume an investment of $100 on that date and the reinvestment of dividends paid since that date. The stock price performance shown in the graph is not necessarily indicative of future price performance.
All indices shown in the graph have been reset to a base of 100 as of September 30, 2018, and assume an investment of $100 on that date and the reinvestment of dividends paid since that date. The stock price performance shown in the graph is not necessarily indicative of future price performance.
ISSUER PURCHASES OF EQUITY SECURITIES 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, as amended (the “Exchange Act”) or through privately negotiated transactions.
(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.
Oct 1, 2017 Sep 30, 2018 Sep 29, 2019 Sep 27, 2020 Oct 3, 2021 Oct 2, 2022 Starbucks Corporation $ 100.00 $ 108.29 $ 171.58 $ 167.04 $ 227.59 $ 173.61 S&P 500 100.00 117.91 122.93 141.55 184.02 155.55 Nasdaq Composite 100.00 125.17 125.82 177.36 231.03 170.38 S&P Consumer Discretionary 100.00 132.54 135.66 174.86 208.34 164.81 24 Table of Contents
Sep 30, 2018 Sep 29, 2019 Sep 27, 2020 Oct 3, 2021 Oct 2, 2022 Oct 1, 2023 Starbucks Corporation $ 100.00 $ 158.45 $ 154.26 $ 210.18 $ 160.32 $ 177.34 S&P 500 100.00 104.25 120.05 156.07 131.92 160.44 Nasdaq Composite 100.00 100.52 141.70 184.58 136.12 171.65 S&P Consumer Discretionary 100.00 102.36 131.93 157.19 124.35 141.47 26 Table of Contents
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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. On April, 4, 2022, we announced a temporary suspension of our share repurchase program to allow us to augment investments in our stores and partners.
Added
ISSUER PURCHASES OF EQUITY SECURITIES The following table provides information regarding repurchases of our common stock during the quarter ended October 1, 2023 .
Removed
During the fourth fiscal quarter ended October 2, 2022, there was no share repurchase activity. As of October 2, 2022, 52.6 million shares remained available for repurchase under current authorizations.
Added
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) July 3, 2023 - July 30, 2023 — $ — — 45,720,818 July 31, 2023 - August 27, 2023 1,072,090 98.16 1,072,090 44,648,728 August 28, 2023 - October 1, 2023 2,059,067 95.39 2,059,067 42,589,661 Total 3,131,157 $ 96.34 3,131,157 (1) Monthly information is presented by reference to our fiscal months during the fourth quarter of fiscal 2023.
Added
(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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

88 edited+20 added−34 removed44 unchanged
Biggest changeThese were partially offset by strategic pricing (approximately 400 basis points) and sales leverage. 30 Table of Contents International Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Oct 2, 2022 Oct 3, 2021 As a % of International Total Net Revenues Net revenues: Company-operated stores $ 5,361.9 $ 5,869.7 77.3 % 84.8 % Licensed stores 1,505.0 981.4 21.7 14.2 Other 73.2 70.5 1.1 1.0 Total net revenues 6,940.1 6,921.6 100.0 100.0 Product and distribution costs 2,357.7 2,187.3 34.0 31.6 Store operating expenses 2,701.8 2,571.4 38.9 37.2 Other operating expenses 191.4 147.3 2.8 2.1 Depreciation and amortization expenses 513.0 544.7 7.4 7.9 General and administrative expenses 345.3 360.5 5.0 5.2 Total operating expenses 6,109.2 5,811.2 88.0 84.0 Income from equity investees 2.3 135.3 0.0 2.0 Operating income $ 833.2 $ 1,245.7 12.0 % 18.0 % Revenues International total net revenues for fiscal 2022 increased $19 million, or 0.3%, primarily due to higher product sales to and royalty revenues from our licensees ($435 million), mainly due to continuing business improvement from the COVID-19 pandemic.
Biggest changeThese were partially offset by previously-committed investments in store partner wages and benefits (approximately 300 basis points) and increased spend on partner training (approximately 40 basis points), as well as inflationary pressures on commodities and our supply chain (approximately 80 basis points). 32 Table of Contents International Fiscal Year Ended Oct 1, 2023 Oct 2, 2022 Oct 1, 2023 Oct 2, 2022 As a % of International Total Net Revenues Net revenues: Company-operated stores $ 5,556.9 $ 5,361.9 74.2 % 77.3 % Licensed stores 1,853.6 1,505.0 24.8 21.7 Other 77.1 73.2 1.0 1.1 Total net revenues 7,487.6 6,940.1 100.0 100.0 Product and distribution costs 2,608.4 2,357.7 34.8 34.0 Store operating expenses 2,761.1 2,701.8 36.9 38.9 Other operating expenses 219.0 191.4 2.9 2.8 Depreciation and amortization expenses 335.1 513.0 4.5 7.4 General and administrative expenses 335.8 345.3 4.5 5.0 Total operating expenses 6,259.4 6,109.2 83.6 88.0 Income from equity investees 2.7 2.3 0.0 0.0 Operating income $ 1,230.9 $ 833.2 16.4 % 12.0 % Store operating expenses as a % of related revenues 49.7 % 50.4 % Revenues International total net revenues for fiscal 2023 increased $548 million, or 7.9%, primarily due to 927 net new Starbucks company-operated stores, or a 12% increase over the past 12 months ($421 million), as well as higher product sales to and royalty revenues from our licensees ($411 million).
Overview 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.
Overview 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 and 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 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.
We actively manage our cash and investments in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, fund acquisitions and return cash to shareholders through common stock cash dividend payments and share repurchases.
Further, we may use our available cash resources to make proportionate capital contributions to our investees. We may also seek strategic acquisitions to leverage existing capabilities and further build our business. Acquisitions may include increasing our ownership interests in our investees. Any decisions to increase such ownership interests will be driven by valuation and fit with our ownership strategy.
Furthermore, we may use our available cash resources to make proportionate capital contributions to our investees. We may also seek strategic acquisitions to leverage existing capabilities and further build our business. Acquisitions may include increasing our ownership interests in our investees. Any decisions to increase such ownership interests will be driven by valuation and fit with our ownership strategy.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations General Our fiscal year ends on the Sunday closest to September 30. All references to store counts, including data for new store openings, are reported net of related store closures, unless otherwise noted. Fiscal year 2022 included 52 weeks.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations General Our fiscal year ends on the Sunday closest to September 30. All references to store counts, including data for new store openings, are reported net of related store closures, unless otherwise noted. Fiscal years 2023 and 2022 included 52 weeks.
These estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as ongoing maintenance and improvement of the assets, changes in economic conditions and changes in operating performance. In fiscal 2022, we announced our Reinvention Plan in the U.S. market to increase efficiency while elevating the partner and customer experience.
These estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as ongoing maintenance and improvement of the assets, changes in economic conditions and changes in operating performance. 40 Table of Contents In fiscal 2022, we announced our Reinvention Plan in the U.S. market to increase efficiency while elevating the partner and customer experience.
While we do not expect to 39 Table of Contents repatriate cash to the U.S. to satisfy domestic liquidity needs, if these amounts were distributed to the U.S., in the form of dividends or otherwise, we may be subject to additional foreign withholding taxes and U.S. state income taxes, which could be material.
While we do not expect to repatriate cash to the U.S. to satisfy domestic liquidity needs, if these amounts were distributed to the U.S., in the form of dividends or otherwise, we may be subject to additional foreign withholding taxes and U.S. state income taxes, which could be material.
The information provided below relates only to the hedging instruments and does not represent the corresponding changes in the underlying hedged items ( in millions ): Increase/(Decrease) to Net Earnings Increase/(Decrease) to OCI 10% Increase in Underlying Rate 10% Decrease in Underlying Rate 10% Increase in Underlying Rate 10% Decrease in Underlying Rate Foreign currency hedges $ 46 $ (46) $ 155 $ (155) Equity Security Price Risk We have minimal exposure to price fluctuations on equity mutual funds and equity exchange-traded funds within our marketable equity securities portfolio.
The information provided below relates only to the hedging instruments and does not represent the corresponding changes in the underlying hedged items ( in millions ): Increase/(Decrease) to Net Earnings Increase/(Decrease) to OCI 10% Increase in Underlying Rate 10% Decrease in Underlying Rate 10% Increase in Underlying Rate 10% Decrease in Underlying Rate Foreign currency hedges $ 27 $ (27) $ 197 $ (197) Equity Security Price Risk We have minimal exposure to price fluctuations on equity mutual funds and equity exchange-traded funds within our marketable equity securities portfolio.
We performed a sensitivity analysis based on a 10% change in the underlying equity prices of our investments as of October 2, 2022 and determined that such a change would not have a significant impact on the fair value of these instruments. 36 Table of Contents Interest Rate Risk Long-term Debt We utilize short-term and long-term financing and may use interest rate hedges to manage our overall interest expense related to our existing fixed-rate debt, as well as to hedge the variability in cash flows due to changes in benchmark interest rates related to anticipated debt issuances.
We performed a sensitivity analysis based on a 10% change in the underlying equity prices of our investments as of October 1, 2023 and determined that such a change would not have a significant impact on the fair value of these instruments. 38 Table of Contents Interest Rate Risk Long-term Debt We utilize short-term and long-term financing and may use interest rate hedges to manage our overall interest expense related to our existing fixed-rate debt, as well as to hedge the variability in cash flows due to changes in benchmark interest rates related to anticipated debt issuances.
The growth in company-operated store revenue was driven by an 8% increase in comparable store sales ($1.8 billion) attributed to a 5% increase in average ticket and 2% increase in comparable transactions. Also contributing were the incremental revenues from 1,120 net new Starbucks company-operated store openings, or a 7% increase, over the past 12 months ($1.0 billion).
The growth in company-operated store revenue was driven by an 8% increase in comparable store sales ($2.1 billion) attributed to a 5% increase in average ticket and 3% increase in comparable transactions. Also contributing were the incremental revenues from 1,339 net new Starbucks company-operated store openings, or a 7% increase, over the past 12 months ($1.2 billion).
(2) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on Starbucks and that specify all significant terms. Green coffee purchase commitments comprise 99% of total purchase obligations. (3) Other obligations include other long-term liabilities primarily consisting of long-term income taxes payable, asset retirement obligations and equity investment capital commitments.
(2) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on Starbucks and that specify all significant terms. Green coffee purchase commitments comprise 92% of total purchase obligations. (3) Other obligations include other long-term liabilities primarily consisting of long-term income taxes payable, asset retirement obligations, equity investment capital commitments and finance lease obligations.
See Note 3 , Derivative Financial Instruments and Note 9 , Debt, to the consolidated financial statements included in Item 8 of Part II of this 10-K for further discussion of our interest rate hedge agreements and details of the components of our long-term debt, respectively, as of October 2, 2022.
See Note 3 , Derivative Financial Instruments and Note 9 , Debt, to the consolidated financial statements included in Item 8 of Part II of this 10-K for further discussion of our interest rate hedge agreements and details of the components of our long-term debt, respectively, as of October 1, 2023.
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 October 2, 2022, we were in compliance with all applicable covenants.
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 October 1, 2023, we were in compliance with all applicable covenants.
The following table summarizes the potential impact as of October 2, 2022 to Starbucks future net earnings and other comprehensive income from changes in the fair value of these derivative financial instruments due to a change in the value of the U.S. dollar as compared to foreign exchange rates.
The following table summarizes the potential impact as of October 1, 2023 to Starbucks future net earnings and other comprehensive income from changes in the fair value of these derivative financial instruments due to a change in the value of the U.S. dollar as compared to foreign exchange rates.
We performed a sensitivity analysis based on a 100 basis point change in the underlying interest rate of our available-for-sale securities as of October 2, 2022 and determined that such a change would not have a significant impact on the fair value of these instruments.
We performed a sensitivity analysis based on a 100 basis point change in the underlying interest rate of our available-for-sale securities as of October 1, 2023 and determined that such a change would not have a significant impact on the fair value of these instruments.
We also use cross-currency swaps and foreign exchange debt instruments to hedge against changes in the fair value of our fixed-rate debt and foreign exchange exposure of net investments in Japan. Excluding interest rate hedging instruments, cross currency swaps and foreign currency debt, hedging instruments generally do not have maturities in excess of three years.
We also use cross-currency swaps and foreign exchange debt instruments to hedge against changes in the fair value of our net investments in foreign operations. Excluding interest rate hedging instruments, cross currency swaps and foreign currency debt, hedging instruments generally do not have maturities in excess of three years.
Our investment portfolio primarily includes highly liquid available-for-sale securities, including corporate debt securities, government treasury securities (domestic and foreign) and commercial paper as well as principal-protected structured deposits. As of October 2, 2022, approximately $2.7 billion of cash and short-term investments were held in foreign subsidiaries.
Our investment portfolio primarily includes highly liquid available-for-sale securities, including corporate debt securities, government treasury securities (domestic and foreign) and commercial paper as well as principal-protected structured deposits. As of October 1, 2023, approximately $2.5 billion of cash and short-term investments were held in foreign subsidiaries.
The information provided below relates only to the hedging instruments and does not represent the corresponding changes in the underlying hedged items (in millions) : Increase/(Decrease) to Net Earnings Increase/(Decrease) to OCI 10% Increase in Underlying Rate 10% Decrease in Underlying Rate 10% Increase in Underlying Rate 10% Decrease in Underlying Rate Commodity hedges $ 3.0 $ (3.0) $ 74 $ (74) Foreign Currency Exchange Risk The majority of our revenue, expense and capital purchasing activities are transacted in U.S. dollars.
The information provided below relates only to the hedging instruments and does not represent the corresponding changes in the underlying hedged items (in millions) : Increase/(Decrease) to Net Earnings Increase/(Decrease) to OCI 10% Increase in Underlying Rate 10% Decrease in Underlying Rate 10% Increase in Underlying Rate 10% Decrease in Underlying Rate Commodity hedges $ 1.2 $ (1.2) $ 33 $ (33) Foreign Currency Exchange Risk The majority of our revenue, expense and capital purchasing activities are transacted in U.S. dollars.
Throughout this MD&A, we commonly discuss the following key operating metrics: • New store openings and store count • Comparable store sales • Operating margin Starbucks results for fiscal 2022 demonstrate the resiliency and strength of our brand.
Throughout this MD&A, we commonly discuss the following key operating metrics: • New store openings and store count • Comparable store sales • Operating margin Starbucks results for fiscal 2023 demonstrate the overall strength of our brand.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) can be found in the Annual Report on Form 10-K for the fiscal year ended October 3, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) can be found in the Annual Report on Form 10-K for the fiscal year ended October 2, 2022.
Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.400%. • A ¥10 billion, or $69.2 million, 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 0.400%. • A ¥10 billion, or $67.0 million, credit facility is currently set to mature on March 27, 2024.
We use a combination of pricing features embedded within supply contracts, such as fixed-price and price-to-be-fixed contracts for coffee purchases, and financial derivatives to manage our commodity price risk exposure. The following table summarizes the potential impact as of October 2, 2022 to Starbucks future net earnings and other comprehensive income (“OCI”) from changes in commodity prices.
We use a combination of pricing features embedded within supply contracts, such as fixed-price and price-to-be-fixed contracts and financial derivatives to manage our commodity price risk exposure. The following table summarizes the potential impact as of October 1, 2023 to Starbucks future net earnings and other comprehensive income (“OCI”) from changes in commodity prices.
As a result of the restructuring efforts in connection with the Reinvention Plan, we recorded an immaterial impairment charge on our consolidated statements of earnings during the fiscal year ended October 2, 2022. Future impairment charges attributed to our Reinvention Plan are not expected to be material.
As a result of the restructuring efforts in connection with the Reinvention Plan, we recorded immaterial impairment charges on our consolidated statements of earnings during the fiscal years ended October 1, 2023 and October 2, 2022. Future impairment charges attributed to our Reinvention Plan are not expected to be material.
Available-for-sale securities are recorded on the consolidated balance sheets at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive income. We do not hedge the interest rate exposure on our investments.
The primary objective of these investments is to preserve capital and liquidity. Available-for-sale securities are recorded on the consolidated balance sheets at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive income. We do not hedge the interest rate exposure on our investments.
We also monitor and limit the amount of associated counterparty credit risk, which we consider to be low. We use interest rate swap agreements and treasury locks to primarily hedge against changes in benchmark interest rates related to anticipated debt issuances.
Risk limits are set annually and speculative trading activities are prohibited. We also monitor and limit the amount of associated counterparty credit risk, which we consider to be low. We use interest rate swap agreements and treasury locks to primarily hedge against changes in benchmark interest rates related to anticipated debt issuances.
The following table summarizes the impact of a change in interest rates as of October 2, 2022 on the fair value of Starbucks debt (in millions) : Change in Fair Value Fair Value 100 Basis Point Increase in Underlying Rate 100 Basis Point Decrease in Underlying Rate Long-term debt (1) $ 13,052 $ 1,100 $ (1,100) (1) Amount disclosed is net of $28 million change in the fair value of our designated interest rate swap.
The following table summarizes the impact of a change in interest rates as of October 1, 2023 on the fair value of Starbucks debt (in millions) : Fair Value Decrease in Fair Value for a 100 Basis Point Increase in Underlying Rate Long-term debt (1)(2) $ 13,426 $ (820) (1) Amount disclosed is net of $16 million change in the fair value of our designated interest rate swaps.
We regularly review our cash positions and our determination of partial indefinite reinvestment of foreign earnings. In the event we determine that all or another portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes, which could be material.
In the event we determine that all or another portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes, which could be material.
CRITICAL ACCOUNTING ESTIMATES Critical accounting estimates are those that management believes are the most important to the portrayal of our financial condition and results and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain, especially in light of the current economic environment due to the COVID-19 pandemic.
CRITICAL ACCOUNTING ESTIMATES Critical accounting estimates are those that management believes are the most important to the portrayal of our financial condition and results and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
We believe the investments in partner wages and training 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.
We believe the investments in partner wages and training have increased retention and in-store operational efficiencies while the acceleration of purpose-built store concepts and innovations in technologies have provided additional convenience and connection with our customers.
Credit Facilities in Japan Additionally, we hold Japanese yen-denominated credit facilities which are available for working capital needs and capital expenditures within our Japanese market. • A ¥5 billion, or $34.6 million, facility is currently set to mature on December 31, 2022.
Credit Facilities in Japan Additionally, we hold the following Japanese yen-denominated credit facilities that are are available for working capital needs and capital expenditures within our Japanese market: • A ¥5 billion, or $33.5 million, credit facility is currently set to mature on January 4, 2024.
Acquisitions and Divestitures See Note 2 , Acquisitions, Divestitures and Strategic Alliance, to the consolidated financial statements included in Item 8 of Part II of this 10-K for information regarding acquisitions and divestitures.
We returned $6.3 billion in fiscal 2022 through share repurchases and dividends. Acquisitions and Divestitures See Note 2 , Acquisitions, Divestitures and Strategic Alliance, to the consolidated financial statements included in Item 8 of Part II of this 10-K for information regarding acquisitions and divestitures.
Consolidated revenues increased 11% to $32.3 billion in fiscal 2022 compared to $29.1 billion in fiscal 2021, primarily driven by strength in our U.S. business and growth in our International segment excluding China, partially offset by the impact of the extra week in fiscal 2021 ($496 million) and unfavorable foreign currency translation.
Consolidated revenues increased 12% to $36.0 billion in fiscal 2023 compared to $32.3 billion in fiscal 2022, primarily driven by strength in our U.S. business and growth in our International segment, partially offset by the impact of unfavorable foreign currency translation.
RESULTS OF OPERATIONS — FISCAL 2022 COMPARED TO FISCAL 2021 Consolidated results of operations (in millions) : Revenues Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 % Change Net revenues: Company-operated stores $ 26,576.1 $ 24,607.0 8.0 % Licensed stores 3,655.5 2,683.6 36.2 Other 2,018.7 1,770.0 14.1 Total net revenues $ 32,250.3 $ 29,060.6 11.0 % Total net revenues increased $3.2 billion, or 11%, over fiscal 2021, primarily due to higher revenues from company-operated stores ($2.0 billion).
RESULTS OF OPERATIONS — FISCAL 2023 COMPARED TO FISCAL 2022 Consolidated results of operations (in millions) : Revenues Fiscal Year Ended Oct 1, 2023 Oct 2, 2022 % Change Net revenues: Company-operated stores $ 29,462.3 $ 26,576.1 10.9 % Licensed stores 4,512.7 3,655.5 23.4 Other 2,000.6 2,018.7 (0.9) Total net revenues $ 35,975.6 $ 32,250.3 11.6 % Total net revenues increased $3.7 billion, or 12%, over fiscal 2022, primarily due to higher revenues from company-operated stores ($2.9 billion).
Absent significant and prolonged COVID-19 relapses or global economic disruptions, and based on the current trend of our business operations and our focused efforts on the Reinvention Plan, we are confident in the strength of our brand and strategy for sustainable, profitable growth over the long-term. 26 Table of Contents Financial Highlights • Total net revenues increased 11% to $32.3 billion in fiscal 2022 compared to $29.1 billion in fiscal 2021, inclusive of $576 million attributable to the extra week in fiscal 2021. • Consolidated operating income decreased to $4.6 billion in fiscal 2022 compared to $4.9 billion in fiscal 2021.
Absent global economic disruptions, and based on the current trend of our business operations and our focused efforts on the Reinvention Plan, we are confident in the strength of our brand and strategy for sustainable, profitable growth over the long-term. 28 Table of Contents Financial Highlights • Total net revenues increased 12% to $36.0 billion in fiscal 2023 compared to $32.3 billion in fiscal 2022. • Consolidated operating income increased to $5.9 billion in fiscal 2023 compared to $4.6 billion in fiscal 2022.
We expect inflationary pressures on commodities and supply chain to continue to a lesser extent in fiscal 2023, relative to the impact on our business and financial metrics, including operating margin, as compared to fiscal 2022.
We expect the inflationary pressures on commodities and supply chain that impacted fiscal 2023 to moderate in fiscal 2024, relative to the impact on our business and financial metrics, including operating margin.
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 October 2, 2022, we had $175.0 million outstanding under our commercial paper program.
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.
Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus 0.350%. As of October 2, 2022, we had no borrowings outstanding under these credit facilities.
Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300%. As of October 1, 2023 we had ¥5 billion, or $33.5 million, of borrowings outstanding under these credit facilities.
See Note 9 , Debt, to the consolidated financial statements included in Item 8 of Part II of this 10-K for details of the components of our long-term debt.
As of October 2, 2022, we had no borrowings outstanding under these credit facilities. See Note 9 , Debt, to the consolidated financial statements included in Item 8 of Part II of this 10-K for details of the components of our long-term debt.
Income Taxes We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the respective tax bases of our assets and liabilities. Deferred tax assets and liabilities are measured using current enacted tax rates expected to apply to taxable income in the years in which we expect the temporary differences to reverse.
Deferred tax assets and liabilities are measured using current enacted tax rates expected to apply to taxable income in the years in which we expect the temporary differences to reverse.
Refer to Note 1 , Summary of Significant Accounting Policies and Estimates, and Note 3 , Derivative Financial Instruments, to the consolidated financial statements included in Item 8 of Part II of this 10-K for further discussion of our hedging instruments. 35 Table of Contents The sensitivity analyses disclosed below provide only a limited, point-in-time view of the market risk of the financial instruments discussed.
Refer to Note 1 , Summary of Significant Accounting Policies and Estimates, and Note 3 , Derivative Financial Instruments, to the consolidated financial statements included in Item 8 of Part II of this 10-K for further discussion of our hedging instruments.
Fiscal year 2021 included 53 weeks, with the 53rd week falling in the fourth fiscal quarter, and fiscal year 2020 included 52 weeks; comparable store sale percentages below are calculated excluding the 53rd week. The discussion of our financial condition and results of operations for the fiscal year ended September 27, 2020, included in Item 7.
Fiscal year 2021 included 53 weeks, with the 53rd week falling in the fourth fiscal quarter. The discussion of our financial condition and results of operations for the fiscal year ended October 3, 2021, included in Item 7.
Our fiscal 2022 annual goodwill impairment testing, which was completed in the third fiscal quarter, resulted in an estimated fair value of our reporting units where a quantitative assessment was performed, was in excess of carrying value of approximately $95 billion for the business units where a quantitative analysis on impairment was performed.
Our fiscal 2023 annual goodwill impairment testing was completed in the third fiscal quarter. Where a quantitative assessment was performed, the estimated fair value of our reporting units exceeded carrying value by approximately $101 billion.
Under this policy, market-based risks are quantified and evaluated for potential mitigation strategies, such as entering into hedging transactions. The market price risk management policy governs how hedging instruments may be used to mitigate risk. Risk limits are set annually and speculative trading activities are prohibited.
We manage our exposure to various market-based risks according to a market price risk management policy. Under this policy, market-based risks are quantified and evaluated for potential mitigation strategies, such as entering into hedging transactions. The market price risk management policy governs how hedging instruments may be used to mitigate 37 Table of Contents risk.
We believe that our significant accounting estimates involve a higher degree of judgment and/or complexity for the reasons discussed below: 37 Table of Contents Property, Plant and Equipment and Other Finite-Lived Assets We evaluate property, plant and equipment, operating lease right-of-use (“ROU”) assets and other finite-lived assets for impairment when facts and circumstances indicate that the carrying values of such assets may not be recoverable.
Property, Plant and Equipment and Other Finite-Lived Assets We evaluate property, plant and equipment, operating lease right-of-use (“ROU”) assets and other finite-lived assets for impairment when facts and circumstances indicate that the carrying values of such assets may not be recoverable.
In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income/(loss). In addition, our income tax returns are periodically audited by domestic and foreign tax authorities. These audits include review of our tax filing positions, such as the timing and amount of deductions taken and the allocation of income between tax jurisdictions.
In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income/(loss). 39 Table of Contents In addition, our income tax returns are periodically audited by domestic and foreign tax authorities.
The combination of these changes resulted in an overall decrease in operating margin of 250 basis points in fiscal 2022 when compared to fiscal 2021. 28 Table of Contents Other Income and Expenses Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Oct 2, 2022 Oct 3, 2021 As a % of Total Net Revenues Operating income $ 4,617.8 $ 4,872.1 14.3 % 16.8 % Net gain resulting from divestiture of certain operations — 864.5 — 3.0 Interest income and other, net 97.0 90.1 0.3 0.3 Interest expense (482.9) (469.8) (1.5) (1.6) Earnings before income taxes 4,231.9 5,356.9 13.1 18.4 Income tax expense 948.5 1,156.6 2.9 4.0 Net earnings including noncontrolling interests 3,283.4 4,200.3 10.2 14.5 Net earnings/(loss) attributable to noncontrolling interests 1.8 1.0 0.0 0.0 Net earnings attributable to Starbucks $ 3,281.6 $ 4,199.3 10.2 % 14.5 % Effective tax rate including noncontrolling interests 22.4 % 21.6 % Net gain resulting from divestiture of certain operations decreased $865 million due to lapping the sale of our ownership interest in our South Korea joint venture in the prior year.
The combination of these changes resulted in an overall increase in operating margin of 200 basis points in fiscal 2023 when compared to fiscal 2022. 30 Table of Contents Other Income and Expenses Fiscal Year Ended Oct 1, 2023 Oct 2, 2022 Oct 1, 2023 Oct 2, 2022 As a % of Total Net Revenues Operating income $ 5,870.8 $ 4,617.8 16.3 % 14.3 % Interest income and other, net 81.2 97.0 0.2 0.3 Interest expense (550.1) (482.9) (1.5) (1.5) Earnings before income taxes 5,401.9 4,231.9 15.0 13.1 Income tax expense 1,277.2 948.5 3.6 2.9 Net earnings including noncontrolling interests 4,124.7 3,283.4 11.5 10.2 Net earnings/(loss) attributable to noncontrolling interests 0.2 1.8 0.0 0.0 Net earnings attributable to Starbucks $ 4,124.5 $ 3,281.6 11.5 % 10.2 % Effective tax rate including noncontrolling interests 23.6 % 22.4 % Interest income and other, net decreased $16 million, primarily due to lapping higher investment gains in the prior year.
The actual impact of the respective underlying rates and price changes on the financial instruments may differ significantly from those shown in the sensitivity analyses. Commodity Price Risk We purchase commodity inputs, primarily coffee, dairy products, diesel, cocoa, sugar and other commodities, that are used in our operations and are subject to price fluctuations that impact our financial results.
Commodity Price Risk We purchase commodity inputs, primarily coffee, dairy products, diesel, cocoa, sugar and other commodities, that are used in our operations and are subject to price fluctuations that impact our financial results.
The fair value calculation includes estimates of revenue growth, which are based on past performance and internal projections for the intangible asset group’s forecasted growth, including assumptions regarding business recovery post COVID-19, and royalty rates, which are adjusted for our particular facts and circumstances.
The fair value calculation includes estimates of revenue growth, which are based on past performance and internal projections for the intangible asset group’s forecasted growth, and royalty rates, which are adjusted for our particular facts and circumstances. The discount rate is selected based on the estimated cost of capital that reflects the risk profile of the related business.
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 Base Rate (as defined in the credit facility), in each case plus an applicable margin. The applicable margin is based on the Company’s long-term credit ratings assigned by Moody’s and Standard & Poor’s rating agencies.
Borrowings under the 2021 credit facility, which was most recently amended in April 2023, will bear interest at a variable rate based on Term SOFR, and, for U.S. dollar-denominated loans under certain circumstances, a Base Rate (as defined in the 2021 credit facility), in each case plus an applicable margin.
Revolving Lines of Credit Our $3.0 billion unsecured 5-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.
Borrowing Capacity Credit Facilities and Commercial Paper Revolving Credit Facility Our $3.0 billion unsecured five-year revolving credit facility (the “2021 credit facility”), of which $150.0 million may be used for issuances of letters of credit, is currently set to mature on September 16, 2026.
Unallocated corporate expenses include corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments. In the fourth quarter of fiscal 2022, we sold our Evolution Fresh brand and business.
Unallocated corporate expenses include corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments. Corporate and Other operating loss increased to $1.8 billion for fiscal 2023, or 20%, compared to $1.5 billion in fiscal 2022.
For both the North America segment and U.S. market, comparable store sales increased 12% for fiscal 2022 compared to an increase of 22% and 21% for the North America segment and the U.S. market, respectively, in fiscal 2021.
For both the North America segment and U.S. market, comparable store sales increased 9% for fiscal 2023 compared to an increase of 12% in fiscal 2022. Average ticket for both the North America segment and the U.S. market grew 6%, primarily driven by pricing in our U.S. market.
During the fourth quarter of fiscal 2021, and for each of the first three quarters of fiscal 2022, we declared a cash dividend of $0.49 per share. Dividends are generally paid in the quarter following the declaration date. Cash returned to shareholders through dividends in fiscal 2022 and 2021 totaled $2.3 billion and $2.1 billion, respectively.
Dividends are generally paid in the quarter following the declaration date. Cash returned to shareholders through dividends in fiscal 2023 and 2022 totaled $2.4 billion and $2.3 billion, respectively. During the fourth quarter of fiscal 2023, we declared a cash dividend of $0.57 per share to be paid on November 24, 2023, with an expected payout of approximately $651.2 million.
Also contributing were inflationary pressures on commodities and our supply chain. In fiscal 2022, we announced our Reinvention Plan in the U.S. market to increase efficiency while elevating the partner and customer experience.
The segment also experienced higher costs, primarily related to previously-committed investments in store partner wages and benefits and increased spend on partner training, as well as inflationary pressures on commodities and our supply chain. In fiscal 2022, we announced our Reinvention Plan in the U.S. market to increase efficiency while elevating the partner and customer experience.
While these tax law changes have no immediate effect and are not expected to have a material impact on our future financial results, we will continue to evaluate its impact as further information becomes available. 29 Table of Contents Segment Information Results of operations by segment (in millions) : North America Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Oct 2, 2022 Oct 3, 2021 As a % of North America Total Net Revenues Net revenues: Company-operated stores $ 21,214.2 $ 18,737.3 90.8 % 91.6 % Licensed stores 2,150.5 1,702.2 9.2 8.3 Other 6.1 8.4 0.0 0.0 Total net revenues 23,370.8 20,447.9 100.0 100.0 Product and distribution costs 6,677.2 5,453.8 28.6 26.7 Store operating expenses 10,860.0 9,359.5 46.5 45.8 Other operating expenses 202.1 166.0 0.9 0.8 Depreciation and amortization expenses 808.4 753.9 3.5 3.7 General and administrative expenses 303.3 300.0 1.3 1.5 Restructuring and impairments 33.3 155.4 0.1 0.8 Total operating expenses 18,884.3 16,188.6 80.8 79.2 Operating income $ 4,486.5 $ 4,259.3 19.2 % 20.8 % Revenues North America total net revenues for fiscal 2022 increased $2.9 billion, or 14%, primarily due to a 12% increase in comparable store sales ($2.2 billion) driven by a 7% increase in average ticket and a 5% increase in transaction.
See Note 14 , Income Taxes, for further discussion. 31 Table of Contents Segment Information Results of operations by segment (in millions) : North America Fiscal Year Ended Oct 1, 2023 Oct 2, 2022 Oct 1, 2023 Oct 2, 2022 As a % of North America Total Net Revenues Net revenues: Company-operated stores $ 23,905.4 $ 21,214.2 90.0 % 90.8 % Licensed stores 2,659.1 2,150.5 10.0 9.2 Other 5.1 6.1 0.0 0.0 Total net revenues 26,569.6 23,370.8 100.0 100.0 Product and distribution costs 7,530.4 6,677.2 28.3 28.6 Store operating expenses 11,959.2 10,860.0 45.0 46.5 Other operating expenses 263.8 202.1 1.0 0.9 Depreciation and amortization expenses 910.1 808.4 3.4 3.5 General and administrative expenses 389.7 303.3 1.5 1.3 Restructuring and impairments 20.7 33.3 0.1 0.1 Total operating expenses 21,073.9 18,884.3 79.3 80.8 Operating income $ 5,495.7 $ 4,486.5 20.7 % 19.2 % Store operating expenses as a % of related revenues 50.0 % 51.2 % Revenues North America total net revenues for fiscal 2023 increased $3.2 billion, or 14%, primarily due to a 9% increase in comparable store sales ($1.9 billion) driven by a 6% increase in average ticket and a 3% increase in comparable transactions.
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.
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.
These decreases were partially offset by sales leverage across markets outside of China. 31 Table of Contents Channel Development Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Oct 2, 2022 Oct 3, 2021 As a % of Channel Development Total Net Revenues Net revenues $ 1,843.6 $ 1,593.6 Product and distribution costs 1,194.2 1,011.2 64.8 % 63.5 % Other operating expenses 51.6 31.3 2.8 2.0 Depreciation and amortization expenses 0.1 1.2 0.0 0.1 General and administrative expenses 12.2 10.8 0.7 0.7 Total operating expenses 1,258.1 1,054.5 68.2 66.2 Income from equity investees 231.8 250.0 12.6 15.7 Operating income $ 817.3 $ 789.1 44.3 % 49.5 % Revenues Channel Development total net revenues for fiscal 2022 increased $250 million, or 16%, compared to fiscal 2021, primarily due to higher Global Coffee Alliance product sales and royalty revenue ($216 million) and growth in our ready-to-drink business ($44 million).
Operating margin increased 440 basis points to 16.4%, primarily due to sales leverage (approximately 270 basis points) and lapping amortization expenses of acquisition-related intangibles assets that are now fully amortized (approximately 240 basis points). 33 Table of Contents Channel Development Fiscal Year Ended Oct 1, 2023 Oct 2, 2022 Oct 1, 2023 Oct 2, 2022 As a % of Channel Development Total Net Revenues Net revenues $ 1,893.8 $ 1,843.6 Product and distribution costs 1,250.1 1,194.2 66.0 % 64.8 % Other operating expenses 54.6 51.6 2.9 2.8 Depreciation and amortization expenses 0.1 0.1 0.0 0.0 General and administrative expenses 8.4 12.2 0.4 0.7 Total operating expenses 1,313.2 1,258.1 69.3 68.2 Income from equity investees 295.7 231.8 15.6 12.6 Gain from sale of assets 91.3 — 4.8 — Operating income $ 967.6 $ 817.3 51.1 % 44.3 % Revenues Channel Development total net revenues for fiscal 2023 increased $50 million, or 3%, compared to fiscal 2022, primarily due to higher Global Coffee Alliance product sales and royalty revenue ($37 million) and growth in our ready-to-drink business ($22 million).
We have resumed our share repurchase program in the first quarter of fiscal 2023. 34 Table of Contents Other than operating expenses, cash requirements for fiscal 2023 are expected to consist primarily of capital expenditures for investments in our new and existing stores, our supply chain and corporate facilities.
Other than normal operating expenses, cash requirements for fiscal 2024 are expected to consist primarily of capital expenditures for investments in our new and existing stores, our supply chain and corporate facilities. Total capital expenditures for fiscal 2024 are expected to be approximately $3.0 billion.
During the fiscal year ended October 2, 2022, we repurchased 36.3 million shares of common stock for $4.0 billion on the open market. On March 15, 2022, we announced that our Board authorized the repurchase of up to an additional 40 million shares under our ongoing share repurchase program.
During the fiscal year ended October 2, 2022, we repurchased 36.3 million shares of common stock for $4.0 billion on the open market. During the fiscal year ended October 1, 2023, we repurchased 10.0 million shares of common stock for $1.0 billion on the open market.
Partially offsetting these increases was the impact of the extra week in fiscal 2021 ($23 million). 27 Table of Contents Operating Expenses Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 Oct 2, 2022 Oct 3, 2021 As a % of Total Net Revenues Product and distribution costs $ 10,317.4 $ 8,738.7 32.0 % 30.1 % Store operating expenses 13,561.8 11,930.9 42.1 41.1 Other operating expenses 461.5 359.5 1.4 1.2 Depreciation and amortization expenses 1,447.9 1,441.7 4.5 5.0 General and administrative expenses 2,032.0 1,932.6 6.3 6.7 Restructuring and impairments 46.0 170.4 0.1 0.6 Total operating expenses 27,866.6 24,573.8 86.4 84.6 Income from equity investees 234.1 385.3 0.7 1.3 Operating income $ 4,617.8 $ 4,872.1 14.3 % 16.8 % Store operating expenses as a % of related revenues 51.0 % 48.5 % Product and distribution costs as a percentage of total net revenues increased 190 basis points, primarily due to higher supply chain costs due to inflationary pressures.
Other revenues decreased $18 million, primarily due to the absence of revenues from the Evolution Fresh business following its sale in the fourth quarter of fiscal 2022 ($60 million), partially offset by an increase in revenue in the Global Coffee Alliance ($37 million). 29 Table of Contents Operating Expenses Fiscal Year Ended Oct 1, 2023 Oct 2, 2022 Oct 1, 2023 Oct 2, 2022 As a % of Total Net Revenues Product and distribution costs $ 11,409.1 $ 10,317.4 31.7 % 32.0 % Store operating expenses 14,720.3 13,561.8 40.9 42.1 Other operating expenses 539.4 461.5 1.5 1.4 Depreciation and amortization expenses 1,362.6 1,447.9 3.8 4.5 General and administrative expenses 2,441.3 2,032.0 6.8 6.3 Restructuring and impairments 21.8 46.0 0.1 0.1 Total operating expenses 30,494.5 27,866.6 84.8 86.4 Income from equity investees 298.4 234.1 0.8 0.7 Gain from sale of assets 91.3 — 0.3 — Operating income $ 5,870.8 $ 4,617.8 16.3 % 14.3 % Store operating expenses as a % of related revenues 50.0 % 51.0 % Product and distribution costs as a percentage of total net revenues decreased 30 basis points, primarily due to pricing (approximately 120 basis points), partially offset by inflationary pressures on commodities and our supply chain (approximately 80 basis points).
Despite COVID-19 induced business interruptions, especially in our China market, we have seen the strength and resilience of our brand as well as strong customer demand across our portfolio.
We have seen the strength and resilience of our brand as well as strong customer demand across our portfolio, with revenue and operating margin growth in fiscal 2023.
Estimates of revenue growth and operating expenses are based on internal projections considering the reporting unit’s past performance 38 Table of Contents and forecasted growth, including assumptions regarding business recovery post COVID-19, strategic initiatives, local market economics and the local business environment impacting the reporting unit’s performance.
Estimates of revenue growth and operating expenses are based on internal projections considering the reporting unit’s past performance and forecasted growth, strategic initiatives, local market economics and the local business environment impacting the reporting unit’s performance. The discount rate is selected based on the estimated cost of capital for a market participant to operate the reporting unit in the region.
Revenue for our Channel Development segment increased $250 million, or 16%, when compared with fiscal 2021, driven by higher product sales to and royalty revenue from the Global Coffee Alliance and growth in our global ready-to-drink business.
Revenue for our Channel Development segment increased 3% in fiscal 2023 compared with fiscal 2022, primarily driven by higher Global Coffee Alliance product sales and royalty revenue and growth in our global ready-to-drink business. In fiscal 2023, we sold the assets associated with the Seattle's Best Coffee brand to Nestlé, which resulted in a pre-tax gain of $91.3 million.
The following table summarizes current and long-term material cash requirements as of October 2, 2022, which we expect to fund primarily with operating cash flows ( in millions ): Material Cash Requirements Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Operating lease obligations (1) $ 9,863.7 $ 1,473.5 $ 2,729.2 $ 2,121.4 $ 3,539.6 Debt obligations Principal payments 15,038.4 1,000.0 3,088.4 1,000.0 9,950.0 Interest payments 6,499.8 487.3 865.2 725.3 4,422.0 Purchase obligations (2) 1,354.5 1,030.1 324.4 — — Other obligations (3) 401.6 125.0 118.7 84.6 73.3 Total $ 33,158.0 $ 4,115.9 $ 7,125.9 $ 3,931.3 $ 17,984.9 (1) Amounts include direct lease obligations, excluding any taxes, insurance and other related expenses.
The following table summarizes current and long-term material cash requirements as of October 1, 2023, which we expect to fund primarily with operating cash flows ( in millions ): Material Cash Requirements Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Operating lease obligations (1) $ 10,594.2 $ 1,577.6 $ 2,931.1 $ 2,206.9 $ 3,878.6 Debt obligations Principal payments 15,519.3 1,819.3 2,750.0 1,100.0 9,850.0 Interest payments 6,362.2 520.8 909.3 740.6 4,191.5 Purchase obligations (2) 1,078.4 694.6 311.4 72.4 — Other obligations (3) 391.4 114.4 145.6 33.4 98.0 Total $ 33,945.5 $ 4,726.7 $ 7,047.4 $ 4,153.3 $ 18,018.1 (1) Amounts include direct lease obligations, excluding any taxes, insurance and other related expenses.
The “Base Rate” of interest is the highest of (i) the Federal Funds Rate plus 0.500%, (ii) Bank of America’s prime rate, and (iii) the Eurocurrency Rate (as defined in the credit facility) plus 1.000%. As of October 2, 2022, we had no borrowings under the 2021 credit facility.
The applicable margin is based on the Company’s long-term credit ratings assigned by the Moody’s and Standard & Poor’s rating agencies. The “Base Rate” is the highest of (i) the Federal Funds Rate (as defined in the 2021 credit facility) plus 0.500%, (ii) Bank of America’s prime rate, and (iii) Term SOFR plus 1.000%.
Operating margin decreased 520 basis points to 44.3%, primarily due to a decline in our North American Coffee Partnership joint venture income due to inflationary pressures and supply chain constraints (approximately 340 basis points) and business mix shift (approximately 170 basis points). 32 Table of Contents Corporate and Other Fiscal Year Ended Oct 2, 2022 Oct 3, 2021 % Change Net revenues: Other $ 95.8 $ 97.5 (1.7) % Total net revenues 95.8 97.5 (1.7) Product and distribution costs 88.3 86.4 2.2 Other operating expenses 16.4 14.9 10.1 Depreciation and amortization expenses 126.4 141.9 (10.9) General and administrative expenses 1,371.2 1,261.3 8.7 Restructuring and impairments 12.7 15.0 (15.3) Total operating expenses 1,615.0 1,519.5 6.3 Operating loss $ (1,519.2) $ (1,422.0) 6.8 % Corporate and Other primarily consists of our unallocated corporate expenses and Evolution Fresh.
Operating margin increased 680 basis points to 51.1%, primarily due to the gain from sale of our Seattle's Best Coffee brand (approximately 480 basis points) and growth in our North American Coffee Partnership joint venture income (approximately 300 basis points), partially offset by impairment charges against certain manufacturing assets (approximately 100 basis points). 34 Table of Contents Corporate and Other Fiscal Year Ended Oct 1, 2023 Oct 2, 2022 % Change Net revenues: Other $ 24.6 $ 95.8 (74.3) % Total net revenues 24.6 95.8 (74.3) Product and distribution costs 20.2 88.3 (77.1) Other operating expenses 2.0 16.4 (87.8) Depreciation and amortization expenses 117.3 126.4 (7.2) General and administrative expenses 1,707.4 1,371.2 24.5 Restructuring and impairments 1.1 12.7 (91.3) Total operating expenses 1,848.0 1,615.0 14.4 Operating loss $ (1,823.4) $ (1,519.2) 20.0 % Corporate and Other primarily consists of our unallocated corporate expenses and Evolution Fresh, prior to its sale in the fourth quarter of fiscal 2022.
Also contributing to these increases were the performance of net new company-operated store openings over the past 12 months ($628 million) and higher product and equipment sales to and royalty revenues from our licensees ($487 million), primarily due to business recovery from the impact of the COVID-19 pandemic.
Also contributing to the increase were the performance of net new company-operated store openings over the past 12 months ($813 million) and higher product and equipment sales to and royalty revenues from our licensees ($487 million). Operating Margin North America operating income for fiscal 2023 increased 22% to $5.5 billion, compared to $4.5 billion in fiscal 2022.
Cash Flows Cash provided by operating activities was $4.4 billion for fiscal 2022, compared to $6.0 billion for fiscal 2021. The change was primarily due to lower net earnings and an increase in inventory purchases and timing of income tax payments. Cash used in investing activities totaled $2.1 billion for fiscal 2022, compared to $0.3 billion for fiscal 2021.
Cash Flows Cash provided by operating activities was $6.0 billion for fiscal 2023, compared to $4.4 billion for fiscal 2022. The change was primarily due to a decrease in net cash used by changes in operating assets and liabilities, including lower inventory purchases driven by reduced coffee commodity prices, and higher net earnings during the period.
FINANCIAL RISK MANAGEMENT Market risk is defined as the risk of losses due to changes in commodity prices, foreign currency exchange rates, equity security prices and interest rates. We manage our exposure to various market-based risks according to a market price risk management policy.
For additional details see Product Supply in Item 1 , as well as Risk Factors in Item 1A of this 10-K. FINANCIAL RISK MANAGEMENT Market risk is defined as the risk of losses due to changes in commodity prices, foreign currency exchange rates, equity security prices and interest rates.
Refer to Note 3 , Derivative Financial Instruments, for additional information on our interest rate swap designated as a fair value hedge. Available-for-Sale Debt Securities Our available-for-sale securities comprise a diversified portfolio consisting mainly of investment-grade debt securities. The primary objective of these investments is to preserve capital and liquidity.
Refer to Note 3 , Derivative Financial Instruments, for additional information on our interest rate swap designated as a fair value hedge.
As discussed in Note 14 , Income Taxes, to the consolidated financial statements included in Item 8 of Part II of this 10-K, we do not expect a significant amount of the Company’s gross unrecognized tax benefits to be recognized by the end of fiscal 2023 for reasons such as a lapse of the statute of limitations or resolution of examinations with tax authorities .
As discussed in Note 14 , Income Taxes, to the consolidated financial statements included in Item 8 of Part II of this 10-K, there is a reasonable possibility that our unrecognized tax benefit liability will be adjusted within 12 months due to the expiration of a statute of limitations and/or resolution of examinations with taxing authorities.
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.
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.
The change was primarily due to resuming our share repurchase program, partially offset by net proceeds from issuance of long-term debt. COMMODITY PRICES, AVAILABILITY AND GENERAL RISK CONDITIONS Commodity price risk represents Starbucks primary market risk, generated by our purchases of green coffee and dairy products, among other items.
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.
These increases were partially offset by sales leverage across markets outside of China (approximately 390 basis points) and strategic pricing, primarily in North America (approximately 320 basis points). • Diluted earnings per share (“EPS”) for fiscal 2022 decreased to $2.83, compared to EPS of $3.54 in fiscal 2021.
These increases were partially offset by previously-committed investments in store partner wages (approximately 250 basis points) and higher general and administrative expenses, primarily in support of our Reinvention Plan (approximately 130 basis points). • Diluted earnings per share (“EPS”) for fiscal 2023 increased to $3.58, compared to EPS of $2.83 in fiscal 2022.
These increases were partially offset by lower performance-based compensation ($62 million). FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Cash and Investment Overview Our cash and investments were $3.5 billion and $6.9 billion as of October 2, 2022 and October 3, 2021, respectively.
This increase was primarily driven by incremental investments in technology ($131 million), increased support costs of strategic initiatives including the Reinvention Plan ($86 million) and higher performance-based compensation ($56 million). FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Cash and Investment Overview Our cash and investments were $4.2 billion and $3.5 billion as of October 1, 2023 and October 2, 2022, respectively.
Partially offsetting these increases was the impact of the extra week in fiscal 2021 ($496 million) and unfavorable foreign currency translation ($368 million).
These increases were partially offset by the impact of unfavorable foreign currency translation ($555 million).
These increases were partially offset by the impact of the extra week in fiscal 2021 ($21 million). Operating Margin Channel Development operating income for fiscal 2022 increased 4% to $817 million, compared to $789 million in fiscal 2021.
Operating Margin Channel Development operating income for fiscal 2023 increased 18% to $968 million, compared to $817 million in fiscal 2022.
Store operating expenses as a percentage of total net revenues increased 100 basis points.
Store operating expenses as a percentage of total net revenues decreased 120 basis points. Store operating expenses as a percentage of company-operated store revenues decreased 100 basis points, primarily due to in-store operational efficiencies (approximately 160 basis points), sales leverage (approximately 160 basis points) and pricing (approximately 160 basis points).
These were partially offset by a 9% decline in comparable store sales ($459 million), driven by a 5% decrease in customer transactions and a 4% decrease in average ticket, primarily attributable to COVID-19 related restrictions in China and lapping the prior-year value-added-tax benefit in China, unfavorable foreign currency translation ($436 million) and the impact of the extra week in fiscal 2021 ($127 million).
Also contributing to the increase was a 5% increase in comparable store sales, driven by customer transactions, compared to a decrease of 9% in fiscal 2022. These increases were partially offset by the impact of unfavorable foreign currency translation.
The change was primarily driven by lapping the net proceeds from the divestiture of our ownership interest in our South Korea joint venture and an increase in spend on capital expenditures. Cash used in financing activities for fiscal 2022 totaled $5.6 billion, compared to cash provided by financing activities of $3.7 billion for fiscal 2021.
Cash used in investing activities was $2.3 billion for fiscal 2023, compared to $2.1 billion for fiscal 2022. The change was primarily due to an increase in spend on capital expenditures and increased purchases of investments in fiscal 2023, partially offset by increased maturities and calls of investments in fiscal 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeQuantitative and Qualitative Disclosures About Market Risk The information required by this item is incorporated by reference to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Commodity Prices, Availability and General Risk Conditions” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Risk Management” in Item 7 of this Report. 40 Table of Contents
Biggest changeQuantitative and Qualitative Disclosures About Market Risk The information required by this item is incorporated by reference to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Commodity Prices, Availability and General Risk Conditions” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Risk Management” in Item 7 of this Report. 41 Table of Contents

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