SBUX Starbucks Corp - 10-K

Item 1A. Risk Factors

You should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K, including the Management’s Discussion and Analysis of Financial Conditions and Results of Operations section, the Quantitative and Qualitative Disclosures About Market Risk section, the Controls and Procedures section, and the consolidated financial statements and related notes. The risks described below are not the only risks facing the Company. The following risks, some of which have occurred and any of which may occur in the future, could materially and adversely affect our current and future business and financial performance. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results.

Risks Related to Brand Relevance and Brand Execution

Our success depends substantially on the value of our brand, and failure to preserve its value could have a negative impact on our financial results.

The Starbucks brand is recognized throughout most of the world, and we have received high ratings in global brand value studies. To be successful in the future, we believe we must preserve, grow, and leverage the value of our brands across all sales channels.

Various factors, events, or conditions may result in a diminution or erosion of trust in our brand value. Adverse developments pertaining to the matters discussed elsewhere in this risk factors section may negatively impact the value of our brands. Such developments may include difficulties executing strategic initiatives, adapting to shifting consumer preferences, or managing global operations, and challenges stemming from macroeconomic volatility, supply chain pressures and disruptions, or an evolving competitive, regulatory, social, and geopolitical landscape. The impact of such developments on the value of our brands may be exacerbated if they receive considerable publicity or if they result in litigation. The value of our brands may be affected by actual or perceived developments, whether isolated or recurring, whether the result of actions by us or our business partners or the result of external developments, and whether such developments are in our control. Negative commentary about Starbucks, even if inaccurate or malicious, has in the past, and could in the future, damage the value of our brand, and adverse impacts may be compounded by social media, video-sharing, and messaging platforms that could dramatically increase the speed with which negative publicity may be disseminated, often before we have a meaningful opportunity to investigate, respond to, and address an issue. In addition, we cannot ensure that our store partners, licensees, or other business partners will not act or refrain from acting in a manner that adversely affects the value and relevance of our brand. Because brand value is based in part on consumer perceptions on a variety of subjective qualities, it may be difficult to address developments negatively impacting the value of our brands in a timely and effective manner to mitigate harm.

The diminution of, or erosion of trust in, our brand value may have negative consequences for the Company. Consumer demand for our products and our brand value could diminish significantly if we or our employees, licensees, or other business partners fail to preserve the quality of our products, or act, or are perceived to act, in an unethical, illegal, or otherwise inappropriate manner. To the extent third parties object to actions or positions taken or perceived to have been taken by us, it may generate negative sentiment around our business. Developments affecting the value of our brands have in the past, and may in the future, trigger boycotts of our stores, products, and brand. Each of these consequences, individually and collectively, could have potentially material impacts on our brand value, business performance, and financial results.

We may not be successful in our brand, marketing, promotional, advertising, and pricing strategies.

Our continued success depends on our ability to adapt brand, marketing, promotional, advertising, and pricing strategies to shifting economic conditions, competitive pressures, and evolving customer preferences. We operate in a complex and costly

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marketing environment. Decisions to collaborate or refrain from collaborating with certain parties may impact our brand image and, consequently, our financial performance. Our programs may not always reach consumers as intended, particularly given the wide range of generational, geographical, cultural, and socioeconomic characteristics and channels of communication used by our customers, and effective resource allocation across channels, including digital, is critical. Additionally, factors such as operating costs, competitor strategies, and inflation may affect our pricing decisions, which could impact demand. For example, there is no guarantee future cost increases will be absorbed by customers. If our marketing or pricing strategies underperform relative to competitors, our sales and market share could decline. Likewise, if we do not continuously strengthen our capabilities in marketing, data analytics (including artificial intelligence and machine learning) and innovation to understand and maintain or grow consumer interest, brand loyalty, and market share while strategically expanding into other profitable categories of the commercial beverage industry, our business could be negatively affected.

Risks Related to Our Business

We may not be successful in implementing important strategic initiatives (including our restructuring plan), effectively managing growth, or executing strategic transactions, any of which may have an adverse impact on our business and financial results.

We may not be able to implement important strategic initiatives in accordance with our expectations or that generate expected returns, which may result in an adverse impact on our business and financial results. In conjunction with our broader Back to Starbucks plan, these strategic initiatives are designed to create growth, improve our results of operations, and drive long-term shareholder value. Such initiatives include improving our service model, and further transforming our non-retail support organization; enhancing partner investment to improve customer experience; closing, renovating, and redesigning coffeehouses; strengthening our leadership in coffee; expanding digital engagement through mobile, loyalty, delivery, and international platforms; simplifying store operations; and responsibly growing our global footprint. We have in the past and may in the future undertake restructuring initiatives, which have resulted, and may continue to result, in the incurrence of significant additional costs, and our ability to achieve the anticipated cost savings and other benefits from these actions is subject to many estimates and assumptions, which are subject to uncertainties. Such initiatives may be disruptive both internally and to our customers and may be viewed negatively by our stakeholders.

We undertake these initiatives in the context of ongoing efforts to adapt to shifting consumer behaviors amid economic volatility, optimize our mix of licensed and company-operated stores, expand relevant product offerings across dayparts, and drive growth in cold beverages and Channel Development partnerships, while also advancing appropriate sustainability efforts, managing climate-related risks, and reducing operating costs. Risks to successful and timely implementation of these initiatives include delays or cancellations of store openings due to labor or material shortages, permit procurement issues, or lack of suitable real estate; supply chain scalability and sustainability challenges; underperformance or delays in product innovation; remodel disruptions or cost overruns; coordination and execution challenges; failure to realize cost savings; increased taxation; regulatory constraints, including public health mandates; credit rating deterioration; and geopolitical instability. If these initiatives fail to deliver expected results or we do not fully realize their intended benefits, our financial performance may suffer. Additionally, prioritizing these efforts over other organizational needs or misallocating resources could materially impact our business and operating results.

Managing growth—particularly in international markets—requires balancing local autonomy with consistency in our goals, policies, and standards. Ineffectively balancing these imperatives could materially harm our business results and financial performance.

Furthermore, we may be unsuccessful in implementing strategic initiatives through large acquisitions, integrations, divestitures, partnerships, joint ventures, or other strategic transactions. If we are unable to complete such transactions or successfully integrate and develop acquired businesses, including the effective management of integration activities, we could fail to achieve the expected increases in revenues and operating results or the anticipated synergies and cost savings. In the past we have been, and in the future we may be, unable to realize the expected benefits of strategic transactions, or it may also take longer than expected to realize the expected benefits. This has in the past required, and may in the future require, us to assess potential impairment of assets, including goodwill and intangibles. Any resulting impairment charges could materially affect our financial results.

Evolving consumer preferences and tastes, as well as adverse public or medical opinions about the health effects of consuming our products, may adversely affect our business.

Our success depends on attracting and retaining customers. Financial performance may be adversely affected by reduced discretionary spending, lack of acceptance of new products, brands, or platforms, or declining demand for existing offerings. We have previously been, and may in the future be, unable to accurately predict consumer demand for our products. This has

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resulted, and may in the future result, in insufficient or excess inventory, increased inventory markdowns, and higher costs. Any of these outcomes could adversely affect our results of operations and financial condition.

Additionally, health concerns related to ingredients such as caffeine, dairy, sugar, or allergens—whether accurate or not—along with increased litigation, regulation and regulatory scrutiny, or taxes on certain food components, ingredients, or additives, could reduce demand and harm our results. Shifts in consumer behavior, including dietary changes or use of weight-loss drugs, may also impact sales.

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.

Our global business strategy, including our plans for new stores, branded products, and other initiatives, relies significantly on a variety of business partners, including licensees, joint venture partners, third-party manufacturers, distributors, and retailers, particularly for our entire global Channel Development business. These partners are often authorized to use our logos and deliver branded products directly to customers. To maintain consistent customer experience, we provide training and oversight to certain partners; however, factors beyond our control—such as financial instability, labor shortages, or noncompliance with sanitation protocols—may affect the quality of their service and products. We do not have direct control over these partners and may lack visibility into their operations.

We source products from a broad network of domestic and international business partners, and in some cases, licensees source products independently. We do not monitor the quality of non-Starbucks products served by authorized foodservice operators. Failures by business partners to comply with applicable laws or meet brand standards may negatively impact our business. Additionally, inconsistent use or inadequate protection of our brand and intellectual property could erode consumer trust and materially affect our financial results.

Reported incidents involving food- or beverage-borne illnesses, tampering, adulteration, contamination, or mislabeling, whether or not accurate, could harm our business.

We may experience food or beverage-safety incidents such as contamination, mislabeling, or adulteration during any stage of production or preparation. We rely on third-party suppliers for many of our ingredients and finished products. A failure to meet quality standards—even if due to factors beyond our control—could result in public exposure, regulatory scrutiny or action, litigation (including product liability claims and class actions), or temporary store closures, which could materially harm our business. Additionally, clean water is essential for beverage preparation, and access may be limited in certain international markets. As we expand our offerings requiring temperature control, the risk of food-safety incidents increases if proper conditions are not maintained due to mechanical failure or human error. Such incidents may harm our brand and reputation and could negatively impact our business and financial performance.

Reports—whether accurate or not—of food- or beverage-safety issues such as contamination, mislabeling, or adulteration during any stage of production or preparation have historically harmed the reputations of companies in our industry. Any perceived association with such incidents, even if unfounded, could harm our reputation and materially impact our business and financial performance. Food-safety incidents involving competitors or shared suppliers, even if unrelated to Starbucks, could generate negative publicity and impact our sales regionally or globally. In addition, real or perceived concerns about food safety issues, such as phthalates, per- and polyfluoroalkyl substances (PFAS), microplastics or heavy metals in the U.S. food supply chain, could impact consumers’ confidence in our offerings. Confirmed food-safety issues may also result in product recalls. A widespread product recall could lead to significant financial losses from recall costs, inventory destruction, lost sales, and reputational damage. Declines in customer traffic due to safety concerns, negative publicity, or store closures could adversely affect our operations.

If we are unable to meet our projections for new store openings or efficiently maintain the attractiveness of our existing stores, our operating results could suffer.

Our growth depends in part on our ability to open new stores and operate them profitably within projected timelines. Store development costs have risen due to construction labor inflation and increased material and equipment expenses. Each new store involves substantial startup costs and a ramp-up period during which profitability may be delayed as we train partners and build a customer base. If we fail to attract sufficient customers or offset higher startup costs, new stores may underperform relative to existing ones.

Store development is subject to risks including site selection, lease negotiations, permitting and regulatory compliance, contractor availability, labor and material costs, and external disruptions such as weather events, natural disasters, or pandemics. We also face competition for prime locations, contractors, and qualified personnel. Additionally, new stores may

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cannibalize sales from nearby existing locations. Failure to manage these risks could result in increased costs and lower-than-expected sales and earnings, materially affecting our operating results.

We also invest in remodeling and maintaining existing stores. If costs exceed projections, closures last longer than planned, or remodeled stores underperform, we may not achieve expected returns, which could negatively impact our financial results.

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 heavily reliant on our North America operating segment, which accounted for approximately 74% of total net revenues in fiscal year 2025. A slowdown or decline in this segment—particularly in the U.S.—has in the past, and could in the future, materially impact our overall business, as other segments may not offset the shortfall. Given its maturity and role as the primary source of operating cash flow, reduced performance in North America could limit our ability to fund international expansion, strategic initiatives, and shareholder returns.

We are dependent on the performance of licensed and company-owned international markets to achieve our growth targets.

The International segment is a critical profit center. Achievement of our growth targets is partially dependent on sustained performance and growth internationally, particularly in the markets operated by our larger regional licensees and in key company-owned markets outside North America. If one or more of these international markets fail to achieve stable revenues and earnings—due to economic downturns or other factors—our consolidated results could be materially impacted.

In addition to the risks that apply to our business generally, wherever conducted, our International business may also be subject to certain additional risks and risks that take on a different magnitude or character in the context of our international business. Success in international markets can depend on factors distinct from those in the U.S., including regional taste preferences, varying consumer acceptance of our products, and differing regulatory regimes across markets. International operations may also face higher occupancy and operating costs due to elevated rents and regulatory compliance. Finally, because many markets are in earlier development stages, operating expenses as a percentage of revenue tend to be higher than in more established markets. Each of these factors present risks to our business performance and financial results.

We face risks as a global business that could adversely affect our financial performance.

Operating in 89 global markets, we face diverse cultural, regulatory, geopolitical, and economic environments. Our success depends on navigating these differences effectively and leveraging operational strengths across markets. However, planned initiatives may not resonate uniformly with customers and could lead to unexpected shifts in perception or market share. Our international operations are also subject to additional inherent risks of conducting business abroad, such as:

• Uncertainty in economic, legal, regulatory, social, and political conditions, including rising anti-American sentiment in certain markets;

• Governmental trade and investment restrictions, such as tariffs, export duties, ownership limits, and favoritism toward local competitors;

• Economic or trade sanctions limiting product sourcing or business operations;

• Delays in store openings due to external factors, competition, or limited access to affordable real estate, potentially impacting financial performance;

• Operational and supply chain challenges abroad, including staffing, logistics, product consistency, and cultural or language barriers;

• Slower-than-expected growth in disposable income in developing economies;

• Complex and varying interpretations of laws and regulations, including those related to taxes, labor, privacy, and responsible business matters;

• Local employment laws increasing the cost and complexity of hiring and termination;

• Labor disruptions due to geopolitical instability or social unrest;

• Health and safety regulations affecting store operations;

• Challenges in enforcing intellectual property and contract rights;

• Foreign currency fluctuations and restrictions on currency use or fund repatriation; and

• Licensing and import requirements that may hinder business operations.

Moreover, many of the foregoing risks are particularly acute in developing markets, which are important to our long-term growth prospects. An inability to effectively manage the risks associated with our international operations could adversely affect our business performance and financial results.

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Our reliance on key business partners may adversely affect our business and operations.

Our growth depends on the ability of licensee partners to execute our strategies and implement our growth platforms and product innovations. Success also relies on negotiating, maintaining, and enforcing commercial agreements, and on partner performance under those agreements. International licensees may face legal or financial constraints that limit expansion. Our Channel Development business is heavily reliant on Nestlé, which holds global rights to distribute certain Starbucks branded packaged goods. If Nestlé fails to meet its obligations or support our brand, it could materially impact Channel Development and our overall financial results. Additionally, our retail licensed operations are concentrated among a few large licensees, and their inability to access capital or grow effectively, including their inability to meet store development and renovation targets, could adversely affect performance in key markets. A failure by any of our large regional licensees or Channel Development business partners to grow the relevant Starbucks business, or otherwise perform its obligations under agreements with us, could adversely affect our performance. We may not have the ability to offset such poor performance or non-performance in the markets or verticals into which these parties extend Starbucks brand. Likewise, if we are unable to maintain and grow our relationships with these licensees and business partners, it could adversely affect our business performance and financial results.

Risks Related to Supply Chain

Increases in the cost of high-quality arabica coffee beans or other commodities or decreases in the availability of high-quality arabica coffee beans or other commodities could have an adverse impact on our business operations and financial results.

The availability and price of coffee beans and other commodities are highly volatile. We purchase, roast, and sell high-quality arabica coffee, which typically trades at a premium above the “C” commodity price. This premium varies based on supply and demand and can significantly impact our ability to secure fixed-price contracts. We often enter supply agreements with defined quality, quantity, and delivery terms, but with pricing tied to future “C” market rates.

Coffee supply and pricing are influenced by factors in producing countries, including weather and extreme weather events, water availability, natural disasters, crop disease, input costs, inventory levels, political and economic conditions, and actions by organizations seeking to influence global prices. Climate change may intensify these risks—for example, droughts or frosts in Brazil have in the past driven price increases. Speculative trading also contributes to volatility. Tariffs have also affected, and in the future may affect, our costs to procure coffee. Given coffee’s central role in our operations and our limited ability to fully hedge against price increases, rising costs or supply shortages could materially impact our profitability and ability to meet customer demand. We supply strategic products, including coffee, to our licensees, and we may have limited ability to pass along increased costs.

We also rely on significant quantities of dairy products and plant-based alternatives, such as oat and almond milk, as well as other commodities including tea, cocoa, produce, meats, eggs, energy, and packaging materials. Price increases or supply disruptions—whether due to shortages, processing delays, tariffs, or other factors—could materially affect our profitability, particularly in international markets.

Our supply chain may be unable to fully support current and future business needs.

Even without acute disruptions, our supply chain may not fully meet current or future business needs. We cannot guarantee that suppliers will support our growth or continue providing products at current volumes or favorable prices and other terms. Delays or cost inefficiencies in supply could impair growth and adversely affect our business, financial condition, and results. Inaccurate sales forecasting or insufficient inventory may lead to expedited shipping costs, stockouts, and diminished customer and partner satisfaction. Conversely, overestimating demand—especially for new products—can result in inventory write-offs. Failure to scale and improve forecasting, planning, production, and logistics could frustrate customers, reduce sales, and harm our brand reputation.

We are subject to risks from changes to the trade policies and tariff and import/export regulations by the U.S. and other foreign governments.

Changes in the import and export policies, including trade restrictions such as new, increased, threatened, or retaliatory tariffs or quotas, embargoes, sanctions and countersanctions, safeguards, or customs restrictions by the U.S. and foreign governments, have in the past required, and could in the future require, us to change the way we conduct business and such changes have in the past adversely affected, and could in the future adversely affect, our financial condition, results of operations, reputation, and our relationships with customers, suppliers, and employees in the short- or long-term. It may be time-consuming and expensive for us to alter our business operations to adapt to or comply with any such changes. Likewise, changes in laws and

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policies governing foreign trade, manufacturing, development, and investment in the territories or countries where we currently sell our products or conduct our business could adversely affect our business.

Interruption of our supply chain and our reliance on suppliers could affect our ability to produce or deliver our products and could negatively impact our business and profitability.

Any material disruption to our supply chain—such as the loss of a roasting plant, logistics interruptions, trade restrictions, pandemics, labor shortages, natural disasters, or geopolitical conflicts—could materially impact our business and profitability. We rely on a broad network of domestic and international suppliers to provide high-quality products in compliance with applicable laws, and in certain cases, products are sourced by our licensees directly. As we update our fresh and prepared food offerings, sourcing from regions with limited infrastructure or political instability may present additional challenges. For certain products, we depend on a limited number of suppliers, and their failure to meet our standards, deliver on time, or comply with regulations—factors often beyond our control—could materially harm our operations and financial results.

Risks Related to Macroeconomic Conditions

Our financial condition and results of operations have been, and may continue to be, adversely affected by a number of macroeconomic and other factors, many of which are largely outside our control.

As a retailer reliant on discretionary spending, our financial results are sensitive to macroeconomic conditions. A prolonged downturn or slow recovery may reduce consumer spending, leading to lower demand or shifts to lower-priced products. Factors such as job loss, inflation, interest rate changes, taxation, credit access, public health crises, trade disputes, and geopolitical instability can all impact consumer behavior, including spending and routines, potentially affecting demand for our products. Reduced customer traffic or transaction value without corresponding cost reductions could pressure margins. If economic uncertainty persists, consumers may adopt lasting changes in spending habits, potentially affecting our sales, profitability, and growth plans.

Our operating results have been, and will continue to be, subject to a number of other macroeconomic and other factors, many of which are largely outside our control. Any one or more of the factors listed below could have a material adverse impact on our business, financial condition, or results of operations:

• Rising real estate costs in certain domestic and international markets;

• Supply chain disruptions;

• Climate change and extreme weather affecting input costs and availability;

• Changes in tax laws and government regulations, such as the One Big Beautiful Bill Act, enacted in the U.S. in July 2025;

• Adverse litigation outcomes;

• Inflation and interest rate fluctuations;

• Natural or man-made disasters disrupting major markets;

• Government shutdowns and election-related impacts globally, including regime change and political and civil unrest;

• Terminations of, or changes in, existing trade agreements among the countries in which we operate;

• Tariffs imposed on commodities or goods, including recent tariffs imposed or threatened to be imposed by the U.S. on other countries, and any retaliation measures taken by such countries;

• Labor unrest, geopolitical instability, terrorism, anti-American sentiment, or public health crises—especially in key markets; and

• Foreign currency exchange rate volatility.

A disruption in the credit markets or a downgrade of our current credit rating could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, which could adversely affect our liquidity and capital resources or significantly increase our cost of capital. Furthermore, unfavorable economic conditions could also adversely affect our suppliers and licensees, who in turn could experience cash flow problems, more costly or unavailable financing, credit defaults, and other financial hardships. This could lead to supplier or licensee insolvency, increase our bad debt expense, or cause us to increase the levels of unsecured credit that we provide to suppliers and licensees. Additionally, the insolvency of any of our licensees could result in disrupted operations or our exit from a particular market and negatively impact our reputation.

Failure to meet market expectations for our financial performance or any announced guidance will likely adversely affect the market price and increase the volatility of our stock, and fluctuations in the stock market as a whole may also impact the market price and volatility of our stock.

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We have in the past failed, and may in the future fail, to meet announced guidance or market expectations, which has adversely affected, and could in the future adversely affect, the market price of our stock. Any guidance we provide is based on certain assumptions, which may or may not prove to be correct. Failure to meet announced guidance or market expectations going forward, particularly with respect to our operational and financial results, shareholder returns, and expectations regarding the success of our Back to Starbucks plan and related guidance, whether due to our assumptions not being met or the impact of various risks and uncertainties, will likely result in either or both a decline in or increased volatility in the market price of our stock. 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

The loss of key personnel, difficulties with recruiting and retaining qualified personnel, or ineffectively managing changes in our workforce could adversely impact our business and financial results.

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, including our chief executive officer or other key senior management personnel, could harm our business. Our success also depends substantially on the contributions and abilities of our retail store employees we rely on 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 ability to do so has been and may continue to be impacted by challenges in the labor market (which has experienced, and may continue to experience, wage inflation and labor shortages), our position with respect to unions and the unionization of partners, increased employee turnover, changes in availability of our workforce, and shifts in remote or hybrid work arrangements. Our ability to attract and retain corporate, retail, and other personnel is also acutely impacted in certain international and domestic markets where the competition for a relatively small number of qualified employees is intense or in markets where large high-tech companies are able to offer more competitive salaries and benefits. These factors and others have also made, and may continue to make, it more difficult to maintain an effective system of operational internal controls for a dispersed workforce, and to train partners to deliver a consistently high-quality product and customer experience.

Additionally, there is intense competition for qualified technology systems developers, who are necessary to develop and implement new technologies for our growth initiatives, including increasing our digital relationships with customers. If we are unable to recruit, retain, and motivate employees sufficiently to maintain our current business and support our projected growth, our business and financial performance may be adversely affected.

Changes in the availability and cost of labor could adversely affect our business.

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. Such increases could be triggered by state and federal legislation and regulatory actions regarding wages, scheduling, and benefits; increases in healthcare and workers’ compensation insurance costs; and increases in wages and costs of other benefits necessary to attract and retain high-quality employees with the right skill sets. For example, at the federal level, effective July 1, 2024, the United States Department of Labor increased the minimum salary threshold requirements for employees who are exempt from the Fair Labor Standards Act overtime requirements, and at the state level, Assembly Bill 1228 increased minimum wage and established working hour and working condition standards for certain partners in California. These changes, along with others that may occur in the future, could have a significant impact on the classification of employees as being exempt from overtime and add to our labor costs. The growth of our business can make it increasingly difficult to locate and hire sufficient numbers of employees, to maintain an effective system of operational internal controls for a globally dispersed enterprise, and to train employees worldwide to deliver a consistently high-quality product and customer experience; the failure to do so could materially harm our business and results of operations. 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 other key functions. In addition, our wages and benefits programs may be insufficient to attract and retain the best talent.

Starting in September 2021, Starbucks partners at a number of company-operated stores sought union representation through elections conducted by the National Labor Relations Board. Unions have secured representation rights at around 6% of our more than 10,000 U.S. company-operated stores, with potentially more to follow, and Starbucks has been engaged in collective bargaining for initial collective bargaining agreements for these stores. If we encounter difficulties negotiating collective bargaining agreements, are unsuccessful in those efforts, or obtain contracts with unfavorable terms, then we could incur additional costs, change our employee culture, decrease our flexibility, and increase our operational complexity. These risks could also present the potential to disrupt our current operational model by affecting our ability to fully implement operational changes to enhance our efficiency and adapt to changing business needs.

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The law places limitations on unilateral actions taken with respect to employees who are represented by unions because, in certain circumstances, the law requires the employer to notify and to bargain with the union prior to making certain operational or other changes that may affect employee wages, hours, or other terms and conditions of employment. Moreover, where a petition for representation has been filed by a union, the employer is also constrained from making changes in wages, hours, and working conditions. These limitations could also negatively affect our costs, change our employee culture, decrease our flexibility, and increase our operational complexity. They also present the potential to disrupt our current operational model by affecting our ability to fully implement operational changes to enhance our efficiency and adapt to changing business needs.

Moreover, we have experienced work stoppages and other disruptions caused by union activities or organizing efforts in some company-operated stores. Such work stoppages and other disruptions have the potential to negatively impact our operations, third-party providers upon whom we rely to deliver product, our sales and customer flow in impacted locations, our costs, and can also have a negative impact on our reputation and brand.

Additionally, while we respect the rights of partners to organize, our position with respect to unions and the unionization of partners could negatively impact how our brand is perceived and could have material adverse effects on our business, including on our 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.

Risks Related to Competition

We face intense competition in each of our channels and markets, which could lead to reduced profitability.

The specialty coffee market is highly competitive across product quality, innovation, service, convenience (e.g., delivery and mobile ordering), and price. We face increasing competition in all channels and markets and do not hold leadership positions in every segment. In the U.S., large quick-service competitors offering coffee, tea, and other competitive products may reduce customer traffic and transaction value. Globally, competition from established brands, new entrants, and smaller specialty operators may hinder growth and impact sales. Furthermore, our competitors may attempt to gain market share by offering products at prices at or below those typically offered by our company, which may require us to increase spending on advertising and promotions and/or reduce prices.

In packaged coffee, tea, and ready-to-drink segments, competition from well-funded players may affect Channel Development profitability.

Our ability to compete depends on product improvement and innovation, pricing, customer experience, and strategic investments in store development, technology, and digital engagement. If we are unable to respond to consumer demand for healthy beverages and foods, or our competitors respond more effectively, this could have a negative effect on our business. However, our competitive strategies may not always succeed and could have unintended consequences. Declines in consumer demand—due to shifting preferences, economic pressures, or changes in routines—could also negatively affect our business.

Risks Related to Responsible Business Matters

Climate change may have an adverse impact on our business.

We recognize that climate-related risks are inherent to global business operations. Climate change can affect the supply and pricing of coffee and other non-coffee inputs due to weather volatility, water scarcity, and other environmental factors in producing regions. It may also impact water availability across our supply chain and markets. Operating in 89 global markets, our properties and operations are increasingly vulnerable to extreme weather events—such as wildfires and droughts—which may disrupt operations, close stores, affect customers and suppliers, and increase costs, potentially resulting in financial losses.

Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to responsible business matters, that could expose us to numerous risks.

We are subject to evolving and increasingly complex laws and regulations from various authorities and regulatory bodies. These rules—often inconsistent across jurisdictions—can increase compliance uncertainty and administrative costs. Additionally, growing stakeholder focus on responsible business matters has led to heightened expectations and regulatory requirements, such as extended producer responsibility obligations that relate to our product packaging, the EU’s Corporate Sustainability Reporting Directive, or the state of California’s new climate change disclosure requirements. The evolving obligations may increase compliance costs and the risk of noncompliance.

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Implementing responsible business initiatives and reporting progress can be costly, complex, and subject to evolving standards, assumptions, and internal controls. Public disclosures may be criticized for accuracy or completeness, and previously reported data may require future adjustments. Failure to meet targets or goals adopted in connection with our responsible business initiatives or otherwise respond to stakeholder expectations on these topics could harm our reputation, reduce customer loyalty, and adversely affect our financial performance. Inadequate progress on responsible business initiatives may also erode trust, trigger negative publicity, litigation, or boycotts, and expose us to civil or criminal liability. Objections from third parties or governments to these initiatives may result in reputational harm, administrative, legislative, or public backlash, or other adverse action, and could negatively impact our financial results or business performance. Such consequences could also result from actual or perceived changes to the scope or extent of our responsible business initiatives, or any discontinuation thereof. Objections may come both from those who believe these initiatives are overly ambitious or inappropriate, and from those who believe they are not ambitious enough. As focus on these issues from consumers, government actors, and other stakeholders intensifies, the risks described in this section may increase.

Certain activist shareholder actions have caused, and could continue to cause, us to incur expense, hinder execution of our business strategy, and adversely impact our stock price.

We regularly engage with shareholders to strengthen the Company and enhance long-term value. However, activist campaigns can result in significant costs, including legal expenses and diversion of management and Board attention. Public activism may also create uncertainty about our strategic direction, strain relationships with stakeholders, hinder talent recruitment, and cause stock price volatility unrelated to business fundamentals. Shareholders with substantial holdings may influence key decisions, including director elections, mergers, and amendments to governing documents. These risks could materially affect our business and operating results.

Risks Related to Regulation and Litigation

Failure to comply with applicable laws and changing legal and regulatory requirements could harm our business and financial results.

Our policies and procedures are designed to ensure compliance with all applicable laws, regulations, and reporting requirements, including those imposed by the SEC, Nasdaq, and foreign jurisdictions. This includes trade, labor, healthcare, food and beverage, sanitation, safety, environmental, labeling, anti-bribery and corruption, and merchandise laws. These legal frameworks are complex and often subject to varying interpretations, which may result in inadvertent non-compliance. Regulatory shifts—such as changes in enforcement priorities—can increase compliance costs and expand reporting obligations. Failure to comply with such laws and regulations could result in the imposition of civil or criminal liability.

Environmental regulations are evolving, with new or expanded rules targeting carbon emissions, plastic use, and commercial water consumption. These changes may lead to higher compliance costs, capital expenditures, and other financial obligations for us and our partners, potentially affecting profitability. Additional emerging regulations, such as import tariffs tied to alleged human rights violations, may also impact operations. Certain jurisdictions have enacted or proposed taxes or other restrictions on the manufacture, distribution, or sale of certain of our products, particularly beverages containing caloric sweeteners. These taxes and other measures vary in structure and may apply broadly or selectively. Additionally, environmentally focused taxes or other measures, such as plastic packaging levies or extended producer responsibility laws, are gaining traction. These measures can adversely affect our financial performance by raising product costs, reducing consumption, or generating negative publicity.

Separately, the OECD’s Pillar Two initiative establishes a 15% global minimum tax for multinational entities. As of September 28, 2025, several countries where we operate have enacted legislation implementing the OECD’s Pillar Two initiative. While not expected to materially impact our consolidated financial results, we continue to monitor developments.

Overall, the regulatory environment is growing more complex due to evolving laws, market expansion, and jurisdictional conflicts. Due to evolving technologies, such as artificial intelligence technologies, the legal and regulatory landscape is uncertain and evolving, and may impose compliance obligations that could increase our costs or limit how we may use these technologies. Moreover, the costs of monitoring and responding to such regulations could have an adverse effect on our operations or financial condition. Non-compliance—whether by us or our partners—can result in litigation, liability, fines, reputational harm, and financial restatements, all of which may adversely affect our business and results of operations.

We have been, and could continue to be, party to litigation or other legal proceedings that could adversely affect our business, results, operations, and reputation.

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We are, and may continue to be, subject to litigation and legal proceedings that could adversely affect our business. These may involve claims from employees, customers, regulators, suppliers, shareholders, or others, including class or collective actions. Allegations have included claims related to employment practices, food safety and product defects, data privacy, discrimination, personal injury, advertising, intellectual property disputes, securities violations, and other matters. A judgment significantly in excess of any applicable insurance coverage or third-party indemnity could materially adversely affect our financial condition or results of operations. Even unfounded claims can result in substantial legal costs, management distraction, and potential settlements or penalties. Litigation may also generate negative publicity, harming our reputation, customer relationships, and financial performance. See Note 16 , Commitments and Contingencies, to the consolidated financial statements included in Item 8 of Part II of this 10-K for information regarding certain legal proceedings in which we are involved.

Risks Related to Cybersecurity, Data Privacy, and Information Technology

The unauthorized access, use, theft, or destruction of customer or employee data (personal, financial, or other), or of Starbucks proprietary or confidential information, that is stored in our information systems or by third parties could impact our reputation and brand and expose us to potential liability and loss of revenues.

Our information technology systems and those of our third-party service providers, business partners, and licensees—including those supporting point-of-sale, mobile platforms, payment systems, delivery, rewards, and administrative functions—store personal, financial, and confidential data from customers, employees, business partners, and licensees, as well as proprietary business information. Although we have put in place policies, procedures, and technological safeguards designed to protect the security of this information, we cannot guarantee that this information will not be improperly disclosed or accessed. Like other prominent retail companies, we have experienced cyber-attacks (e.g., phishing) and other attempts to breach or gain unauthorized access to our systems, as have our third-party service providers, business partners, and licensees. We expect such threats to continue and evolve, especially with the rapid evolution and increased adoption of artificial intelligence.

Unauthorized access, theft, or destruction of data or any breach, ransomware attack or other incident affecting our systems—whether through external attacks or internal methods—could result in reputational harm, loss of customers, business disruption, regulatory investigations, litigation (including class actions), and significant financial costs. It may take considerable time for us to investigate and evaluate the full impact of incidents, particularly for sophisticated attacks. Responding to cybersecurity incidents may require substantial investments in technology, personnel, legal compliance, and customer support, including notification and credit monitoring. These costs could materially impact our financial results and divert resources from strategic initiatives. Media reports of actual or perceived vulnerabilities—whether involving us or our third-party service providers, business partners, or licensees—can damage our brand and business, regardless of an incident’s scope or validity.

Failure to maintain satisfactory compliance with certain privacy and data protection laws and regulations may result in substantial negative financial consequences, reputational harm, and civil or criminal penalties.

We are subject to a complex and rapidly evolving landscape of local, national, and international laws and regulations governing the collection, use, retention, protection, disclosure, transfer, and other processing of personal data. These laws and regulations are frequently amended, reinterpreted, and increasingly enforced, often resulting in heightened compliance obligations, litigation risk, and operational costs. Regulatory scrutiny is intensifying, with agencies such as the Federal Trade Commission and state attorneys general applying consumer protection laws to online data practices. The legal landscape remains fluid, with privacy and data protection laws potentially limiting data use, requiring changes to processing practices, exposing us to fines, litigation, or other penalties, or impacting our ability to develop new services. Regulatory changes may include new legislation, invalidation of existing rules, or increased penalties, all of which can impact our ability to develop and offer new products and services. For example, the EU’s GDPR and the U.K. equivalent impose strict data protection requirements and significant penalties for noncompliance. China’s Personal Information Protection Law (PIPL) and Data Security Law similarly regulate personal and non-personal data processing activities and establish data subject rights and obligations for personal information processors, with civil and criminal liabilities for violations. Other jurisdictions served by Starbucks and its licensees are enacting or proposing comparable laws, including restrictions on cross-border data transfers and enhanced data safeguards, which may increase compliance costs and affect business operations.

In the U.S., the California Consumer Privacy Act (CCPA) and numerous other state privacy laws impose disclosure obligations and grant consumers rights over their personal data. Some such laws include private rights of action. These state laws require ongoing investment in compliance infrastructure. Privacy and data protection laws, such as those referenced above, may also affect emerging business models, such as Starbucks Digital Solutions, which rely on Starbucks acting as a data controller in licensed markets. In such cases, Starbucks may bear primary responsibility for compliance with applicable privacy regulations.

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The increasing adoption of artificial intelligence technologies has led data protection authorities around the world to consider and adopt new and evolving interpretations of privacy and data protection laws, with specific obligations regarding processing of personal data, including required notices, consents, and opt-outs.

Claims we have failed to comply with applicable privacy and data protection laws or to adequately safeguard personal data, even if unfounded, may result in regulatory investigations, enforcement actions, litigation (including class actions), reputational harm, and financial penalties, any of which could materially affect our operations and financial performance.

We rely heavily on information technology in our operations and growth initiatives, and any material failure, inadequacy, interruption, or security failure of that technology could harm our ability to effectively operate and grow our business and could adversely affect our financial results.

We rely extensively on interconnected information technology systems to support our operations, including point-of-sale, mobile ordering, payments, supply chain management, loyalty programs, and administrative functions. We also depend on third-party providers for key systems and services, which may lack full redundancy within or across markets. Our growth initiatives—particularly those involving digital engagement and convenience-led formats—depend heavily on the reliability and performance of these systems. Any failure, inadequacy, inefficiency, or interruption could disrupt operations and adversely affect financial results. Our contractual and operational safeguards may not be effective in preventing the failure of these systems or services to operate effectively and be available. Failures—whether due to outages, cyber-attacks, software flaws, misconfigurations, or other disruptions—could materially impact product availability, operational efficiency, and financial performance. If our incident response and recovery plans are ineffective or delayed, remediation efforts may incur significant, unplanned costs.

Emerging technologies, including artificial intelligence and machine learning, may not deliver expected efficiencies and could introduce new risks, such as those related to cybersecurity, data privacy, inaccuracies, hallucinations, bias or discrimination and intellectual property infringement, which may become more pronounced as the Company’s reliance on such technologies increases.

Risks Related to Intellectual Property

Failure to adequately protect our intellectual property or ensure that we are not infringing on the intellectual property of others could harm the value of our brand and our business.

Our brand names, trademarks, and other intellectual property are critical assets that support brand awareness and product development across domestic and international markets. We protect these assets through a combination of trademarks, copyrights, service marks, trade secrets, patents, and other intellectual property rights. While we have registered certain trademarks in the U.S. and abroad, not all of our trademarks are registered in every market where we operate or may operate in the future, and some may never be registered.

Securing and enforcing intellectual property rights—especially in rapidly evolving areas—can be costly and time-consuming. Additionally, the laws and enforcement mechanisms we rely on to protect our intellectual property from unauthorized use may be inadequate. Our competitive position may be adversely affected by our possible inability to effectively protect our intellectual property.

We also seek to maintain certain intellectual property as trade secrets. The secrecy of such trade secrets and other sensitive information could be compromised, which could cause us to lose the competitive advantage resulting from these trade secrets.

Additionally, we also face the risk of infringing third-party intellectual property rights. Any infringement claims, even unmerited claims, can be time consuming and disruptive to our ability to generate revenues or enter into new market opportunities. Further, such claims may lead to expensive and disruptive litigation or significantly increased costs as a result of our attempt to license the intellectual property rights to avoid infringement of third-party rights. Additionally, licensees and other third parties who hold licenses to our intellectual property may take actions that diminish the value of our intellectual property, further exposing us to reputational and financial risk.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified above, under Risk Factors in Part I, Item 1A of this 10-K, and elsewhere herein. Therefore, our actual results could differ materially from those discussed in the forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason. Please also see the cautionary language at the beginning of Part I of this 10-K regarding forward-looking statements.

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 2025, 2024, and 2023 included 52 weeks.

The discussion of our financial condition and results of operations for the fiscal year ended October 1, 2023, included in Item 7. 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 September 29, 2024.

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. Unallocated corporate expenses are reported within Corporate and Other.

We believe our financial results and long-term growth model will continue to be driven by new store openings, comparable store sales, and operating margin management, underpinned by disciplined capital allocation. Comparable store sales includes company-operated stores open 13 months or longer, and exclude the effects of foreign currency exchange rates. Stores that are temporarily closed remain in comparable store sales while permanent store closures are removed in the month following closure. We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies. Throughout this MD&A, we commonly discuss the following key operating metrics:

• New store openings and store count

• Comparable store sales

• Operating margin

Starbucks results for fiscal 2025 showed continued progress on key “Back to Starbucks” initiatives, specifically investments in coffeehouse partners, as we work to rebuild a stronger Starbucks. These investments include the Green Apron Service model, additional investments in staffing and hours at the right times to deliver enhanced customer service, and the Leadership Experience 2025, a conference designed to empower and motivate our retail leaders to accelerate our “Back to Starbucks” strategy. Consolidated net revenues increased 3% to $37.2 billion in fiscal 2025 compared to $36.2 billion in fiscal 2024, primarily driven by incremental revenues from net new company-operated stores over the past 12 months, an increase in revenue in the Global Coffee Alliance, and incremental revenue from the acquisition of 23.5 Degrees Topco Limited, a U.K. licensed business partner, partially offset by a decrease in comparable store sales and a decline in our licensed store business.

For both the North America segment and U.S. market, revenue increased 1% in fiscal 2025 compared to fiscal 2024, primarily driven by net new company-operated store growth of 4% , or 441 stores, over the past 12 months, prior to the 584 North America restructuring closures late in the fourth quarter of fiscal 2025. This growth was partially offset by a 2% decline in comparable store sales. Comparable transactions declined 4% , partially offset by average ticket growth of 2% , primarily driven by annualization of pricing in the current year. Also contributing were lower product and equipment sales to, and royalty revenues from, our licensees.

For the International segment, revenue increased 7% in fiscal 2025 compared to fiscal 2024, primarily driven by net new company-operated and licensed store openings over the past 12 months, incremental net revenue from the conversion of 113 licensed stores to company-operated stores following the acquisition of 23.5 Degrees Topco Limited during the first quarter of fiscal 2025, and higher product and equipment sales to, and royalty revenues from, our licensees.

Revenue for our Channel Development segment increased 6% in fiscal 2025 compared with fiscal 2024, primarily driven by an increase in revenue in the Global Coffee Alliance.

In support of our “Back to Starbucks” strategy, we completed our assessment of our coffeehouse portfolio late in the fourth quarter and made decisions to close stores that did not demonstrate a viable path to profitability, or meet our standards of delivering a warm, welcoming space for our customers and partners. Our store closures in North America were substantially

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completed in fiscal 2025 and the International store closures are expected to be completed in the first half of fiscal 2026. As a result of these closures, we expect a fiscal 2026 reduction in our baseline North America company-operated revenues, partially offset by sales transfer to nearby coffeehouses that remain open. We also expect the future impact to operating margins to be slightly accretive. With a healthier base of coffeehouses, we see meaningful opportunity for disciplined growth. We anticipate that these actions, along with simplifying our broader support organization, will allow us to restructure, redeploy, and refocus our resources on priorities that we believe will deliver long-term sustainable business growth.

We expect that the macroeconomic challenges we have been experiencing, including impacts from new tariffs and dynamic coffee prices, will continue; however, we are encouraged by the results we have seen from our “Back to Starbucks” initiatives. Following our Green Apron Service model going live across our full U.S company-operated store portfolio in the fourth quarter of fiscal 2025, we are focused on empowering coffeehouse leaders to take ownership of sustaining the model as our permanent way of working, which we expect to enhance the customer experience and drive future transaction growth. Further, as announced in early November 2025, we look forward to working with our new strategic joint venture partner, Boyu Capital, to accelerate long-term growth in China. We believe, through strategic prioritization, that we are taking the right actions now and in the future, specifically through our investments in store partners, uplifting the coffeehouse experience through disciplined capital deployment, introducing new food and beverage platforms, reimagining the Starbucks rewards program, and enhancing support for our licensee partners. These actions, while driving more efficiency, accountability, and agility as a company, will lay the foundation for the future of Starbucks.

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Financial Highlights

• Total net revenues increased 3% to $37.2 billion in fiscal 2025 compared to $36.2 billion in fiscal 2024.

• Consolidated operating inco me decreased to $2.9 billion in fiscal 2025 compared to $5.4 billion in fiscal 2024. Fiscal 2025 operating margin was 7.9% compared to 15.0% in fiscal 2024. Operating margin contraction of 710 basis points was primarily due to restructuring costs ass ociated with the closure of coffeehouses and simplification of our support organization (approximately 240 basis points) , deleverage (approximately 210 basis points), investments in support of “Back to Starbucks,” which were largely in labor hours (approximately 130 basis points), and inflation (approximately 80 basis points).

• Diluted earnings per share (“EPS”) for fiscal 2025 declined to $1.63, compared to EPS of $3.31 in fiscal 2024. The decrease was primarily driven by contraction in operating margin, including restructuring and impairment costs in support of our “Back to Starbucks” strategy, as compared to the prior year.

• Capital expenditures were $2.3 billion in fiscal 2025 and $2.8 billion in fiscal 2024.

• We returned $2.8 billion and $3.8 billion to our shareholders in fiscal 2025 and fiscal 2024, respectively, through dividends and share repurchases.

Acquisitions and Divestitures

See Note 2 , Acquisitions and Divestitures, to the consolidated financial statements included in Item 8 of Part II of this 10-K for information regarding acquisitions and divestitures.

RESULTS OF OPERATIONS — FISCAL 2025 COMPARED TO FISCAL 2024

Consolidated results of operations (in millions) :

Revenues

Fiscal Year Ended

Sep 28,

Sep 29,

Change

Net revenues:

Company-operated stores

Licensed stores

Other

Total net revenues

Total net revenues increased $1 billion, or 3%, over fiscal 2024, primarily due to higher revenues from company-operated stores ($979 million) and other revenues ($184 million), partially offset by a decline in revenues from licensed stores ($155 million).

Company-operated store revenue increased $979 million, primarily driven by net new company-operated store growth of 5%, or 1,010 stores, over the past 12 months ($1.2 billion), prior to the 627 restructuring closures late in the fourth quarter of fiscal 2025, and incremental revenue from the conversion of 113 licensed stores to company-operated stores ($131 million) following the acquisition of 23.5 Degrees Topco Limited. Partially offsetting this increase was a 1% decline in comparable store sales ($408 million), attributable to a 2% decline in comparable transactions, partially offset by a 1% increase in average ticket, primarily due to annualization of prior year pricing.

Licensed stores revenue decreased $155 million, primarily driven by lower product and equipment sales to, and royalty revenues from, our licensees in our North America segment ($143 million), the impact of the acquisition of 23.5 Degrees Topco Limited ($36 million), and by unfavorable foreign currency translation impacts ($22 million). These decreases were partially offset by higher product sales to, and royalty revenues from, our licensees in our International segment ($79 million).

Other reven ues increased $184 million, primarily due to an increase in revenue in the Global Coffee Alliance ($99 million) and increased sales of cocoa butter to third parties ($66 million).

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Operating Expenses

Fiscal Year Ended

Sep 28,

Sep 29,

Sep 28,

Sep 29,

As a % of Total

Net Revenues

Product and distribution costs

Store operating expenses

Other operating expenses

Depreciation and amortization expenses

General and administrative expenses

Restructuring and impairments

Total operating expenses

Income from equity investees

Operating income

Store operating expenses as a % of related revenues

Product and distribution costs as a percentage of total net revenues increased 50 basis points , primarily due to inflation (approximately 80 basis points).

Store operating expenses as a percentage of total net revenu es increased 360 basis points . Store operating expenses as a percentage of company-operated store revenues increased 410 basis points , primarily due to deleverage (approximately 200 basis points), additional labor (approximately 160 basis points), and increased marketing (approximately 90 basis points).

Other operating expenses increased $19 million, primarily due to support costs for our licensed markets.

Depreciation and amortization expenses as a percentage of total net revenues increased 30 basis points, primarily due to deleverage.

General and administrative expenses increased $94 million , primarily due to the Leadership Experience 2025 ($81 million).

Restructuring and impairments were $892 million, largely due to costs associated with the closure of coffeehouses and simplification of our support organization. See Note 1 8 , Restructuring, to the consolidated financial statements included i n Item 8 of Part II of this 10-K, for further discussion.

Income from equity investees decreased $53.4 million, primarily due to lower income from our North American Coffee Partnership joint venture.

The combination of these changes resulted in an overall decrease in operating margin of 710 basis points i n fiscal 2025 when compared to fiscal 2024.

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Other Income and Expenses

Fiscal Year Ended

Sep 28,

Sep 29,

Sep 28,

Sep 29,

As a % of Total

Net Revenues

Operating income

Interest income and other, net

Interest expense

Earnings before income taxes

Income tax expense

Net earnings including noncontrolling interests

Net earnings/(loss) attributable to noncontrolling interests

Net earnings attributable to Starbucks

Effective tax rate including noncontrolling interests

Interest income and other, net decreased $10 million, primarily due to lower cash balances and lower interest rates in the current year.

Interest expens e decreased $19 million, primarily due to savings from cross-currency interest rate hedging, partially offset by higher interest rates on refinanced long-term debt.

The effective tax rate for fiscal 2025 was 25.9% compared to 24.3% for fiscal 2024.The increase was primarily due to the discrete impact of changes in indefinite reinvestment assertions for certain foreign entities in the third quarter of fiscal 2025 (approximately 290 basis points), partially offset by the discrete impact of a tax status change for a certain foreign entity in the first quarter of fiscal 2025 (approximately 120 basis points). See Note 14 , Income Taxes, to the consolidated financial statements included i n Item 8 of Part II of this 10-K, for further discussion.

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Segment Information

Results of operations by segment (in millions) :

North America

Fiscal Year Ended

Sep 28,

Sep 29,

Sep 28,

Sep 29,

As a % of North America

Total Net Revenues

Net revenues:

Company-operated stores

Licensed stores

Other

Total net revenues

Product and distribution costs

Store operating expenses

Other operating expenses

Depreciation and amortization expenses

General and administrative expenses

Restructuring and impairments

Total operating expenses

Operating income

Store operating expenses as a % of related revenues

Revenues

North America total net revenues for fiscal 2025  increased $364 million, or 1%, primarily driven by net new company-operated store growth of 4%, or 441 stores over the past 12 months ($980 million), prior to the 584 restructuring closures late in the fourth quarter of fiscal 2025. This growth was partially offset by a 2% decline in comparable store sales ( $419 million ) driven by a 4% decline in comparable transactions, partially offset by a 2% increase in average ticket, primarily due to annualization of prior year pricing. Also contributing were lower product and equipment sales to, and royalty revenues from, our licensees ($143 million) and the impact of unfavorable foreign currency translation ($42 million).

Operating Margin

North America operating income for fiscal 2025 decr eased 41% to $3.2 billion, compared to $5.4 billion in fiscal 2024. Operating margi n contracted 830 basis points to 11.5%, primarily driven by deleverage (approximately 310 basis points) restructuring costs ass ociated with the closure of coffeehouses and simplification of our support organization (approximately 240 basis points) and investments in support of “Back to Starbucks,” which were largely in labor hours (approximately 180 basis points).

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International

Fiscal Year Ended

Sep 28,

Sep 29,

Sep 28,

Sep 29,

As a % of International

Total Net Revenues

Net revenues:

Company-operated stores

Licensed stores

Other

Total net revenues

Product and distribution costs

Store operating expenses

Other operating expenses

Depreciation and amortization expenses

General and administrative expenses

Restructuring and impairments

Total operating expenses

Income/ (loss) from equity investees

Operating income

Store operating expenses as a % of related revenues

Revenues

International total net revenues for fiscal 2025 increased $481 million, or 7%, primarily due to net new company-operated store growth of 5%, or 526 stores, over the past 12 months ($264 million) and the incremental net revenue from the conversion of 113 licensed stores to company-operated stores ($95 million) following the acquisition of 23.5 Degrees Topco Limited during the first quarter of fiscal 2025. Also contributing to the increase in revenues were higher product sales to, and royalty revenues from, our licensees ($79 million), primarily due to the opening of 378 net new licensed store over the past 12 months.

Operating Margin

International operating income for fiscal 2025 decrease d 9% to $950 million, compared to $1.0 billion in fiscal 2024. Operating margin contracted 210 basis points, to 12.1% , primarily due to increased promotional activity (approximately 170 basis points) and restructuring and impairment costs associated with the closure of coffeehouses and simplification of our support organization (approximately 110 basis points).

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Channel Development

Fiscal Year Ended

Sep 28,

Sep 29,

Sep 28,

Sep 29,

As a % of Channel Development

Total Net Revenues

Net revenues

Product and distribution costs

Other operating expenses

General and administrative expenses

Restructuring and impairments

Total operating expenses

Income from equity investees

Operating income

Revenues

Channel Development total net revenues for fiscal 2025 increased $102 million, or 6%, compared to fiscal 2024, primarily due to an increase in revenue in the Global Coffee Alliance ($99 million).

Operating Margin

Channel Development operating income for fiscal 2025 decreas ed 4% to $885 million, compared to $926 million in fiscal 2024. Operating margin contracted 500 basis points to 47.3% , primarily driven by a decline in our North American Coffee Partnership joint venture income (approximately 350 basis points) and higher global product costs (approximately 90 basis points).

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Corporate and Other

Fiscal Year Ended

Sep 28,

Sep 29,

Change

Net revenues:

Other

Total net revenues

Product and distribution costs

Other operating expenses

Depreciation and amortization expenses

General and administrative expenses

Restructuring and impairments

Total operating expenses

Operating loss

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

Corporate and Other operating los s increased 7% to $2.1 billion for fiscal 2025 compared to $1.9 billion for fiscal 2024, largely due to costs associated with the restructuring of our support organization, primarily severance costs.

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

Cash and Investment Overview

Our cash and investments were $3.7 billion and $3.8 billion as of September 28, 2025, and September 29, 2024, respectively. We actively manage our cash and investments in order to internally fund operating needs, make scheduled interest and principal payments on our borrowings, fund acquisitions, and return cash to shareholders through common stock cash dividend payments and share repurchases. Our investment portfolio primarily includes highly liquid available-for-sale securities, including corporate debt securities and U.S. government treasury securities, as well as principal-protected structured deposits. As of September 28, 2025, approximately $1.6 billion of cash and short-term investments were held in foreign subsidiaries.

Borrowing Capacity

Credit Facilities and Commercial Paper

Revolving Credit Facility

During the third quarter of fiscal 2025, we replaced our $3.0 billion unsecured five-year revolving credit facility (the “2021 credit facility”) with a new $3.0 billion unsecured five-year revolving credit facility (the “2025 credit facility”).

Our 2025 credit facility, of which $150.0 million may be used for issuances of letters of credit, is currently set to mature on June 13, 2030. The 2025 credit facility is available for working capital, capital expenditures, and other general corporate purposes, including acquisitions and share repurchases. We have the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $1.0 billion.

Borrowings under the 2025 credit facility will bear interest at a fluctuating rate based on the Term Secured Overnight Financing Rate (“Term SOFR”), and, for U.S. dollar-denominated loans under certain circumstances, a Base Rate (as defined in the 2025 credit facility), in each case plus an applicable rate. The applicable rate is based on the Company’s long-term credit ratings assigned by Moody’s and Standard & Poor’s rating agencies. The 2025 credit facility contains alternative interest rate provisions specifying rate calculations to be used at such time Term SOFR ceases to be available as a benchmark due to reference rate reform. The “Base Rate” of interest is the highest of (i) the Federal Funds Rate plus 0.50%, (ii) Bank of America’s prime rate, (iii) Term SOFR plus 1.00% and (iv) 1.00%. Upon the occurrence of any event of default under the

2025 credit facility, interest on the outstanding amount of the indebtedness under the 2025 credit facility will bear interest at a rate per annum equal to 2% in excess of the interest then borne by such borrowings.

The 2025 credit facility contains provisions requiring us to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio, which measures our ability to cover financing expenses. As of September 28, 2025, we were in compliance with all applicable covenants. No amounts were outstanding under our 2025 credit facility as of September 28, 2025, or our 2021 credit facility as of September 29, 2024.

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Our total available contractual borrowing capacity for general corporate purposes was $3.0 billion as of the end of fiscal 2025.

Commercial Paper

Under our commercial paper program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $3.0 billion, with individual maturities that may vary but not exceed 397 days from the date of issue. Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under our 2025 credit facility. The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures, and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock and share repurchases. As of September 28, 2025, and September 29, 2024, we had no borrowings outstanding under our commercial paper program.

Credit Facilities in Japan

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

• A ¥5.0 billion, or $33.4 million, credit facility is currently set to mature on December 30, 2025. Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on Tokyo Interbank Offered Rate (“TIBOR”) plus an applicable margin of 0.400%.

• A ¥10.0 billion, or $66.8 million, credit facility is currently set to mature on March 27, 2026. Borrowings under this credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300%.

As of September 28, 2025 and September 29, 2024, 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.

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

Use of Cash

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

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

We regularly review our cash positions and our determination of partial indefinite reinvestment of foreign earnings. In the event we determine that all or another portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes, which could be material. Any foreign earnings that are not indefinitely reinvested may be repatriated at management’s discretion. During fiscal 2025, we revised our indefinite reinvestment assertions from prior years' cumulative earnings from certain foreign subsidiaries, and in the fourth quarter of fiscal 2025, we repatriated approximately $900 million of cash from foreign subsidiaries, upon which approximately $90 million in related withholding taxes were recorded and paid. We continue to be indefinitely reinvested in the remainder of our foreign earnings, for which no tax accrual has been recorded.

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On July 4, 2025, the President of the United States signed and enacted tax legislation into law through a reconciliation bill titled “An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14,” commonly referred to as the “One Big Beautiful Bill Act.” This legislation was enacted during the fourth quarter of fiscal 2025; therefore, the fiscal 2025 accounting impacts from this tax law change are included in our fourth quarter of fiscal 2025 results. This tax law change did not result in a material impact to our consolidated financial statements. See Note 14 , Income Taxes, to the consolidated financial statements included in Item 8 of Part II of this 10-K, for further discussion.

During each of the first three quarters of fiscal 2024, we declared a cash dividend to shareholders of $0.57 per share. During the fourth quarter of fiscal 2024, and for each of the first three quarters of fiscal 2025, we declared a cash dividend of $0.61 per share. During the fourth quarter of fiscal 2025, we declared a cash dividend of $0.62 per share to be paid on November 28, 2025 , with an expected payout of approximately $704.8 million . Dividends are generally paid in the quarter following the declaration date. Cash returned to shareholders through dividends in fiscal 2025 and 2024 totaled $2.8 billion and $2.6 billion , respectively.

During the fiscal year ended September 29, 2024, we repurchased 12.8 million shares of common stock for $1.3 billion on the open market. During the fiscal year ended September 28, 2025, we made no common stock share repurchases. As of September 28, 2025, 29.8 million shares remained available for repurchase under current authorizations.

Other than normal operating expenses, cash requirements for fiscal 2026 are expected to consist primarily of capital expenditures in our new and existing stores, our supply chain, and corporate facilities. Total capital expenditures for fiscal 2026 ar e expected to be moderately lower than fiscal 2025.

The following table summarizes current and long-term material cash requirements as of September 28, 2025, which we expect to fund primarily with operating cash flows ( in millions ):

Material Cash Requirements

Total

Less than 1

Year

Years

Years

More than

5 Years

Operating lease obligations (1)

Debt obligations

Principal payments

Interest payments

Purchase obligations (2)

Other obligations (3)

Total

(1) Amounts include direct lease obligations, excluding any taxes, insurance, and other related expenses.

(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 88% of total purchase obligations.

(3) Other obligations include other long-term liabilities primarily consisting of long-term asset retirement obligations, income taxes payable, equity investment capital commitments, and finance lease obligations.

Cash Flows

Cash provided by operating activities was $4.7 billion for fiscal 2025, compared to $6.1 billion for fiscal 2024. The change was primarily due to the decrease in net earnings of $1.9 billion and a net increase of $451.2 million in inventories, which was primarily driven by green and roasted coffee, largely due to elevated coffee prices. These impacts were partially offset by a net increase of $713.2 million in loss on disposal, impairment, and accelerated amortization of assets primarily driven by restructuring costs as part of the “Back to Starbucks” strategy and a net increase in accounts payable, primarily due to payment timing.

Cash used in investing activities was $2.5 billion for fiscal 2025, compared to $2.7 billion for fiscal 2024. The change was primarily due to a net decrease in capital expenditures of $472.0 million driven by a reduction in retail store investments and renovations in North America. These increases were partially offset by the acquisition of 23.5 Degrees Topco Limited.

Cash used in financing activities was $2.3 billion for fiscal 2025, compared to $3.7 billion for fiscal 2024. The change was primarily due to no current year share repurchases of our common stock compared to the prior year.

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COMMODITY PRICES, AVAILABILITY, AND GENERAL RISK CONDITIONS

Commodity price risk represents our primary market risk, generated by our purchases of green coffee and dairy products, among other items. We purchase, roast, and sell high-quality arabica coffee and related products, and risk arises from the price volatility of green coffee. In addition to coffee, we also purchase significant amounts of dairy products to support the needs of our company-operated stores. The price and availability of these commodities, including impacts from volatility in green coffee prices and new tariffs, directly impact our results of operations, and we expect commodity prices, particularly coffee, to continue to impact future results of operations. For additional details see Product Supply in Item 1 of Part I of this 10-K, as well as Risk Factors in Item 1A of Part I 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. 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 risk. 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. We also use cross-currency swaps to hedge against changes in the fair value of our net investments in foreign operations. Excluding interest rate hedging instruments and cross currency swaps, hedging instruments generally do not have maturities in excess of three years. 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.

The sensitivity analyses disclosed below provide only a limited, point-in-time view of the market risk of the financial instruments discussed. 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. 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 September 28, 2025, to Starbucks future net earnings and other comprehensive income (“OCI”) from changes in commodity prices. The information provided below relates only to the derivative 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

Foreign Currency Exchange Risk

The majority of our revenue, expense, and capital purchasing activities are transacted in U.S. dollars. However, because a portion of our operations consists of activities outside of the U.S., we have transactions in other currencies, primarily the Chinese renminbi, Japanese yen, Canadian dollar, British pound, South Korean won, and euro. To reduce cash flow volatility from foreign currency fluctuations, we enter into derivative instruments to hedge portions of cash flows of anticipated intercompany royalty payments, inventory purchases, intercompany borrowing, and lending activities, and certain other transactions in currencies other than the functional currency of the entity that is party to the arrangements, as well as the translation risk of certain balance sheet items and net investments in foreign operations. The volatility in the foreign exchange market may lead to significant fluctuation in foreign currency exchange rates and adversely impact our financial results in the case of weakening foreign currencies relative to the U.S. dollar.

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The following table summarizes the potential impact as of September 28, 2025, 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 information provided below relates only to the derivative 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

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. Marketable equity securities are recorded at fair value and approximates a portion of our liability under our Management Deferred Compensation Plan (“MDCP”). Gains and losses from the portfolio and the change in our MDCP liability are recorded in our consolidated statements of earnings.

We performed a sensitivity analysis based on a 10% change in the underlying equity prices of our investments as of September 28, 2025, and determined that such a change would not have a significant impact on the fair value of these instruments.

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. 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 September 28, 2025.

The following table summarizes the impact of a change in interest rates as of September 28, 2025, 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)

(1) Amount disclosed is net of $12 million change in the fair value of our designated interest rate swaps. 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. 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 performed a sensitivity analysis based on a 100 basis point change in the underlying interest rate of our available-for-sale securities as of September 28, 2025, and determined that such a change would not have a significant impact on the fair value of these instruments.

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. Judgments and uncertainties may result in materially different amounts being reported under different conditions or using different assumptions.

Our significant accounting estimates are discussed in additional detail in Note 1 , Summary of Significant Accounting Policies and Estimates, to the consolidated financial statements included in Item 8 of Part II of this 10-K. We consider financial reporting and disclosure practices and accounting policies quarterly to ensure that they provide accurate and transparent information relative to the current economic and business environment. During the past five fiscal years, we have not made any material changes to the accounting methodologies used to assess the areas discussed below, unless noted otherwise. We believe that our significant accounting estimates involve a higher degree of judgment and/or complexity for the reasons discussed below.

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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. We routinely evaluate the likelihood of realizing the benefit of our deferred tax assets and may record a valuation allowance if, based on all available evidence, we determine that some portion of the tax benefit will not be realized.

In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of operations. In projecting future taxable income, we consider historical results and incorporate assumptions about the amount of future state, federal, and foreign pre-tax operating income adjusted for items that do not have tax consequences. Our assumptions regarding future taxable income are consistent with the plans and estimates we use to manage our underlying businesses. 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. We evaluate our exposures associated with our various tax filing positions and recognize a tax benefit only if it is more likely than not that the tax position will be sustained upon examination by the relevant taxing authorities, including resolutions of any related appeals or litigation processes, based on the technical merits of our position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. For uncertain tax positions that do not meet this threshold, we record a related liability. We adjust our unrecognized tax benefit liability and income tax expense in the period in which the uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position, or when new information becomes available. 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 have generated income in certain foreign jurisdictions that may be subject to additional foreign withholding taxes and U.S. state income taxes. We regularly review our plans for reinvestment or repatriation of unremitted foreign earnings. Foreign earnings declared as indefinitely reinvested may be repatriated as our plans are based on our estimated working and other capital needs in jurisdictions where our earnings are generated. If these amounts are 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.

Our income tax expense and deferred tax assets and liabilities for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. Deferred tax asset valuation allowances and our liabilities for unrecognized tax benefits require significant management judgment regarding applicable statutes and their related interpretation, the status of various income tax audits, and our particular facts and circumstances. Although we believe that the judgments and estimates discussed herein are reasonable, actual results, including forecasted business performance, could differ, and we may be exposed to losses or gains that could be material. To the extent we prevail in matters for which a liability has been established or are required to pay amounts in excess of our established liability, our effective income tax rate in a given financial statement period could be materially affected.

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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. When evaluating for impairment, we first compare the carrying value of the asset to the asset’s estimated future undiscounted cash flows. If the estimated undiscounted future cash flows are less than the carrying value of the asset, we determine if we have an impairment loss by comparing the carrying value of the asset to the asset’s estimated fair value and recognize an impairment charge when the asset’s carrying value exceeds its estimated fair value. The adjusted carrying amount of the asset becomes its new cost basis and is depreciated over the asset’s remaining useful life.

Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For company-operated store assets, the impairment test is performed at the individual store asset group level, which is inclusive of property, plant and equipment and lease ROU assets. The fair value of a store’s assets is estimated using a discounted cash flow model. For other long-lived assets, fair value is determined using an approach that is appropriate based on the relevant facts and circumstances, which may include discounted cash flows, comparable transactions, or comparable company analyses.

Our impairment calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values. Key assumptions used in estimating future cash flows and asset fair values include projected revenue growth and operating expenses, as well as forecasting asset useful lives and selecting an appropriate discount rate. For company-operated stores, estimates of revenue growth and operating expenses are based on internal projections and consider the store’s historical performance, the local market economics, and the business environment impacting the store’s performance. The discount rate is selected based on what we believe a buyer would assume when determining a purchase price for the store. The fair value of a store’s ROU asset is estimated considering what a market participant would pay to lease the asset for its highest and best use. 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 the fourth quarter of fiscal 2025 , as part of the “Back to Starbucks” strategy, the Company assessed its existing store portfolio with respect to both whether coffeehouses had a viable path to offering the physical environment consistent with the brand and a clear path to financial performance, and we closed, or plan to close, coffeehouses that did not meet these criteria.

As a result, we recorded $892 million in restructuring and impairments in our consolidated statements of earnings during the fiscal year ended September 28, 2025. This total included $352.8 million related to impairment and disposition of company-operated store assets and $239.3 million primarily associated with accelerated amortization of ROU lease assets and other lease exit costs due to store closures prior to the end of contractual lease terms. Refer to Note 18 , Restructuring, included in Item 8 of Part II of this 10-K, for further discussion.

Asset impairment charges are discussed in Note 1 , Summary of Significant Accounting Policies and Estimates, to the consolidated financial statements included in Item 8 of Part II of this 10-K.

Goodwill and Indefinite-Lived Intangible Assets

We evaluate goodwill and indefinite-lived intangible assets for impairment annually during our third fiscal quarter, or more frequently if an event occurs or circumstances change that would indicate impairment may exist. When evaluating these assets for impairment, we may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount, we calculate the estimated fair value of the reporting unit using discounted cash flows or a combination of discounted cash flow and market approaches.

When assessing goodwill for impairment, our decision to perform a qualitative impairment assessment for an individual reporting unit is influenced by a number of factors, inclusive of the carrying value of the reporting unit’s goodwill, the significance of the excess of the reporting unit’s estimated fair value over carrying value at the last quantitative assessment date, and the amount of time in between quantitative fair value assessments and the date of acquisition. If we perform a quantitative assessment of an individual reporting unit’s goodwill, our impairment calculations contain uncertainties because they require management to make assumptions and to apply judgment when estimating future cash flows and asset fair values, including projected revenue growth and operating expenses related to existing businesses, product innovation, and new store concepts, as well as utilizing valuation multiples of similar publicly traded companies and selecting an appropriate discount rate. 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. These estimates, as well as the selection of comparable companies and valuation multiples used in the market approaches, are highly subjective, and our ability to realize the future cash flows used in our fair value calculations

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is affected by factors such as the success of strategic initiatives, changes in economic conditions, changes in our operating performance, and changes in our business strategies, including retail initiatives and international expansion. We continue to believe the fair value of each of our reporting units is significantly in excess of its carrying value, and absent a sustained multi-year global decline in our business in key markets such as the U.S. and China, we do not anticipate incurring significant goodwill impairment in the next 12 months. We note that the goodwill impairment assessment of the China reporting unit was deemed a critical audit matter because of the significant estimates and assumptions made to determine the fair value. Considerations and procedures performed to address the critical audit matter are discussed in Item 9A, Controls and Procedures.

Our fiscal 2025 annual goodwill impairment testing was completed in the third fiscal quarter. Using the most recent quantitative assessment performed, the estimated fair value of our reporting units exceeded carrying value by approximately $ 120 billion.

When assessing indefinite-lived intangible assets for impairment, where we perform a qualitative assessment, we evaluate if changes in events or circumstances have occurred that indicate that impairment may exist. If we do not perform a qualitative impairment assessment or if changes in events and circumstances indicate that a quantitative assessment should be performed, management is required to calculate the fair value of the intangible asset group. 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. These estimates are highly subjective, and our ability to achieve the forecasted cash flows used in our fair value calculations is affected by factors such as the success of strategic initiatives, changes in economic conditions, changes in our operating performance, and changes in our business strategies, including retail initiatives and international expansion. We do not anticipate recording significant impairment charges in the next 12 months.

Definite-lived intangible asset impairment charges are discussed in Note 8 , Other Intangible Assets and Goodwill, to the consolidated financial statements included in Item 8 of Part II of this 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 , Summary of Significant Accounting Policies and Estimates, to the consolidated financial statements included in Item 8 of Part II of this 10-K for a detailed description of recent accounting pronouncements.