Exhibit 99.1
Starbucks Contact, Investor Relations: | Starbucks Contact, Media: | |
Mary Ellen Fukuhara | Audrey Lincoff | |
206-318-4025 | 206-447-7950 ext. 52690 |
Starbucks Announces Record Third Quarter Results; Raises Full Year 2004 EPS Target to $0.94-$0.95
Revenues Up 27 Percent; Net Earnings Increase By 44 Percent
Company Sets Aggressive Fiscal 2005 Targets Including 1,500 New Retail Locations
For the 13 weeks ended June 27, 2004, consolidated net revenues increased 27 percent to $1.3 billion from $1.0 billion for the same period in fiscal 2003. Net earnings for the 13 weeks ended June 27, 2004, increased 44 percent to $98 million from $68 million for the same period in fiscal 2003. Diluted earnings per share were $0.24 for the 13 weeks ended June 27, 2004, compared to $0.17 per share for the comparable period in fiscal 2003.
For the 39 weeks ended June 27, 2004, consolidated net revenues increased 28 percent to $3.8 billion from $3.0 billion for the same period in fiscal 2003. Net earnings for the 39 weeks ended June 27, 2004, increased 45 percent to $288 million from $199 million for the same period in fiscal 2003. Diluted earnings per share were $0.70 for the 39 weeks ended June 27, 2004, compared to $0.50 per share for the comparable period in fiscal 2003.
“Our third quarter financial results demonstrate the on-going strength of our business,” commented Orin Smith, president and ceo. “Starbucks operations are functioning at a more sophisticated level than ever before. Our consistently strong performance positions us well to achieve our aggressive fiscal 2005 goals – including an acceleration of store growth as we pursue the Company’s expanding global opportunity.”
Consolidated Financial and Operating Summary
Company-operated retail revenuesincreased 26 percent to $1.1 billion for the 13 weeks ended June 27, 2004, from $878 million for the same period in fiscal 2003. The increase was primarily attributable to the opening of 651 new Company-operated retail stores in the last 12 months and comparable store sales growth of 11 percent for the quarter. The increase in comparable store sales was due to a 10 percent increase in the number of customer transactions and a one percent increase in the average dollar value per transaction.
- more -
- page 2 -
Specialty revenuesincreased 32 percent to $211 million for the 13 weeks ended June 27, 2004, compared to $159 million for the same period in fiscal 2003. Licensing revenues increased 33 percent to $139 million due to higher product sales and royalty revenues from opening 727 new licensed retail stores in the last 12 months, the acquisition of Seattle Coffee Company in the fiscal fourth quarter of 2003, and growth in the grocery and warehouse club business. Foodservice and other revenues increased 31 percent to $71 million primarily due to the acquisition of Seattle Coffee Company and growth in new and existing Starbucks foodservice accounts.
Cost of sales and related occupancy costswere unchanged at 41.1 percent of total net revenues for the 13 weeks ended June 27, 2004, compared to the corresponding period of fiscal 2003. Higher dairy and green coffee commodity costs were offset by efficiencies in supply chain distribution operations and leverage gained on fixed occupancy costs distributed over an expanded revenue base.
Store operating expensesas a percentage of Company-operated retail revenues decreased to 40.4 percent for the 13 weeks ended June 27, 2004, from 40.9 percent for the corresponding period of fiscal 2003 primarily due to higher costs in the prior year associated with regional leadership conferences and provisions for asset impairment for international Company-operated retail stores. In the fiscal second quarter of 2004, the Company held its first global leadership conference for retail management partners (employees), which replaced regional conferences held during the fiscal third quarter of 2003. The conferences are important investments in the development of the Company’s retail management partners (employees).
Other operating expenses(expenses associated with the Company’s specialty operations) decreased to 21.0 percent of total specialty revenues for the 13 weeks ended June 27, 2004, compared to 22.5 percent in the corresponding period of fiscal 2003. This decrease was primarily due to leverage gained on payroll-related expenditures distributed over an expanded revenue base, partially offset by provisions for asset impairment related to integrating Seattle Coffee Company grocery operations into Starbucks distribution channels.
Depreciation and amortization expensesincreased to $70.6 million for the 13 weeks ended June 27, 2004, compared to $59.8 million for the corresponding period of fiscal 2003. The increase was primarily due to the opening of 651 Company-operated retail stores in the last 12 months and higher depreciation expenses associated with the Company’s foodservice operations. As a percentage of total net revenues, depreciation and amortization expenses decreased to 5.4 percent for the 13 weeks ended June 27, 2004, from 5.8 percent for the same period in fiscal 2003.
- more -
- page 3 -
General and administrative expensesincreased to $73.4 million for the 13 weeks ended June 27, 2004, compared to $58.1 million for the corresponding period of fiscal 2003. The increase was primarily due to additional staff to support the accelerated retail store growth. As a percentage of total net revenues, general and administrative expenses were unchanged at 5.6 percent for the 13 weeks ended June 27, 2004, and June 29, 2003.
Income from equity investeesincreased $5.6 million to $13.5 million for the 13 weeks ended June 27, 2004, from $7.8 million for the same period in fiscal 2003. The increase was primarily due to volume driven operating results for the North American Coffee Partnership, which produces bottled Frappuccino® and Starbucks Double Shot® coffee drinks, and new licensed retail store openings, particularly in Japan. The July 2003 increase from five percent to 50 percent in the Company’s ownership interest in the Taiwan and Shanghai licensed operations also contributed to the growth.
Operating incomeincreased 45.1 percent to $153.8 million for the 13 weeks ended June 27, 2004, compared to $106.0 million for the same period in fiscal 2003. Operating margin increased to 11.7 percent of total net revenues for the 13 weeks ended June 27, 2004, compared to 10.2 percent in the corresponding period of fiscal 2003, primarily due to reductions in store operating and depreciation and amortization expenses as a percentage of total net revenues.
Interest and other incomedecreased to $4.4 million for the 13 weeks ended June 27, 2004, from $5.1 million in the corresponding period of fiscal 2003, primarily due to lower gains realized on market revaluations of the Company’s trading securities.
Fiscal 2004 Targets
The Company also provided updated fiscal 2004 targets:
• | Starbucks continues to plan to open approximately 1,300 new stores on a global basis for fiscal 2004; |
• | The Company continues to expect full year fiscal 2004 revenue growth in the range of 25 to 30 percent; |
• | For the remainder of the fiscal year, Starbucks comparable store sales growth is likely to continue to exceed its target range of three to seven percent; |
• | The Company continues to experience higher than normal dairy costs. Additionally, investments in store maintenance, infrastructure supporting accelerating store growth, and new business platforms, such as the music initiative that includes CD burning services and the Hear MusicTM Coffeehouse concept, are expected to continue during the fourth quarter, and; |
- more -
- page 4 -
• | As a result of Starbucks strong third quarter performance, along with its current revenue and operating outlook for the fourth quarter of 2004, the Company is raising its full-year earnings per share target to $0.94 to $0.95. This new target range is $0.04 per share higher than the Company’s previous goal of $0.90 to $0.91 and is approximately $0.10 above Starbucks original fiscal 2004 target range of $0.83 to $0.85 per share. Both the new and previous target ranges include an approximate $0.02 per share benefit from the 53rd week in fiscal 2004. The entire benefit from the 53rd week will occur in the fourth quarter of 2004. |
Fiscal 2005 Targets
Looking ahead, Starbucks introduced the following fiscal 2005 targets:
• | The Company is accelerating its store development plans and expects to open approximately 1,500 new stores on a global basis in fiscal 2005. In the United States, Starbucks plans to open approximately 550 Company-operated locations and 525 licensed locations. In International markets, Starbucks plans to open approximately 100 Company-operated stores and 325 licensed stores; |
• | Starbucks is targeting total net revenue growth of approximately 20 percent, excluding the impact of the 53rd week in fiscal 2004; |
• | The Company continues to believe comparable store sales growth in the range of three to seven percent is the right level to target. However, based on current business performance it is possible that comparable store sales growth may again exceed the Company’s target range during fiscal 2005; |
• | Starbucks is targeting earnings per share of $1.12 to $1.15 for fiscal 2005. The earnings per share target range equates to 20 to 25 percent growth over $0.92 to $0.93 per share in fiscal 2004, which is the Company’s current year target adjusted for the $0.02 impact of the 53rd week, and; |
• | Capital expenditures are expected to be in the range of $600 to $650 million in fiscal 2005, compared to the current target of $475 million in fiscal 2004. |
- more -
- page 5 -
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
13 Weeks Ended | 13 Weeks Ended | |||||||||||||||||||
June 27, | June 29, | % | June 27, | June 29, | ||||||||||||||||
2004 | 2003 | Change | 2004 | 2003 | ||||||||||||||||
As a % of total net revenues | ||||||||||||||||||||
(in thousands, except per share data) | (unless otherwise indicated) | |||||||||||||||||||
Net revenues: | ||||||||||||||||||||
Company-operated retail | $ | 1,108,055 | $ | 877,754 | 26.2 | % | 84.0 | % | 84.7 | % | ||||||||||
Specialty: | ||||||||||||||||||||
Licensing | 139,195 | 104,340 | 33.4 | % | 10.6 | % | 10.0 | % | ||||||||||||
Foodservice and other | 71,441 | 54,682 | 30.6 | % | 5.4 | % | 5.3 | % | ||||||||||||
Total specialty | 210,636 | 159,022 | 32.5 | % | 16.0 | % | 15.3 | % | ||||||||||||
Total net revenues | 1,318,691 | 1,036,776 | 27.2 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of sales and related occupancy costs | 542,148 | 425,709 | 41.1 | % | 41.1 | % | ||||||||||||||
Store operating expenses | 448,029 | 359,250 | (a) 40.4 | % | (a) 40.9 | % | ||||||||||||||
Other operating expenses | 44,259 | 35,748 | (b) 21.0 | % | (b) 22.5 | % | ||||||||||||||
Depreciation and amortization expenses | 70,550 | 59,764 | 5.4 | % | 5.8 | % | ||||||||||||||
General and administrative expenses | 73,357 | 58,108 | 5.6 | % | 5.6 | % | ||||||||||||||
Subtotal operating expenses | 1,178,343 | 938,579 | ||||||||||||||||||
Income from equity investees | 13,459 | 7,821 | 1.0 | % | 0.8 | % | ||||||||||||||
Operating income | 153,807 | 106,018 | 45.1 | % | 11.7 | % | 10.2 | % | ||||||||||||
Interest and other income, net | 4,424 | 5,115 | 0.3 | % | 0.5 | % | ||||||||||||||
Earnings before income taxes | 158,231 | 111,133 | 42.4 | % | 12.0 | % | 10.7 | % | ||||||||||||
Income taxes(c) | 60,127 | 42,777 | 4.6 | % | 4.1 | % | ||||||||||||||
Net earnings | $ | 98,104 | $ | 68,356 | 43.5 | % | 7.4 | % | 6.6 | % | ||||||||||
Net earnings per common share - diluted | $ | 0.24 | $ | 0.17 | ||||||||||||||||
Weighted average shares outstanding - diluted | 412,289 | 402,664 | ||||||||||||||||||
(a) | Calculated as a percentage of Company-operated retail revenues. | |
(b) | Calculated as a percentage of total specialty revenues. | |
(c) | The effective tax rates for the 13 weeks ended June 27, 2004, and the 13 weeks ended June 29, 2003, were 38.0 percent and 38.5 percent for the respective periods. |
- more -
- page 6 -
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
39 Weeks Ended | 39 Weeks Ended | |||||||||||||||||||
June 27, | June 29, | % | June 27, | June 29, | ||||||||||||||||
2004 | 2003 | Change | 2004 | 2003 | ||||||||||||||||
As a % of total net revenues | ||||||||||||||||||||
(in thousands, except per share data) | (unless otherwise indicated) | |||||||||||||||||||
Net revenues: | ||||||||||||||||||||
Company-operated retail | $ | 3,239,031 | $ | 2,536,557 | 27.7 | % | 84.3 | % | 84.7 | % | ||||||||||
Specialty: | ||||||||||||||||||||
Licensing | 395,211 | 295,581 | 33.7 | % | 10.3 | % | 9.9 | % | ||||||||||||
Foodservice and other | 206,708 | 162,370 | 27.3 | % | 5.4 | % | 5.4 | % | ||||||||||||
Total specialty | 601,919 | 457,951 | 31.4 | % | 15.7 | % | 15.3 | % | ||||||||||||
Total net revenues | 3,840,950 | 2,994,508 | 28.3 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of sales and related occupancy costs | 1,582,534 | 1,236,968 | 41.2 | % | 41.3 | % | ||||||||||||||
Store operating expenses | 1,279,826 | 1,008,690 | (a) 39.5 | % | (a) 39.8 | % | ||||||||||||||
Other operating expenses | 128,759 | 103,785 | (b) 21.4 | % | (b) 22.7 | % | ||||||||||||||
Depreciation and amortization expenses | 208,379 | 175,110 | 5.4 | % | 5.8 | % | ||||||||||||||
General and administrative expenses | 223,756 | 178,603 | 5.8 | % | 6.0 | % | ||||||||||||||
Subtotal operating expenses | 3,423,254 | 2,703,156 | ||||||||||||||||||
Income from equity investees | 36,152 | 20,995 | 0.9 | % | 0.7 | % | ||||||||||||||
Operating income | 453,848 | 312,347 | 45.3 | % | 11.8 | % | 10.4 | % | ||||||||||||
Interest and other income, net | 11,317 | 10,850 | 0.3 | % | 0.4 | % | ||||||||||||||
Earnings before income taxes | 465,165 | 323,197 | 43.9 | % | 12.1 | % | 10.8 | % | ||||||||||||
Income taxes(c) | 176,762 | 124,447 | 4.6 | % | 4.2 | % | ||||||||||||||
Net earnings | $ | 288,403 | $ | 198,750 | 45.1 | % | 7.5 | % | 6.6 | % | ||||||||||
Net earnings per common share - diluted | $ | 0.70 | $ | 0.50 | ||||||||||||||||
Weighted average shares outstanding - diluted | 410,587 | 400,544 | ||||||||||||||||||
(a) | Calculated as a percentage of Company-operated retail revenues. | |
(b) | Calculated as a percentage of total specialty revenues. | |
(c) | The effective tax rates for the 39 weeks ended June 27, 2004, and the 39 weeks ended June 29, 2003, were 38.0 percent and 38.5 percent for the respective periods. |
- more -
- page 7 -
STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 27, | September 28, | |||||||
2004 | 2003 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 383,373 | $ | 200,907 | ||||
Short-term investments — Available-for-sale securities | 311,847 | 128,905 | ||||||
Short-term investments — Trading securities | 23,893 | 20,199 | ||||||
Accounts receivable, net of allowances of $4,970 and $4,809, respectively | 122,760 | 114,448 | ||||||
Inventories | 385,284 | 342,944 | ||||||
Prepaid expenses and other current assets | 64,758 | 55,173 | ||||||
Deferred income taxes, net | 79,776 | 61,453 | ||||||
Total current assets | 1,371,691 | 924,029 | ||||||
Long-term investments – Available-for-sale securities | 158,962 | 136,159 | ||||||
Equity and other investments | 162,246 | 144,257 | ||||||
Property, plant and equipment, net | 1,383,058 | 1,384,902 | ||||||
Other assets | 59,076 | 52,113 | ||||||
Other intangible assets | 25,948 | 24,942 | ||||||
Goodwill | 63,311 | 63,344 | ||||||
TOTAL ASSETS | $ | 3,224,292 | $ | 2,729,746 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 142,149 | $ | 168,984 | ||||
Accrued compensation and related costs | 198,504 | 152,608 | ||||||
Accrued occupancy costs | 65,558 | 56,179 | ||||||
Accrued taxes | 49,990 | 54,934 | ||||||
Other accrued expenses | 137,680 | 101,800 | ||||||
Deferred revenue | 124,374 | 73,476 | ||||||
Current portion of long-term debt | 732 | 722 | ||||||
Total current liabilities | 718,987 | 608,703 | ||||||
Deferred income taxes, net | 44,993 | 33,217 | ||||||
Long-term debt | 3,803 | 4,354 | ||||||
Other long-term liabilities | 7,024 | 1,045 | ||||||
Shareholders’ equity: | ||||||||
Common stock and additional paid-in capital — Authorized, 600,000,000 shares; issued | 1,025,289 | 959,103 | ||||||
and outstanding, 398,256,520 and 393,692,536 shares, respectively, (includes 1,697,100 common stock units in both periods) Other additional paid-in-capital | 39,393 | 39,393 | ||||||
Retained earnings | 1,358,086 | 1,069,683 | ||||||
Accumulated other comprehensive income | 26,717 | 14,248 | ||||||
Total shareholders’ equity | 2,449,485 | 2,082,427 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 3,224,292 | $ | 2,729,746 | ||||
- more -
- page 8 -
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
39 Weeks Ended | ||||||||
June 27, 2004 | June 29, 2003 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net earnings | $ | 288,403 | $ | 198,750 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 226,925 | 190,654 | ||||||
Provision for impairments and asset disposals | 9,703 | 5,007 | ||||||
Deferred income taxes, net | (4,539 | ) | (4,037 | ) | ||||
Equity in income of investees | (18,031 | ) | (7,568 | ) | ||||
Tax benefit from exercise of non-qualified stock options | 45,045 | 23,328 | ||||||
Net amortization of premium on securities | 8,049 | 4,312 | ||||||
Cash provided/(used) by changes in operating assets and liabilities: | ||||||||
Inventories | (41,278 | ) | (15,081 | ) | ||||
Accounts payable | (28,617 | ) | 40,248 | |||||
Accrued compensation and related costs | 45,185 | 28,638 | ||||||
Accrued taxes | (5,169 | ) | (6,326 | ) | ||||
Deferred revenue | 50,864 | 32,017 | ||||||
Other accrued expenses | 28,968 | 30,824 | ||||||
Other operating assets and liabilities | (4,845 | ) | (33,187 | ) | ||||
Net cash provided by operating activities | 600,663 | 487,579 | ||||||
INVESTING ACTIVITIES: | ||||||||
Purchase of available-for-sale securities | (413,078 | ) | (271,556 | ) | ||||
Maturity of available-for-sale securities | 107,943 | 132,558 | ||||||
Sale of available-for-sale securities | 89,321 | 69,178 | ||||||
Net additions to equity, other investments and other assets | (4,366 | ) | (8,807 | ) | ||||
Net additions to property, plant and equipment | (221,111 | ) | (259,179 | ) | ||||
Net cash used by investing activities | (441,291 | ) | (337,806 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of common stock | 103,345 | 72,298 | ||||||
Principal payments on long-term debt | (540 | ) | (525 | ) | ||||
Repurchase of common stock | (82,204 | ) | (61,242 | ) | ||||
Net cash provided by financing activities | 20,601 | 10,531 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 2,493 | 3,657 | ||||||
Net increase in cash and cash equivalents | 182,466 | 163,961 | ||||||
CASH AND CASH EQUIVALENTS: | ||||||||
Beginning of period | 200,907 | 99,677 | ||||||
End of the period | $ | 383,373 | $ | 263,638 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the year for: | ||||||||
Interest | $ | 409 | $ | 226 | ||||
Income taxes | $ | 144,999 | $ | 112,381 |
- more -
- page 9 -
Store Data
The Company’s store data for the periods presented are as follows:
Net stores opened during the period | ||||||||||||||||||||||||
13-week period ended | 39-week period ended | Stores open as of | ||||||||||||||||||||||
June 27, 2004 | June 29, 2003 | June 27, 2004 | June 29, 2003 | June 27, 2004 | June 29, 2003 | |||||||||||||||||||
United States: | ||||||||||||||||||||||||
Company-operated Stores | 99 | 122 | 302 | 335 | 4,081 | 3,544 | ||||||||||||||||||
Licensed Stores | 84 | 77 | 281 | 225 | 1,703 | 1,258 | ||||||||||||||||||
183 | 199 | 583 | 560 | 5,784 | 4,802 | |||||||||||||||||||
International: | ||||||||||||||||||||||||
Company-operated Stores | 27 | 24 | 89 | 71 | 856 | 742 | ||||||||||||||||||
Licensed Stores | 75 | 60 | 222 | 224 | 1,479 | 1,197 | ||||||||||||||||||
102 | 84 | 311 | 295 | 2,335 | 1,939 | |||||||||||||||||||
Total | 285 | 283 | 894 | 855 | 8,119 | 6,741 | ||||||||||||||||||
Segment Results
Segment information is prepared on the same basis that the Company’s management internally reviews financial information for operational decision making purposes.
United States
United States operations (“United States”) sell coffee and other beverages, whole bean coffees, complementary food, coffee brewing equipment and merchandise primarily through Company-operated retail stores. Specialty operations within the United States include retail store and other licensing operations, foodservice accounts and other initiatives related to the Company’s core businesses.
International
International operations (“International”) sell coffee and other beverages, whole bean coffees, complementary food, coffee brewing equipment and merchandise through Company-operated retail stores in Canada, the United Kingdom, Thailand and Australia, as well as through retail store licensing operations and foodservice accounts in these and 30 other countries. International operations are in various early stages of development and have country-specific regulatory requirements that require a more extensive support organization relative to the current levels of revenue and operating income than the United States.
Unallocated Corporate
Unallocated corporate expenses pertain to certain functions, such as executive management, accounting, administration, tax, treasury, and information technology infrastructure, which are not specifically attributable to the Company’s operating segments and include related depreciation and amortization expenses.
- more -
- page 10 -
The tables below present, by operating segment, total net revenues, operating income and operating income as a percentage of related revenues, net of intersegment eliminations for the period ended(in thousands):
% of | % of | |||||||||||||||||||||||||||
United | Inter- | % of | ||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Total | |||||||||||||||||||||||
13 Weeks Ended June 27, 2004 | States | Revenue | national | Revenue | Corporate | Net Revenues | Consolidated | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Company-operated retail | $ | 947,379 | 84.6 | % | $ | 160,676 | 81.0 | % | $ | — | — | % | $ | 1,108,055 | ||||||||||||||
Specialty: | ||||||||||||||||||||||||||||
Licensing | 106,031 | 9.4 | 33,164 | 16.7 | — | — | 139,195 | |||||||||||||||||||||
Foodservice and other | 66,859 | 6.0 | 4,582 | 2.3 | — | — | 71,441 | |||||||||||||||||||||
Total specialty | 172,890 | 15.4 | 37,746 | 19.0 | — | — | 210,636 | |||||||||||||||||||||
Total net revenues | 1,120,269 | 100.0 | 198,422 | 100.0 | — | — | 1,318,691 | |||||||||||||||||||||
Cost of sales and related occupancy costs | 442,402 | 39.5 | 99,746 | 50.3 | — | — | 542,148 | |||||||||||||||||||||
Store operating expenses | 388,337 | 41.0 | (1) | 59,692 | 37.2 | (1) | — | — | 448,029 | |||||||||||||||||||
Other operating expenses | 37,711 | 21.8 | (2) | 6,548 | 17.3 | (2) | — | — | 44,259 | |||||||||||||||||||
Depreciation and amortization expenses | 50,865 | 4.5 | 11,592 | 5.8 | 8,093 | 0.6 | 70,550 | |||||||||||||||||||||
General and administrative expenses | 20,260 | 1.8 | 12,032 | 6.1 | 41,065 | 3.1 | 73,357 | |||||||||||||||||||||
Income from equity investees | 8,530 | 0.8 | 4,929 | 2.5 | — | — | 13,459 | |||||||||||||||||||||
Operating income/(loss) | $ | 189,224 | 16.9 | % | $ | 13,741 | 6.9 | % | $ | (49,158 | ) | (3.7 | )% | $ | 153,807 | |||||||||||||
% of | % of | |||||||||||||||||||||||||||
United | Inter- | % of | ||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Total | |||||||||||||||||||||||
13 Weeks Ended June 29, 2003 | States | Revenue | national | Revenue | Corporate | Net Revenues | Consolidated | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Company-operated retail | $ | 752,376 | 85.7 | % | $ | 125,378 | 79.1 | % | $ | — | — | % | $ | 877,754 | ||||||||||||||
Specialty: | ||||||||||||||||||||||||||||
Licensing | 73,967 | 8.4 | 30,373 | 19.2 | — | — | 104,340 | |||||||||||||||||||||
Foodservice and other | 52,005 | 5.9 | 2,677 | 1.7 | — | — | 54,682 | |||||||||||||||||||||
Total specialty | 125,972 | 14.3 | 33,050 | 20.9 | — | — | 159,022 | |||||||||||||||||||||
Total net revenues | 878,348 | 100.0 | 158,428 | 100.0 | — | — | 1,036,776 | |||||||||||||||||||||
Cost of sales and related occupancy costs | 338,403 | 38.5 | 87,306 | 55.1 | — | — | 425,709 | |||||||||||||||||||||
Store operating expenses | 311,877 | 41.5 | (1) | 47,373 | 37.8 | (1) | — | — | 359,250 | |||||||||||||||||||
Other operating expenses | 29,239 | 23.2 | (2) | 6,509 | 19.7 | (2) | — | — | 35,748 | |||||||||||||||||||
Depreciation and amortization expenses | 41,769 | 4.8 | 9,807 | 6.2 | 8,188 | 0.8 | 59,764 | |||||||||||||||||||||
General and administrative expenses | 11,709 | 1.3 | 10,930 | 6.9 | 35,469 | 3.4 | 58,108 | |||||||||||||||||||||
Income from equity investees | 5,286 | 0.6 | 2,535 | 1.6 | — | — | 7,821 | |||||||||||||||||||||
Operating income/(loss) | $ | 150,637 | 17.2 | % | $ | (962 | ) | (0.6 | )% | $ | (43,657 | ) | (4.2 | )% | $ | 106,018 | ||||||||||||
(1) | Shown as a percentage of related Company-operated retail revenues. | |
(2) | Shown as a percentage of related total specialty revenues. |
- more -
- page 11 -
The tables below present, by operating segment, total net revenues, operating income and operating income as a percentage of related revenues, net of intersegment eliminations for the period ended(in thousands):
% of | % of | |||||||||||||||||||||||||||
United | Inter- | % of | ||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Total | |||||||||||||||||||||||
39 Weeks Ended June 27, 2004 | States | Revenue | national | Revenue | Corporate | Net Revenues | Consolidated | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Company-operated retail | $ | 2,770,172 | 84.8 | % | $ | 468,859 | 81.6 | % | $ | — | — | % | $ | 3,239,031 | ||||||||||||||
Specialty: | ||||||||||||||||||||||||||||
Licensing | 301,804 | 9.2 | 93,407 | 16.3 | — | — | 395,211 | |||||||||||||||||||||
Foodservice and other | 194,383 | 6.0 | 12,325 | 2.1 | — | — | 206,708 | |||||||||||||||||||||
Total specialty | 496,187 | 15.2 | 105,732 | 18.4 | — | — | 601,919 | |||||||||||||||||||||
Total net revenues | 3,266,359 | 100.0 | 574,591 | 100.0 | — | — | 3,840,950 | |||||||||||||||||||||
Cost of sales and related occupancy costs | 1,289,341 | 39.5 | 293,193 | 51.0 | — | — | 1,582,534 | |||||||||||||||||||||
Store operating expenses | 1,106,830 | 40.0 | (1) | 172,996 | 36.9 | (1) | — | — | 1,279,826 | |||||||||||||||||||
Other operating expenses | 109,411 | 22.1 | (2) | 19,348 | 18.3 | (2) | — | — | 128,759 | |||||||||||||||||||
Depreciation and amortization expenses | 149,992 | 4.6 | 33,740 | 5.9 | 24,647 | 0.6 | 208,379 | |||||||||||||||||||||
General and administrative expenses | 55,261 | 1.7 | 36,514 | 6.4 | 131,981 | 3.5 | 223,756 | |||||||||||||||||||||
Income from equity investees | 21,647 | 0.7 | 14,505 | 2.5 | — | — | 36,152 | |||||||||||||||||||||
Operating income/(loss) | $ | 577,171 | 17.7 | % | $ | 33,305 | 5.8 | % | $ | (156,628 | ) | (4.1 | )% | $ | 453,848 | |||||||||||||
% of | % of | |||||||||||||||||||||||||||
United | Inter- | % of | ||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Total | |||||||||||||||||||||||
39 Weeks Ended June 29, 2003 | States | Revenue | national | Revenue | Corporate | Net Revenues | Consolidated | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Company-operated retail | $ | 2,186,214 | 85.6 | % | $ | 350,343 | 79.6 | % | $ | — | — | % | $ | 2,536,557 | ||||||||||||||
Specialty: | ||||||||||||||||||||||||||||
Licensing | 213,906 | 8.4 | 81,675 | 18.6 | — | — | 295,581 | |||||||||||||||||||||
Foodservice and other | 154,242 | 6.0 | 8,128 | 1.8 | — | — | 162,370 | |||||||||||||||||||||
Total specialty | 368,148 | 14.4 | 89,803 | 20.4 | — | — | 457,951 | |||||||||||||||||||||
Total net revenues | 2,554,362 | 100.0 | 440,146 | 100.0 | — | — | 2,994,508 | |||||||||||||||||||||
Cost of sales and related occupancy costs | 997,222 | 39.0 | 239,746 | 54.5 | — | — | 1,236,968 | |||||||||||||||||||||
Store operating expenses | 877,707 | 40.1 | (1) | 130,983 | 37.4 | (1) | — | — | 1,008,690 | |||||||||||||||||||
Other operating expenses | 84,580 | 23.0 | (2) | 19,205 | 21.4 | (2) | — | — | 103,785 | |||||||||||||||||||
Depreciation and amortization expenses | 123,302 | 4.8 | 28,165 | 6.4 | 23,643 | 0.8 | 175,110 | |||||||||||||||||||||
General and administrative expenses | 33,354 | 1.3 | 33,326 | 7.6 | 111,923 | 3.7 | 178,603 | |||||||||||||||||||||
Income from equity investees | 15,893 | 0.6 | 5,102 | 1.2 | — | — | 20,995 | |||||||||||||||||||||
Operating income/(loss) | $ | 454,090 | 17.8 | % | $ | (6,177 | ) | (1.4 | )% | $ | (135,566 | ) | (4.5 | )% | $ | 312,347 | ||||||||||||
(1) | Shown as a percentage of related Company-operated retail revenues. | |
(2) | Shown as a percentage of related total specialty revenues. |
- more -
- page 12 -
United States
United States total net revenues increased by $242 million, or 28 percent, to $1.1 billion for the 13 weeks ended June 27, 2004, compared to $878 million for the corresponding period of fiscal 2003. United States Company-operated retail revenues increased $195 million, or 26 percent, to $947 million for the 13 weeks ended June 27, 2004, compared to $752 million for the corresponding period of fiscal 2003, primarily due to the opening of 537 new Company-operated retail stores in the last 12 months and comparable store sales growth of 12 percent for the 13 weeks ended June 27, 2004. The increase in comparable store sales was due to an 11 percent increase in the number of customer transactions and a one percent increase in the average dollar value per transaction.
Total United States specialty revenues increased $47 million, or 37 percent, to $173 million for the 13 weeks ended June 27, 2004, compared to $126 million in the corresponding period of fiscal 2003. Licensing revenues increased $32 million, or 43 percent, to $106 million from $74 million in fiscal 2003. This increase was primarily due to higher product sales and royalty revenues as a result of opening 445 new licensed retail stores in the last 12 months, the acquisition of Seattle Coffee Company in the fiscal fourth quarter of 2003, and volume driven growth in the grocery and warehouse club business as a result of an expanded agreement with Kraft to include the addition of six new Starbucks coffees. Foodservice and other revenues increased $15 million, or 29 percent, to $67 million from $52 million in fiscal 2003, due to both the addition of Seattle Coffee Company foodservice accounts as well as the growth in new and existing Starbucks foodservice accounts.
United States operating income increased 25.6 percent to $189.2 million for the 13 weeks ended June 27, 2004, from $150.6 million for the same period in fiscal 2003. Operating margin decreased to 16.9 percent of related revenues from 17.2 percent in the corresponding period of fiscal 2003, primarily due to higher dairy costs, partially offset by reductions in occupancy and most other operating expenses as a percentage of related revenues.
International
International total net revenues increased by $40 million, or 25 percent, to $198 million for the 13 weeks ended June 27, 2004, compared to $158 million for the corresponding period of fiscal 2003. International Company-operated retail revenues increased by $35 million, or 28 percent, to $161 million for the 13 weeks ended June 27, 2004, compared to $125 million for the corresponding period for fiscal 2003, primarily due to the opening of 114 new Company-operated retail stores in the last 12 months, the weakening of the United States dollar against both the British pound sterling and Canadian dollar, and comparable store sales growth of seven percent for the 13 weeks ended June 27, 2004. The increase in comparable store sales resulted from a six percent increase in the number of customer transactions and a one percent increase in the average dollar value per transaction.
Total international specialty revenues increased $5 million, or 14 percent, to $38 million for the 13 weeks ended June 27, 2004, compared to $33 million in the corresponding period of fiscal 2003. The increase was primarily due to higher product sales and royalty revenues from opening 282 new licensed retail stores in the last 12 months.
International operating income increased to $13.7 million for the 13 weeks ended June 27, 2004, from an operating loss of $1.0 million in the corresponding period of fiscal 2003. Operating margin increased to a positive 6.9 percent of related revenues from a negative 0.6 percent in the corresponding period of fiscal 2003, primarily due to greater efficiency throughout the organization. Excluding Canadian operations, operating income increased to $5.4 million for the 13 weeks ended June 27, 2004, compared to an operating loss of $7.5 million in the corresponding period of fiscal 2003.
- more -
- page 13 -
Starbucks will be holding a conference call today at 1:30 p.m. Pacific time, which will be hosted by Howard Schultz, chairman and chief global strategist, Orin Smith, president and chief executive officer, Michael Casey, executive vice president and chief financial officer and Jim Donald, president, North America. The call will be broadcast live over the Internet and can be accessed at the Company’s web site address of http://www.starbucks.com/aboutus/investor.asp. A replay of the call will be available via telephone from approximately 5:30 p.m. Pacific time today through 5:30 p.m. Pacific time on July 28, 2004, by calling 1-800-642-1687, reservation number 8669044, or via the Investor Relations page on Starbucks.com through approximately 5:00 p.m. Pacific time on Thursday, August 19, 2004 at the following URL: http://www.starbucks.com/aboutus/investor.asp.
Starbucks Coffee Company is the leading retailer, roaster and brand of specialty coffee in the world, with more than 8,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim. The Company is committed to offering the highest quality coffee and theStarbucks Experiencewhile conducting its business in ways that produce social, environmental and economic benefits for communities in which it does business. In addition to its retail operations, the Company produces and sells bottled Frappuccino® coffee drinks, Starbucks DoubleShot™ coffee drink, and a line of superpremium ice creams through its joint venture partnerships. The Company’s brand portfolio provides a wide variety of consumer products. Tazo Tea’s line of innovative premium teas and Hear Music’s exceptional compact discs enhance theStarbucks Experiencethrough best-of-class products. The Seattle’s Best Coffee® and Torrefazione Italia® Coffee brands enable Starbucks to appeal to a broader consumer base by offering an alternative variety of coffee flavor profiles.
This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, including anticipated store openings, comparable store sales expectations, trends in or expectations regarding the Company’s revenue and expense growth, capital expenditures, net earnings and earnings per share results, are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors including but not limited to, coffee, dairy and other raw material prices and availability, successful execution of internal performance and expansion plans, fluctuations in U.S. and international economies, ramifications from the war on terrorism, or other international events or developments, the impact of initiatives by competitors, the effect of legal proceedings, and other risks detailed in the Company’s filings with the Securities and Exchange Commission, including the “Certain Additional Risks and Uncertainties” section of Starbucks Annual Report on Form 10-K for the fiscal year ended September 28, 2003.
###