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Analysis of Starbucks Annual Report

Kiran Pandurang Patil

MBA, Trine University

FIN 5063: Corporate Finance

Dr. Duane Kilty

June 23, 2024

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Public companies are required to furnish a yearly report to their shareholders detailing their financial and
operational status. The report includes comprehensive financial and operational data, a recap of the
company's actions during the previous year, and potential future projections (Hayes Adam, 2024). The
main goal of annual report is to share information among stakeholders, investors, clients, suppliers, and
public. Annual Report functions as a quick overview of the financial standing, difficulties, approaches, and
accomplishments of a business.

Business Introduction:

With operations in 84 markets, Starbucks is the world's premier specialty coffee producer, marketer, and
retailer (Starbucks Annual Report, 2021). Starbucks Corporation is a transnational American chain of coffee
shops with its main office located in Seattle, Washington. It is currently the biggest network of coffee shops
in the world, having been established in 1971. The corporation operated 33833 stores worldwide as of
October 2021, with 16826 of those locations being in the US. As of October 3, 2021, Starbucks employed
approximately 383,000 people worldwide. In the U.S., Starbucks employed approximately 245,000 people,
with approximately 235,000 in company-operated stores and the remainder in corporate support, store
development, roasting, manufacturing, warehousing, and distribution operations. Approximately 138,000
employees were employed outside of the U.S., with approximately 135,000 in company-operated stores
and the remainder in regional support operations. In the fiscal year 2021, revenue from stores run by the
company made about 85% of total net revenues (Starbucks Annual Report, 2021).

The proportion of company-operated versus licensed stores in a given market typically varies depending on
a number of factors, such as capacity to secure prime local real estate, the intricacy, profitability, and
anticipated ultimate size of the market for Starbucks, as well as aptitude to take advantage of the age-
specific support network. Providing premium coffee and beverages in an atmosphere of comfort is the
foundation of Starbucks' business model. Starbucks has been successful in the coffee sector because of its
dedication, focus on sustainability, and global network of outlets. Although it leases its warehouse and
distribution spaces, Starbucks owns the bulk of its roasteries. Three reportable operating segments make
up Starbucks (Starbucks Annual Report, 2021),

1) North America, which includes the United States and Canada (Net Revenue for FY 2021 – 70%)

2) International, which includes Europe, the Middle East, Africa, Asia Pacific, China, Japan, and Latin
America and the Caribbean (Net Revenue for FY 2021 – 24%)

3) Channel Development. operational parts that are not reportable, like Evolution (Net Revenue for FY
2021 – 6%)

Financial Overview:

Majority of warehouse and distribution facilities are leased by Starbucks, whereas most of their roasting
facilities are owned. The properties own by Starbucks works as roasting, manufacturing, warehousing,
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distribution and corporate administrative operations which are located in York (PA), Seattle (WA), Minden
(NV), Lebanon (TN), Kent (WA), Auburn (WA), Shanghai (China). Starbucks common stock is traded on
Nasdaq, under the symbol “SBUX”. As of November 12, 2021, we had approximately 18,000 shareholders
of record. This does not include persons whose stock is in nominee or “street name” accounts through
brokers (Starbucks Annual Report, 2021).

Starbucks has suffered and been negatively impacted by COVID-19, much as many other food and coffee
enterprises. Despite this, the company has expanded over decades, with solid foundations that allow it to
withstand any environmental challenges. Starbucks would take use of its globalization to expand the
business to other nations to fully realize the potential of the corporation. Compared to the previous year,
total net revenues expanded by $5.5 billion, or 24%, mostly because of stronger sales from company-
operated stores which generates net revenue of $5.4 billion. The 20% increase in comparable store sales
which is net $3.8 billion in the previous year, which can be attributed to a 9% increase in comparable
transactions and a 10% increase in average ticket, prompted the growth in company-operated store
revenue. Other contributing factors included the additional revenues from 524 net new Starbucks
company-operated store openings, or a 3% increase, over the previous year with net amount of $782
million, the impact of an extra week in fiscal 2021 Is $496 million, and the favorable foreign currency
translation of $359 million. The growth in overall net revenues was also fueled by the $357 million in
revenue from licensed stores, which came from increasing sales of products and equipment as well as
royalties of $270 million from Starbucks licensees as well as the effects of positive foreign transaction
of $28 million and the additional week in fiscal 2021 with $57 million. A $256 million decline in other sales
was mostly caused by the transfer of its single-serve product operations to Nestlé. Growth in our ready-to-
drink division with $43 million and the effects of the extra fiscal week in fiscal 2021 with $23 million helped
to somewhat offset this decline (Starbucks Annual Report, 2021).

Starbucks remarkable international expansion is not merely a matter of luck or coincidence. The company’s
success can be attributed to a combination of strategic decisions, cultural sensitivity, and a commitment to
providing an exceptional customer experience (International Marketing, 2024).

Analysis of Financial condition and result of operations:

September 30th is the closest Sunday to the end of Starbucks' fiscal year. Unless otherwise specified, all
references to store counts, including data for new store openings, are given net of associated store
closures. There were 53 weeks in the fiscal year 2021; the 53rd week fell in the fourth fiscal quarter.
Comparable store sales percentages for fiscal 2021 were determined with the extra week in the fourth
quarter of the fiscal year 2021 excluded. In the fourth quarter of fiscal 2021, certain changes were made to
Starbucks management team, and our operating segment reporting structure was realigned as a result. We
realigned our fully licensed Latin America and Caribbean markets from our Americas operating segment to
our International operating segment (Starbucks Annual Report, 2021). These modifications had no effect
on net earnings per share, operating income, total operating expenses, or consolidated net revenues.

Comparable store sales, margin management, and new store openings will continue to be the main drivers
of Starbucks' financial success and long-term growth plan. Comparing fiscal 2021 to fiscal 2020,
consolidated revenues climbed by 24% to $29.1 billion, mostly because of businesses recovering from the
COVID-19 pandemic. In FY 2021, North America segment’s store sales increased by 22%. By the time the
fiscal year finished in October 2021, Starbucks had completed its restructuring plan, opening 807 shops
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across the United States and Canada. In international segment for FY 2021, store sales increased by 16%
specifically for China market with increase of 17% in sales includes 3% VAT benefits. At the same time,
Starbucks experienced 17% decreased in revenue for channel development. Starbucks started to encounter
some supply shortages and transportation delays in fiscal 2021, which were mostly caused by the COVID-19
pandemic's effects as well as modifications in consumer demand and behavior.

Risk Factors:

It is important to assess a company's risk factors at the outset and whether recent developments, including
those relating to macroeconomic, geopolitical, and public health conditions, have had (or are expected to
have) a material impact on a company's business, financial condition and results of operations (Gez Maia,
2022).

Macroeconomic conditions describes adverse effect of COVID-19 pandemic on financial condition and
result of operation which includes, increase in real estate cost, inflation, supply chain issues, changes in
government regulations and tax rules, fluctuation in FOREX, natural disaster, geopolitical events like Wars
etc. Market conditions and Market expectations create fluctuation in stock market and adversely affect
market price and stock volatility. Brand relevance and brand execution risks includes failure to preserve
brand value can affect financial results which occur because of incidents such as actual or perceived
breaches of privacy or violations of domestic or international privacy laws, contaminated food, product
recalls, store employees or other food handlers infected with communicable diseases, such as COVID-19. It
also includes fail to fulfill responsibilities and commitments leads to damage brand. Incidents including
Food safety or quality control issues may result in medical disorders, legal ramifications, and reputational
harm to a business. If company fails to implement strategic initiatives and unsuccessful in implementing
marketing, promotional or advertising plans and pricing strategies.

Another important risk factor is associated with cybersecurity and data privacy which includes Inadequate
adherence to specific privacy and data protection rules and regulations could result in significant financial
ramifications as well as legal or criminal fines. Starbucks' reputation and brand could be impacted, and it
could be exposed to potential liability and lost revenue if third parties, acting on behalf of Starbucks, gain
unauthorized access to, use, steal, or destroy personal, financial, or other data belonging to customers or
employees, or if Starbucks proprietary or confidential information is stored in information systems.
Starbucks orders and delivers food primarily through digital platforms. Any hacking could result in damage
and the compromise of client data. Labor and supply chain related risks includes reliance on key business
partners, increase in cost with decrease in supply, interruption in supply chain, less availability of labor,
difficulties in recruiting and retaining quality professional have adverse effect on customer service
efficiency which affects the business.

Sensitivity to market risk reflects the degree to which changes in interest rates, foreign exchange rates,
commodity prices, or equity prices can adversely affect an earnings or capital (Sensitivity to Market Risk,
Pg. 7.1-2). Coffee, dairy products, cocoa, sugar, and other commodities that are utilized in their operations
could put Starbucks at danger from commodity price fluctuations. Their financial revenue may be affected
by fluctuations in the prices of commodities. FOREX risk that might occur and affect Starbucks due to
fluctuation in currency because of its global presence. Equity security and stock price is risk associated with
investments in stocks and securities. Interest rate risk is a type of financial risk whereby fluctuations in
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interest rates may have an impact on the yield on investments such as bonds. This modification wouldn't
significantly affect the fair value of Starbucks' securities.

Importance of Data in annual report:

An annual report's data holds significance for numerous stakeholders, including investors, analysts,
employees, agencies, customers, suppliers, and rival companies. Fundamental analysts can understand a
company's future direction by analyzing the details provided in its annual report. The annual report
contains key information on a company's financial position that can be used to measure, a company's
ability to pay its debts as they come due, whether a company made a profit or loss in its fiscal year, a
company's growth over several years, how much of earnings are retained by a company to grow its
operations, the proportion of operational expenses to revenue generated (Hayes Adam, 2024).

Usually, the report is distributed to stakeholders such as shareholders, who use it to assess the company's
financial performance and make investment choices. A yearly report comprises the subsequent segments,
general company details, highlights of operations and finances, letter from the CEO to the shareholders,
text with narratives, images, and graphics, discussion and analysis by management (MD&A), financial
statements, which comprise the cash flow, income, and balance sheets, financial statements' notes, report
of the auditor, overview of the financial information and policies for accounting (Hayes Adam, 2024).
Investors should take great care to read financial annual reports because they offer important information
about the financial health and prospects of a company. These reports give shareholders a thorough picture
of the company's financial performance, allowing them to evaluate the return on their investments.
Management can determine the organization's strong and weak points by examining the financial
statements. This information helps identify opportunities for expansion, allocate resources more
effectively, and mitigate hazards. Companies must create and submit these reports to regulatory agencies,
like the Securities and Exchange Commission (SEC) in the US, as required by law. These reports guarantee
accountability and transparency by giving regulators a thorough understanding of an organization's
financial operations (Fintrak, 2024). By analyzing past financial performance, organizations can identify
trends, patterns, and areas of improvement. By conducting a comprehensive analysis of the financial
accounts, management may identify possible risks and take proactive measures to mitigate their effects.
Financial data is crucial for assessing the possible effects of various options, from operational decisions
made by frontline staff to strategic decisions made by upper management.

Financial Statement:

When evaluating the potential outcomes of different options, financial Statement is essential for both
operational decisions made by frontline staff and strategic decisions made by senior management. Written
documents that describe a company's financial activity are called financial statements. To assure accuracy
and for tax, financing, or investment objectives, accountants and government authorities frequently audit
financial accounts. The balance sheet, income statement, statement of cash flow, and statement of
changes in equity are the primary financial statements for a for-profit company. A comparable but distinct
set of financial statements is used by nonprofit organizations (Murphy, 2024). Forecasting, budgeting, and
strategic planning all involve financial statements. You may compare your real finances with goals,
objectives, and projections, as well as track significant patterns, by keeping an eye on your company's
interim and yearly financial statements (BDC, n.d.).
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Result of Operations (in millions) for Starbucks (Starbucks Annual Report, 2021 & Starbucks Annual Report,
2020):

Revenue –

Fiscal Year Ended 2021 2020 2019

Company operated
stores $24,607.0 $19,164.6 $21,544.4
Licensed stores $2,683.6 $2,327.1 $2,875.0
Other $1,770.0 $2,026.3 $2,089.2
Total Net Revenue $29,060.6 $23,518.0 $26,508.6

Operating Expense –

Fiscal Year Ended 2021 2020 2019

Production and distribution cost $8,738.7 $7,694.9 $8,526.9
Store operating expense $11,930.9 $10,764.0 $10,493.6
Other operating expense $359.5 $430.3 $371.0
Depreciation and Amortization expense $1,441.7 $1,431.3 $1,377.3
General and Administrative expense $1,932.6 $1,679.6 $1,824.1
Restructuring and impairments $170.4 $278.7 $135.8
Total operating expense $24,573.8 $22,278.8 $22,728.7
Income from equity investees $385.3 $322.5 $298.0
Operating income $4,872.1 $1,561.7 $4,077.9

Balance Sheet:

An overview of a company's assets, liabilities, and shareholders' equity as of a particular date is given by
the balance sheet. The balance sheet is also commonly referred to as a statement of financial position or
statement of financial condition (Contributor Chron, 2020). For Profit organization the balance sheet
reports out firm’s assets, liabilities and equity at one point of the time and based on accounting formula
Assets = Liabilities + Equity whereas for Nonprofit organization the balance sheet reports out firm’s assets,
liabilities and net assets and based on accounting formula Assets = Liabilities + Net Assets. Assets are what
organization owns and can be commonly categorized by 2 types, Current Assets (Cash, Marketable
securities, account receivable, Inventory) and Fixed Assets (Physical and long-term assets like net plant and
equipment and building, Patents, Trademarks). Liabilities are what organization owes and categorized by 2
types, Current liabilities (Accumulated Wages and Tax, Accounts Payable, Notes Payable) and Long-Term
liabilities (Long term loans or bonds). The 3rd part in Balance Sheet differs for profit and nonprofit
organizations. For Profit organization the equity is difference between assets and liabilities and commonly
referred as Stockholder’s Equity (Preferred stock, Ownership claim in company, Retained Earnings)
whereas for Non-profit organization the Net assets are assets leftover after liabilities removed and
commonly includes anything holds value (Cash, Investments, fixed assets, prepaid expenses, account
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receivable). Sometimes net assets also come with restriction depends on donor which needs to refer
separately in balance sheet.

Asset (Starbucks Annual Report, 2021 & Starbucks Annual Report, 2020 & Starbucks Annual Report, 2019)-

Fiscal Year Ended (In millions) Oct 3, 2021 Sep 27, 2020 Sep 29, 2019 Sep 30, 2018

Cash and cash equivalents $6,455.70 $4,350.90 $2,686.60 $8,756.30

Short-term investments $162.20 $281.20 $70.50 $181.50

Accounts receivable, net $940.00 $883.40 $879.20 $693.10

Inventories $1,603.90 $1,551.40 $1,529.40 $1,400.50

Prepaid expenses and other current assets $594.60 $739.50 $488.20 $1,462.80

Total current assets $9,756.40 $7,806.40 $5,653.90 $12,494.20

Long-term investments $281.70 $206.10 $220.00 $267.70

Equity investments $268.50 $478.70 $396.00 $334.70

Property, plant and equipment, net $6,369.50 $6,241.40 $6,431.70 $5,929.10

Operating lease and right of use asset $8,236.00 $8,134.10

Deferred income taxes, net $1,874.80 $1,789.90 $1,765.80 $134.70

Other long-term assets $578.50 $568.60 $479.60 $412.20

Other intangible assets $349.90 $552.10 $781.80 $1,042.20

Goodwill $3,677.30 $3,597.20 $3,490.80 $3,541.60

Total Assets $31,392.60 $29,374.50 $19,219.60 $24,156.40

Liabilities and shareholder’s Equity/ Deficit (Starbucks Annual Report, 2021 & Starbucks Annual Report,
2020 & Starbucks Annual Report, 2019) -

Fiscal Year Ended (In millions) Oct 3, 2021 Sep 27, 2020 Sep 29, 2019 Sep 30, 2018

Current liabilities:

Accounts payable $1,211.60 $997.90 $1,189.70 $1,179.30

Accrued liabilities $1,973.20 $1,160.70 $1,753.70 $1,752.50

Accrued payroll and benefits $772.30 $696.00 $664.60 $656.80

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Income taxes payable $348.00 $98.20 $1,291.70 $102.80

Current portion of operating lease

$1,251.30 $1,248.80
liability
Stored value card liability and current
$1,596.10 $1,456.50
portion of deferred revenue

Short-term debt $438.80

Current portion of long-term debt $998.90 $1,249.90 $349.90

Total current liabilities $8,151.40 $7,346.80 $6,168.70 $5,684.20

Long-term debt $13,616.90 $14,659.60 $11,167.00 $9,090.20

Operating lease liability $7,738.00 $7,661.70

Deferred revenue $6,463.00 $6,598.50 $6,744.40 $6,775.70

Other long-term liabilities $737.80 $907.30 $1,370.50 $1,430.50

Total liabilities $36,707.10 $37,173.90 $25,450.60 $22,980.60

Shareholder’s deficit:
Common stock ($0.001 par value) —
authorized, 2,400.0 shares; issued and
1.20 1.20 1.20 1.30
outstanding, 1,180.0 and 1,173.3 shares,
respectively

Additional paid-in capital $846.10 $373.90 $41.10 $41.10

Retained deficit $6,315.70 $7,815.60 $5,771.20 $1,457.40

Accumulated other comprehensive

$147.20 ($364.60) ($503.30) ($330.30)
income/(loss)

Total shareholders’ deficit $5,321.20 $7,805.10 $6,232.20 $1,169.50

Noncontrolling interests 6.70 5.70 1.20 6.30

Total deficit $5,314.50 $7,799.40 $6,231.00 $1,175.80

Total liabilities and shareholder’s

$31,392.60 $29,374.50 $19,219.60 $24,156.40
equity/(deficit)

Financial experts always try to keep the left (assets) and right (Liabilities, equity, net asset) balanced and
equal in amount which we can observed in above balance sheet. Above balance sheet describes that the
cash equivalent drastically decreased between FY 2018 and 2019 and then increased gradually but not
reach the same amount as of 2018 till 2021. Decreased cash equivalent increased liabilities and
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shareholder’s deficit between FY 2018 and 2019. If we carefully observed the total liabilities and compare
to its subparts the 37-40% of liabilities fall under long term debt. After loss in accumulated income from FY
2018 to FY 2020 in FY 2021 the loss changes to gain for shareholders.

Income Statement:

An income statement displays your company's profitability. It provides information about the revenue and
expenses of your company. An earnings statement or a profit-loss statement are other names for the
income statement. It shows your revenue from selling products or services, expenses to generate the
revenue and manage your business, net income (or profit) that remains after your expenses, profit and loss
on non-core activities excluding current operations. Income statements are often shared as quarterly and
annual reports, showing financial trends and comparisons over time. Income statements are frequently
examined by accountants, investors, and company owners to gauge how well a company is performing in
comparison to its anticipated future performance and to make any adjustments to their approach. When a
company fails to meet goals, a business owner may decide to change course to make improvements the
following quarter. In a similar vein, an investor may choose to liquidate one investment and invest in a
business that is exceeding expectations (Stobierski, 2020).

Earnings (Starbucks Annual Report, 2021 & Starbucks Annual Report, 2020 & Starbucks Annual Report,
2019) –

Fiscal Year Ended (In millions) Oct 3, 2021 Sep 27, 2020 Sep 29, 2019 Sep 30, 2018

Net revenues

Company-operated stores $24,607.00 $19,164.60 $21,544.40 $19,690.30

Licensed stores $2,683.60 $2,327.10 $2,875.00 $2,652.20

Other $1,770.00 $2,026.30 $2,089.20 $2,377.00

Total net revenues $29,060.60 $23,518.00 $26,508.60 $24,719.50

Product and distribution costs $8,738.70 $7,694.90 $8,526.90 $7,930.70

Store operating expenses $11,930.90 $10,764.00 $10,493.60 $9,472.20

Other operating expenses $359.50 $430.30 $371.00 $554.90

Depreciation and amortization expenses $1,441.70 $1,431.30 $1,377.30 $1,247.00

General and administrative expenses $1,932.60 $1,679.60 $1,824.10 $1,708.20

Restructuring and impairments $170.40 $278.70 $135.80 $224.40

Total operating expenses $24,573.80 $22,278.80 $22,728.70 $21,137.40

Income from equity investees $385.30 $322.50 $298.00 $301.20

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Operating income $4,872.10 $1,561.70 $4,077.90 $3,883.30

Net gain resulting from divestiture of
$864.50 $622.80 $499.20
certain operations
Interest income and other, net $90.10 $39.70 $96.50 $191.40

Interest expense ($469.80) ($437.00) ($331.00) ($170.30)

Earnings before income taxes $5,356.90 $1,164.40 $4,466.20 $5,780.00

Income tax expense $1,156.60 $239.70 $871.60 $1,262.00

Net earnings including noncontrolling
$4,200.30 $924.70 $3,594.60 $4,518.00
interests
Net earnings/(loss) attributable to
1 (3.6) (4.6) (0.3)
noncontrolling interests
Net earnings attributable to Starbucks $4,199.30 $928.30 $3,599.20 $4,518.30

Comprehensive Income (Starbucks Annual Report, 2021 & Starbucks Annual Report, 2020 & Starbucks
Annual Report, 2019) –

Fiscal Year Ended (In millions) Oct 3, 2021 Sep 27, 2020 Sep29, 2019 Sep 30, 2018
Net earnings including noncontrolling
$4,200.30 $924.70 $3,594.60 $4,518.00
interests
Other comprehensive income/(loss), net of tax

Unrealized holding gains/(losses) on

($3.40) $8.30 $10.50 $7.00
available-for-sale securities
Tax (expense)/benefit $0.70 ($1.80) ($2.30) $1.90
Unrealized gains/(losses) on cash flow
$283.80 ($126.30) ($14.10) $24.40
hedging instruments
Tax (expense)/benefit ($43.60) $31.30 $3.40 $6.50
Unrealized gains/(losses) on net
$63.10 $38.70 ($39.80) $7.80
investment hedging instruments
Tax (expense)/benefit ($16.00) ($9.80) $10.10 $2.20
Translation adjustment and other $188.20 $206.90 ($146.20) $220.00
Tax (expense)/benefit $2.20 $1.50 $2.50 $3.40
Reclassification adjustment for net $41.80 -$20.10 $1.30 $24.70
(gains)/losses realized in net earnings for
available- for-sale securities, hedging
instruments, translation adjustment and
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other
Tax expense/(benefit) ($5.00) $5.20 $1.60 $1.20
Other comprehensive income/(loss) $511.80 $133.90 ($173.00) $174.70
Comprehensive income including
$4,712.10 $1,058.60 $3,421.60 $4,343.30
noncontrolling interests
Comprehensive income/(loss) attributable
$1.00 ($3.60) ($4.60) $0.30
to noncontrolling interests
Comprehensive income attributable to
$4,711.10 $1,062.20 $3,426.20 $4,343.60
Starbucks

The above income statement shows that total net revenue has drastically decreased in FY 2020 due to
COVID-19 Pandemic. These decreases were partially offset by increased supply chain costs due to
accelerated inflationary pressures in the latter half of fiscal 2021. Other operating expenses decreased $71
million, primarily due to lower Global Coffee Alliance transaction costs, inclusive of lapping integration
costs for the Global Coffee Alliance and a change of a related accrual estimate in fiscal 2021. The total
operating expense is also increased by 10% in FY 2021.

Cash Flow Statement:

The statement of cash flows is financial statement that shows firm’s cash flows (cash generated and
distributed) over a given period. The statement of cash flows reconciles noncash balance sheet items and
income statement items to show changes in cash and marketable securities over period (Cornett et.al, 2023).
The statement is divided into 3 activities for both organizations, operating(direct result of production and
sales as well as cost to operate nonprofit), investing (purchase or sale of long term debts, interest earned),
and financing(Debt and equity finance transaction, interest paid on loan). In general, for profit organization
cash flow statement determines how much cash is available in firm to fund its operations as well as pay
down debts (Murphy Chris, 2024). Nonprofits want to track changes in cash flow to see whether it has an
adequate supply of incoming cash to cover program and support needs (Contributor Chron, 2020). Cash
equivalents consist of short-term investments that are highly liquid and easily convertible to cash. They are
usually held for less than three months.

Fiscal Year Ended (In millions) Oct 3, 2021 Sep 27, 2020 Sep 29, 2019

Other comprehensive income/(loss), net of tax

Net earnings including
$4,200.30 $924.70 $3,594.60
noncontrolling interests
Adjustments to reconcile net earnings to net cash provided by operating activities

Depreciation and amortization $1,524.10 $1,503.20 $1,449.30

Deferred income taxes, net -$146.20 -$25.80 -$1,495.40

Income earned from equity
-$347.30 -$280.70 -$250.60
method investees
Distributions received from equity $336.00 $227.70 $216.80
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method investees
Net gain resulting from
-$864.50 — -$622.80
divestiture of certain operations
Stock-based compensation $319.10 $248.60 $308.00

Goodwill impairments — — $10.50

Non-cash lease cost $1,248.60 $1,197.60 —

Loss on retirement and
$226.20 $454.40 $142.60
impairment of assets
Other -$6.00 $24.50 $45.30

Cash provided by/(used in) changes in operating assets and liabilities

Accounts receivable -$43.00 -$2.70 -$197.70

Inventories -$49.80 -$10.90 -$173.00

Prepaid expenses and other
$251.10 -$317.50 $922.00
current assets
Income taxes payable $286.10 -$1,214.60 $1,237.10

Accounts payable $189.90 -$210.80 $31.90

Deferred revenue -$6.10 $31.00 -$30.50

Operating lease liability -$1,488.10 -$1,231.40 —

Other operating assets and
$358.70 $280.50 -$141.10
liabilities
Net cash provided by operating
$5,989.10 $1,597.80 $5,047.00
activities
INVESTING ACTIVITIES

Purchases of investments -$432.00 -$443.90 -$190.40

Sales of investments $143.20 $186.70 $298.30

Maturities and calls of investments $345.50 $73.70 $59.80

Additions to property, plant, and
-$1,470.00 -$1,483.60 -$1,806.60
equipment
Net proceeds from the divestiture
$1,175.00 — $684.30
of certain operations
Other -$81.20 -$44.40 -$56.20

Net cash used in investing activities -$319.50 -$1,711.50 -$1,010.80

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FINANCING ACTIVITIES

Repayments of commercial paper -$296.50 — —

Proceeds from issuance of short-
$215.10 $1,406.60 —
term debt
Repayments of short-term debt -$349.80 -$967.70 —
Proceeds from issuance of long-
— $4,727.60 $1,996.00
term debt
Repayments of long-term debt -$1,250.00 — -$350.00
Proceeds from issuance of
$246.20 $298.80 $409.80
common stock
Cash dividends paid -$2,119.00 -$1,923.50 -$1,761.30

Repurchase of common stock — -$1,698.90 -$10,222.30

Minimum tax withholdings on
-$97.00 -$91.90 -$111.60
share-based awards
Other — -$37.70 -$17.50
Net cash provided by/ (used in)
-$3,651.00 $1,713.30 -$10,056.90
financing activities
Effect of exchange rate changes
$86.20 $64.70 -$49.00
on cash and cash equivalents
Net increase/(decrease) in cash and
$2,104.80 $1,664.30 -$6,069.70
cash equivalents
CASH AND CASH EQUIVALENTS

Beginning of period $4,350.90 $2,686.60 $8,756.30

End of period $6,455.70 $4,350.90 $2,686.60

The Cash flow statement describes there is drastic increase in net cash provided by operating activities in
Fy2021 even after COVID -19 pandemic. It also explains because of this increase in cash equivalent
Starbucks paid all their long-term debt. The cash equivalent for FY 2021 at beginning is increased by
approx. 50% till end of the period.

Estimation:
 14

The cash and investments of Starbucks were $6.9 billion and $4.8 billion, respectively, as of October 3,
2021, and September 27, 2020. To fund internal operating needs, make periodic interest and principal
payments on our borrowings, make acquisitions, and return cash to shareholders through common stock
cash dividend payments and share repurchases, they aggressively manage cash and investments. Highly
liquid securities that are readily accessible for purchase comprise most of the investment portfolio. These
securities include commercial paper, domestic and foreign government treasury securities, and corporate
debt instruments. Roughly $2.9 billion in cash was stored in foreign entities as of October 3, 2021
(Starbucks Annual Report, 2021). The sale of ownership stake in joint venture in South Korea boosted the
net gain from the disposal of some operations by $865 million. In fiscal 2021, operating activities generated
$6.0 billion in cash, up from $1.6 billion in fiscal 2020. Higher net earnings and surpassing the U.S. federal
tax payment linked to the Nestlé deal in fiscal 2020 were the main causes of the shift. In fiscal 2021, the
total amount of cash used for investing operations was $0.3 billion, as opposed to $1.7 billion in fiscal
2020. Higher maturities and calls for investments, along with the net profits from the sale of our ownership
stake in our joint venture in South Korea, were the main drivers of the shift. A decline in investment sales
and an increase in capital contributions to equity method investments somewhat countered this. In
comparison, the cash provided by financing activities for fiscal 2020 was $1.7 billion, while the cash used in
financing activities for fiscal 2021 was $3.7 billion. Lower net proceeds from borrowing activities and higher
debt repayments were the main causes of the adjustment, with our share repurchase program's temporary
halt serving as a minor mitigating factor.

50.00% 50.00%
Cost Estimate % Growth Rate 40.00%
40.00%
35000
30.00% 30.00%
30000
25000 20.00% 20.00%
$ in millions

20000
10.00% 10.00%
15000
10000 0.00% 0.00%
5000
0 -10.00% -10.00%
2017 2018 2019 2020 2021
-20.00% -20.00%
Year

Revenue Operating Cost

As per the given trend we can forecast the possible revenue for next 5 years with same trend of growth
rate. It clearly shows that Starbucks financial status is stable and have increasing growth rate since 2017 till
FY 2021 only decrease in FY 2020 because of COVID- 19 Pandemic.

The Forecast for next 5 years,

 15

Year 2022 2023 2024 2025 2026

Revenue $32257.27 $36128.14 $39740.95 $44509.84 $49851.05
% Growth 11 12 10 12 12

Among the biggest coffee chains worldwide is Starbucks. Despite being a reputable business, it was
negatively impacted by the pandemic. About 20% of its patrons are regulars, coming in roughly 16 times
over the course of a month. Men and women in their 25 to 40s make up half of the clientele. In comparison
to other regions of the world, Starbucks has been operating in China with somewhat lower performance. It
should primarily concentrate on China's development and innovation strategies. Starbucks needs to avoid
issues brought on by excessive debt. Starbucks needs to prioritize a few key areas, including innovation,
market competition, customer experience, and health. Starbucks must adjust to the trend of its patrons
adopting healthier lifestyles by introducing healthier options on its menu, such as lowering the amount of
sugar in its coffees. For strengthening the identity of its brand, the business should make its customers feel
at home. There is no denying that Starbucks faces competition from conventional coffee. The business
needs to stand out from the competition and keep its devoted clientele. Every year brings with it the
necessity to develop and launch new items in response to shifting consumer demands. Overall, FY 2021's
performance appears to be strong. Every year, the ratio of revenue to expenses gets better. Starbucks
needs to improve customer happiness and support throughout its overseas operations.
 16

References:

BDC Advisory Services (n.d.) - Statement of retained earnings -

https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/
statement-of-retained-earnings#:~:text=The%20statement%20of%20retained%20earnings,in%20and
%20growing%20their%20business.

Briana (n.d.) - Understanding the 4 Essential Nonprofit Financial Statements -

https://www.springly.org/en-us/blog/essential-nonprofit-financial-statements/

CCELINGO (Jan 25, 2024) - Starbucks’ International Strategy: A Comprehensive Analysis -

https://www.accelingo.com/starbucks-international-strategy/#:~:text=Premium%20Positioning%20and
%20Strong%20Brand,experience%20across%20all%20international%20locations

Chris B. Murphy (May 23, 2024) - Cash Flow Statement: What It Is and How to Read One
-https://www.investopedia.com/investing/what-is-a-cash-flow-statement/#:~:text=Also%20known
%20as%20the%20statement,is%20on%20solid%20financial%20ground.

Chron Contributor (Sep 15, 2020) - Which Financial Statements Are Most Pertinent to a Nonprofit
Organization? - https://smallbusiness.chron.com/financial-statements-pertinent-nonprofit-organization-
14406.html

Cornett, M., et al. (2023) - Finance: Applications and Theory (6th Ed.) - McGraw-Hill Higher Education

Fintrak (Mar 13, 2024) - 9 Importance of Financial Annual Report In an Organization -

https://www.fintraksoftware.com/financial-annual-report-in-an-organization/#:~:text=Stakeholders
%20can%20use%20annual%20reports,financial%20health%20and%20future
%20prospects.&text=Annual%20reports%20provide%20insight%20into,executive%20compensation%2C
%20and%20risk%20management.

Gez Maia, et al. (Nov 1, 2023) - Updating Annual Report Risk Factors: Key Developments and Drafting
Considerations for Public Companies - https://www.whitecase.com/insight-alert/updating-annual-
report-risk-factors-key-developments-and-drafting-considerations

Grof Writer (Oct 18, 2023) - The Importance Of Financial Statements - https://grof.co/sg/blog/what-is-
the-importance-of-financial-statements

Hayes Adam (Jun 10, 2024) - What Is an Annual Report?

-https://www.investopedia.com/terms/a/annualreport.asp

RMS manual of examination policies federal deposit insurance corporation (Pg 7.1-2) – Sensitivity to
market risk - https://www.fdic.gov/resources/supervision-and-examinations/examination-policies-
manual/section7-1.pdf

Starbucks Investor Relations (Oct 2021) - Starbucks FY 2021 annual report -

https://investor.starbucks.com/files/doc_financials/2021/ar/Starbucks-Fiscal-2021-Annual-Report.pdf

Starbucks Investor Relations (Sep 2020) - Starbucks FY 2020 annual report -

https://investor.starbucks.com/files/doc_financials/2020/ar/2020-Starbucks-Annual-Report.pdf
 17

Starbucks Investor Relations (Sep 2019) - Starbucks FY 2019 annual report -

https://investor.starbucks.com/files/doc_financials/2019/ar/2019-Annual-Report.pdf

Starbucks Investor Relations (Sep 2018) - Starbucks FY 2018 annual report -

https://investor.starbucks.com/files/doc_financials/2018/2018-Annual-Report.pdf

Stobierski Tim (May 28, 2020) - HOW TO READ & UNDERSTAND AN INCOME STATEMENT -
https://online.hbs.edu/blog/post/income-statement-analysis

8
right-of use asset
Deferred income taxes,
net
1,874.80
1,789.90
1,765.80
134.7
 18

Other long-term assets

578.5
568.6
479.6
412.2
Other intangible assets
349.9
552.1
781.8
1,042.20
Goodwill
3,677.30
3,597.20
3,490.80
3,541.60
 19

Total Assets
31,392.60
29,374.50
19,219.60
24,156.40
Liabilities and Shareholders
Equity (Deficit)
Fiscal Year Ended (In
millions)
Oct 3, 2021
Sep 27, 2020
Sep 29, 2019
Sep 30, 2018
Current liabilities:
Accounts payable
 20

$ 1,211.6
$ 997.9
1,189.70
1,179.30
Accrued liabilities
1,973.2
1,160.7
1,753.70
1,752.50
Accrued payroll and
benefits
772.3
696.0
664.60
656.80
 21

Income taxes payable

348.0
98.2
1,291.70
102.80
Current portion of
operating lease
liability
1,251.3
1,248.8
-
-
Stored value card
liability and current
portion of deferred
 22

revenue
1,596.1
1,456.5
-
-
Short-term debt
-
438.8
-
-
Current portion of
long-term debt
998.9
1,249.9
-
 23

349.90
Total current liabilities
8,151.4
7,346.8
6,168.70
5,684.20
Long-term debt
13,616.9
14,659.6
11,167.00
9,090.20
8
right-of use asset
Deferred income taxes,
net
 24

1,874.80
1,789.90
1,765.80
134.7
Other long-term assets
578.5
568.6
479.6
412.2
Other intangible assets
349.9
552.1
781.8
1,042.20
Goodwill
 25

3,677.30
3,597.20
3,490.80
3,541.60
Total Assets
31,392.60
29,374.50
19,219.60
24,156.40
Liabilities and Shareholders
Equity (Deficit)
Fiscal Year Ended (In
millions)
Oct 3, 2021
Sep 27, 2020
 26

Sep 29, 2019

Sep 30, 2018
Current liabilities:
Accounts payable
$ 1,211.6
$ 997.9
1,189.70
1,179.30
Accrued liabilities
1,973.2
1,160.7
1,753.70
1,752.50
Accrued payroll and
benefits
 27

772.3
696.0
664.60
656.80
Income taxes payable
348.0
98.2
1,291.70
102.80
Current portion of
operating lease
liability
1,251.3
1,248.8
-
 28

-
Stored value card
liability and current
portion of deferred
revenue
1,596.1
1,456.5
-
-
Short-term debt
-
438.8
-
-
Current portion of
 29

long-term debt
998.9
1,249.9
-
349.90
Total current liabilities
8,151.4
7,346.8
6,168.70
5,684.20
Long-term debt
13,616.9
14,659.6
11,167.00
9,090.
30