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 Second Quarter Fiscal 2005 Results & Raises Full Year EPS Target
Earnings Per Share Increase 26 Percent to $0.24
Fiscal 2005 Earnings Per Share Target Raised to $1.17 to $1.19
Highlights Opportunities in China and Expansion into Qingdao
SEATTLE; April 27, 2005 –Starbucks Corporation (Nasdaq: SBUX) today announced revenues and earnings for its fiscal second quarter ended April 3, 2005.
For the 13 weeks ended April 3, 2005, consolidated net revenues increased 22 percent to $1.5 billion from $1.2 billion for the same period in fiscal 2004. Net earnings for the 13 weeks ended April 3, 2005, increased 27 percent to $101 million from $79 million for the same period in fiscal 2004. Earnings per share for the 13 weeks ended April 3, 2005, increased 26 percent to $0.24, compared to $0.19 per share for the comparable period in fiscal 2004.
“Our strong second quarter financial results, including continued operating margin expansion, reflects our ongoing ability to deliver performance in existing markets while building the platform for future growth,” commented Howard Schultz, chairman. “We are pleased with all areas of our business, from our retail operations both domestically and internationally, to our specialty businesses, and we are well positioned for the second half of the fiscal year.”
Schultz added, “With more than 300 Starbucks locations in greater China, I am especially excited about the opportunities awaiting us with our expansion in the broader China market, including the opening of Starbucks first Company-operated store in Qingdao. The Company continues to seek opportunities to add stores and bring theStarbucks Experienceto new markets worldwide.”
Consolidated Financial and Operating Summary
Company-operated retail revenuesincreased 22 percent to $1.3 billion for the 13 weeks ended April 3, 2005, from $1.1 billion for the same period in fiscal 2004. The increase was primarily attributable to the opening of 669 new Company-operated retail stores in the last 12 months and comparable store sales growth of seven percent for the quarter. The increase in comparable store sales was due to a four percent increase in the number of customer transactions and a three percent increase in the average value per transaction.
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Specialty revenuesincreased 23 percent to $235 million for the 13 weeks ended April 3, 2005, compared to $191 million for the corresponding period of fiscal 2004. Licensing revenues increased 32 percent to $161 million primarily due to higher product sales and royalty revenues from the opening of 758 new licensed retail stores in the last 12 months. Foodservice and other revenues increased eight percent to $73 million primarily due to growth in new and existing U.S. and International foodservice accounts.
Cost of sales and related occupancy costsincreased to 41.4 percent of total net revenues for the 13 weeks ended April 3, 2005, compared to 41.0 percent in the corresponding 13-week period of fiscal 2004. This increase was primarily due to higher initial costs associated with the Company’s continued expansion of the lunch program in Company-operated retail stores, as well as higher dairy costs, offset in part by a higher average value per retail transaction.
Store operating expensesas a percentage of Company-operated retail revenues increased to 41.5 percent for the 13 weeks ended April 3, 2005, from 40.6 percent for the corresponding period of fiscal 2004, primarily due to higher payroll-related expenditures for future planned acceleration in Company-operated store openings, extended store operating hours and a higher number of drive-thru locations opened in the past year, as well as higher maintenance and repair expenditures to ensure a consistentStarbucks Experiencein existing stores.
Other operating expenses(expenses associated with the Company’s specialty operations) decreased to 19.7 percent of total specialty revenues for the 13 weeks ended April 3, 2005, compared to 21.4 percent in the corresponding period of fiscal 2004. The decrease was primarily due to lower expenditures within the grocery and warehouse club businesses and efficiencies gained from the expansion of the foodservice distribution network.
Depreciation and amortization expensesincreased to $88 million for the 13 weeks ended April 3, 2005, compared to $74 million for the corresponding period of fiscal 2004. The increase was primarily due to the opening of 669 new Company-operated retail stores in the last 12 months. As a percentage of total net revenues, depreciation and amortization expenses decreased to 5.8 percent for the 13 weeks ended April 3, 2005, from 6.0 percent for the corresponding 13-week period of fiscal 2004.
General and administrative expensesincreased to $82 million for the 13 weeks ended April 3, 2005, compared to $80 million for the corresponding period of fiscal 2004. The increase was primarily due to higher professional fees in support of both domestic and international expansion, partially offset by a lower provision for incentive compensation. As a percentage of total net revenues, general and administrative expenses decreased to 5.4 percent for the 13 weeks ended April 3, 2005, from 6.4 percent for the corresponding period of fiscal 2004.
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Income from equity investeesincreased to $16 million for the 13 weeks ended April 3, 2005, compared to $12 million for the corresponding period of fiscal 2004. The increase was primarily due to volume driven operating results for The North American Coffee Partnership, which produces bottled Frappuccino® and Starbucks DoubleShot® coffee drinks, and improved results from international investees as a result of new licensed retail store openings, particularly in Japan.
Operating incomeincreased 27 percent to $157 million for the 13 weeks ended April 3, 2005, compared to $124 million for the corresponding 13-week period of fiscal 2004. Operating margin increased to 10.3 percent of total net revenues for the 13 weeks ended April 3, 2005, compared to 10.0 percent for the corresponding period of fiscal 2004, primarily due to strong revenue growth and leverage of general and administrative and other operating expenses, partially offset by higher retail store operating expenses.
Interest and other incomeremained unchanged at $4 million for both the 13 weeks ended April 3, 2005, and March 28, 2004. Higher interest income earned on higher cash and liquid investment balances was offset by a decrease in the market value of trading securities for the 13 weeks ended April 3, 2005, compared to an increase in market value in the corresponding period in fiscal 2004.
Net earningsfor the 13 weeks ended April 3, 2005, increased 27 percent to $101 million from $79 million for the same period in fiscal 2004. Earnings per share for the 13 weeks ended April 3, 2005, increased 26 percent to $0.24, compared to $0.19 per share for the comparable period in fiscal 2004.
Fiscal 2005 Targets
The Company also provided updated fiscal 2005 targets:
• | Starbucks still 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 in the range of at least 20 percent in fiscal 2005, excluding the 53rd week impact on 2004. While the Company’s longer term target range of three percent to seven percent comparable store sales growth remains unchanged, Starbucks currently expects the remainder of fiscal 2005 to be at or slightly above the high end of that range, with monthly anomalies; | |||
• | Based on strong second quarter earnings and the Company’s updated forecast for the remainder of the year, Starbucks is raising its earnings per share target range to $1.17 to $1.19 for fiscal 2005, excluding the impact from expensing stock options. The new target represents a $0.02 increase over the previous range of $1.15 to $1.17 per share. Excluding the $0.03 per share impact of the 53rd week in fiscal 2004, Starbucks new fiscal 2005 target range equates to 27 percent to 29 percent growth over $0.92 earnings per share in fiscal 2004; |
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• | Starbucks began the year targeting quarterly earnings per share growth rates in the 20 percent to 25 percent range, and while the first half earnings per share growth of 28 percent slightly exceeded that range, the Company believes growth for the third quarter will be as originally projected and expects fourth quarter earnings per share growth to be moderately higher. More specifically, the Company continues to target quarterly earnings per share in the range of $0.29 — $0.30 for the third quarter and has broadened its fourth quarter target range to $0.29 - $0.30, resulting in the Company’s fiscal year target range of $1.17 to $1.19; | |||
• | Consistent with the first half of the year, Starbucks is now targeting a full year effective tax rate of 37.7 percent with minor variations from quarter to quarter, and; | |||
• | Starbucks continues to target capital expenditures in the range of $600 to $650 million in fiscal 2005. |
Starbucks will be holding a conference call today at 1:30 p.m. Pacific time, which will be hosted by Howard Schultz, chairman, Jim Donald, president and ceo, and Michael Casey, executive vice president and chief financial officer. 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 through 5:30 p.m. Pacific time on Wednesday, May 4, 2005, by calling 1-800-642-1687, reservation number 4093381. A posting of speaker remarks and a replay of the call will also be available via the Investor Relations page on Starbucks.com through approximately 5:00 p.m. Pacific time on Thursday, May 26, 2005, at the following URL: http://www.starbucks.com/aboutus/investor.asp.
The Company’s consolidated financial statements, operating segment results, and other additional information have been provided on the following pages in accordance with current year classifications, including the reclassification of auction rate securities from “Cash and cash equivalents” to “Short-term investments — available-for-sale securities” on the consolidated balance sheets. This information should be reviewed in conjunction with this press release. Please refer to the Company’s Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on February 18, 2005, for additional information.
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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
�� | ||||||||||||||||||||
13 Weeks Ended | ||||||||||||||||||||
13 Weeks Ended | March 28, | |||||||||||||||||||
March 28, | April 3, | 2004 | ||||||||||||||||||
April 3, | 2004 | % | 2005 | (as restated*) | ||||||||||||||||
2005 | (as restated*) | Change | As a % of total net revenues | |||||||||||||||||
(in thousands, except per share data) | (unless otherwise indicated) | |||||||||||||||||||
Net revenues: | ||||||||||||||||||||
Company-operated retail | $ | 1,283,947 | $ | 1,050,481 | 22.2 | % | 84.5 | % | 84.6 | % | ||||||||||
Specialty: | ||||||||||||||||||||
Licensing | 161,292 | 122,517 | 31.6 | % | 10.6 | % | 9.9 | % | ||||||||||||
Foodservice and other | 73,477 | 68,070 | 7.9 | % | 4.9 | % | 5.5 | % | ||||||||||||
Total specialty | 234,769 | 190,587 | 23.2 | % | 15.5 | % | 15.4 | % | ||||||||||||
Total net revenues | 1,518,716 | 1,241,068 | 22.4 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of sales including occupancy costs | 628,740 | 508,268 | 41.4 | % | 41.0 | % | ||||||||||||||
Store operating expenses | 532,944 | 425,976 | (a) 41.5 | % | (a) 40.6 | % | ||||||||||||||
Other operating expenses | 46,347 | 40,802 | (b) 19.7 | % | (b) 21.4 | % | ||||||||||||||
Depreciation and amortization expenses | 87,772 | 74,225 | 5.8 | % | 6.0 | % | ||||||||||||||
General and administrative expenses | 81,929 | 79,982 | 5.4 | % | 6.4 | % | ||||||||||||||
Subtotal operating expenses | 1,377,732 | 1,129,253 | 22.0 | % | ||||||||||||||||
Income from equity investees | 16,369 | 11,944 | 1.1 | % | 1.0 | % | ||||||||||||||
Operating income | 157,353 | 123,759 | 27.1 | % | 10.3 | % | 10.0 | % | ||||||||||||
Interest and other income, net | 4,014 | 3,685 | 0.3 | % | 0.3 | % | ||||||||||||||
Earnings before income taxes | 161,367 | 127,444 | 26.6 | % | 10.6 | % | 10.3 | % | ||||||||||||
Income taxes(c) | 60,831 | 48,559 | 4.0 | % | 3.9 | % | ||||||||||||||
Net earnings | $ | 100,536 | $ | 78,885 | 27.4 | % | 6.6 | % | 6.4 | % | ||||||||||
Net earnings per common share - diluted | $ | 0.24 | $ | 0.19 | ||||||||||||||||
Weighted average shares outstanding - diluted | 414,031 | 411,559 | ||||||||||||||||||
(a) | Calculated as a percentage of Company-operated retail revenues. | |
(b) | Calculated as a percentage of total specialty revenues. | |
(c) | The effective tax rates were 37.7 percent for the 13 weeks ended April 3, 2005, and 38.1 percent for the 13 weeks ended March 28, 2004. | |
* | Amounts have been restated for lease accounting corrections. Please refer to Note 2 in the Company’s Annual Report on Form 10-K/A for the fiscal year ended October 3, 2004, for additional information. |
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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
26 Weeks Ended | ||||||||||||||||||||
26 Weeks Ended | March 28, | |||||||||||||||||||
March 28, | April 3, | 2004 | ||||||||||||||||||
April 3, | 2004 | % | 2005 | (as restated*) | ||||||||||||||||
2005 | (as restated*) | Change | As a % of total net revenues | |||||||||||||||||
(in thousands, except per share data) | (unless otherwise indicated) | |||||||||||||||||||
Net revenues: | ||||||||||||||||||||
Company-operated retail | $ | 2,642,608 | $ | 2,130,976 | 24.0 | % | 85.0 | % | 84.5 | % | ||||||||||
Specialty: | ||||||||||||||||||||
Licensing | 318,505 | 256,016 | 24.4 | % | 10.3 | % | 10.2 | % | ||||||||||||
Foodservice and other | 147,147 | 135,267 | 8.8 | % | 4.7 | % | 5.3 | % | ||||||||||||
Total specialty | 465,652 | 391,283 | 19.0 | % | 15.0 | % | 15.5 | % | ||||||||||||
Total net revenues | 3,108,260 | 2,522,259 | 23.2 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of sales including occupancy costs | 1,276,495 | 1,036,977 | 41.1 | % | 41.1 | % | ||||||||||||||
Store operating expenses | 1,053,950 | 831,797 | (a) 39.9 | % | (a) 39.0 | % | ||||||||||||||
Other operating expenses | 90,628 | 84,500 | (b) 19.5 | % | (b) 21.6 | % | ||||||||||||||
Depreciation and amortization expenses | 166,331 | 142,154 | 5.4 | % | 5.6 | % | ||||||||||||||
General and administrative expenses | 165,528 | 150,399 | 5.3 | % | 6.0 | % | ||||||||||||||
Subtotal operating expenses | 2,752,932 | 2,245,827 | 22.6 | % | ||||||||||||||||
Income from equity investees | 29,259 | 21,988 | 0.9 | % | 0.9 | % | ||||||||||||||
Operating income | 384,587 | 298,420 | 28.9 | % | 12.4 | % | 11.8 | % | ||||||||||||
Interest and other income, net | 9,136 | 6,893 | 0.3 | % | 0.3 | % | ||||||||||||||
Earnings before income taxes | 393,723 | 305,313 | 29.0 | % | 12.7 | % | 12.1 | % | ||||||||||||
Income taxes(c) | 148,434 | 116,293 | 4.8 | % | 4.6 | % | ||||||||||||||
Net earnings | $ | 245,289 | $ | 189,020 | 29.8 | % | 7.9 | % | 7.5 | % | ||||||||||
Net earnings per common share - diluted | $ | 0.59 | $ | 0.46 | ||||||||||||||||
Weighted average shares outstanding - diluted | 414,676 | 409,608 | ||||||||||||||||||
(a) | Calculated as a percentage of Company-operated retail revenues. | |
(b) | Calculated as a percentage of total specialty revenues. | |
(c) | The effective tax rates were 37.7 percent for the 26 weeks ended April 3, 2005, and 38.1 percent for the 26 weeks ended March 28, 2004. | |
* | Amounts have been restated for lease accounting corrections. Please refer to Note 2 in the Company’s Annual Report on Form 10-K/A for the fiscal year ended October 3, 2004, for additional information. |
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STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
April 3, | October 3, | |||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 177,142 | $ | 145,053 | ||||
Short-term investments — available-for-sale securities | 490,379 | 483,157 | ||||||
Short-term investments — trading securities | 33,083 | 24,799 | ||||||
Accounts receivable, net of allowances of $3,249 and $2,231, respectively | 151,638 | 140,226 | ||||||
Inventories | 406,073 | 422,663 | ||||||
Prepaid expenses and other current assets | 83,175 | 71,347 | ||||||
Deferred income taxes, net | 70,877 | 63,650 | ||||||
Total current assets | 1,412,367 | 1,350,895 | ||||||
Long-term investments – available-for-sale securities | 142,782 | 135,179 | ||||||
Equity and other investments | 189,115 | 168,177 | ||||||
Property, plant and equipment, net | 1,698,803 | 1,551,416 | ||||||
Other assets | 58,978 | 85,561 | ||||||
Other intangible assets | 29,620 | 26,800 | ||||||
Goodwill | 71,662 | 68,950 | ||||||
TOTAL ASSETS | $ | 3,603,327 | $ | 3,386,978 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 181,754 | $ | 199,346 | ||||
Accrued compensation and related costs | 204,324 | 208,927 | ||||||
Accrued occupancy costs | 44,138 | 29,231 | ||||||
Accrued taxes | 76,124 | 62,959 | ||||||
Other accrued expenses | 156,834 | 123,684 | ||||||
Deferred revenue | 168,610 | 121,377 | ||||||
Current portion of long-term debt | 742 | 735 | ||||||
Total current liabilities | 832,526 | 746,259 | ||||||
Deferred income taxes, net | 5,929 | 21,770 | ||||||
Long-term debt | 3,246 | 3,618 | ||||||
Other long-term liabilities | 157,189 | 144,683 | ||||||
Shareholders’ equity: | ||||||||
Common stock and additional paid-in capital — Authorized, 600,000,000 shares; issued and outstanding, 397,899,707 and 397,405,844 shares, respectively, (includes 1,697,100 common stock units in both periods) | 832,251 | 956,685 | ||||||
Other additional paid-in capital | 39,393 | 39,393 | ||||||
Retained earnings | 1,690,618 | 1,445,329 | ||||||
Accumulated other comprehensive income | 42,175 | 29,241 | ||||||
Total shareholders’ equity | 2,604,437 | 2,470,648 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 3,603,327 | $ | 3,386,978 | ||||
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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
26 Weeks Ended | ||||||||
March 28, | ||||||||
April 3, | 2004 | |||||||
2005 | (as restated*) | |||||||
OPERATING ACTIVITIES: | ||||||||
Net earnings | $ | 245,289 | $ | 189,020 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 179,857 | 152,283 | ||||||
Provision for impairments and asset disposals | 6,790 | 5,949 | ||||||
Deferred income taxes, net | (20,946 | ) | (10,440 | ) | ||||
Equity in income of investees | (16,102 | ) | (8,724 | ) | ||||
Tax benefit from exercise of non-qualified stock options | 88,781 | 31,363 | ||||||
Net amortization of premium on securities | 7,112 | 4,641 | ||||||
Cash provided/(used) by changes in operating assets and liabilities: | ||||||||
Inventories | 18,894 | 36,907 | ||||||
Accounts payable | (20,350 | ) | (13,081 | ) | ||||
Accrued compensation and related costs | (5,488 | ) | 32,093 | |||||
Deferred revenue | 47,061 | 31,734 | ||||||
Other accrued expenses | 23,753 | 23,570 | ||||||
Other operating assets and liabilities | 11,842 | (2,154 | ) | |||||
Net cash provided by operating activities | 566,493 | 473,161 | ||||||
INVESTING ACTIVITIES: | ||||||||
Purchase of available-for-sale securities | (582,992 | ) | (532,580 | ) | ||||
Maturity of available-for-sale securities | 362,666 | 63,639 | ||||||
Sale of available-for-sale securities | 196,395 | 148,538 | ||||||
Acquisition, net of cash acquired | (11,282 | ) | — | |||||
Net additions to equity, other investments and other assets | 12,676 | (22,916 | ) | |||||
Distribution from equity investees | 11,287 | 15,234 | ||||||
Net additions to property, plant and equipment | (311,690 | ) | (137,726 | ) | ||||
Net cash used by investing activities | (322,940 | ) | (465,811 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of common stock | 121,534 | 73,118 | ||||||
Principal payments on long-term debt | (366 | ) | (360 | ) | ||||
Repurchase of common stock | (334,749 | ) | (40,724 | ) | ||||
Net cash (used) provided by financing activities | (213,581 | ) | 32,034 | |||||
Effect of exchange rate changes on cash and cash equivalents | 2,117 | 2,753 | ||||||
Net increase in cash and cash equivalents | 32,089 | 42,137 | ||||||
CASH AND CASH EQUIVALENTS: | ||||||||
Beginning of period | 145,053 | 99,462 | ||||||
End of the period | $ | 177,142 | $ | 141,599 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the 26 weeks ended: | ||||||||
Interest | $ | 108 | $ | 289 | ||||
Income taxes | $ | 68,526 | $ | 100,179 |
* | Amounts have been restated for lease accounting corrections. Please refer to Note 2 in the Company’s Annual Report on Form 10-K/A for the fiscal year ended October 3, 2004, for additional information. |
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Stock Compensation Expense
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123R, “Share-Based Payment” (“SFAS 123R”), a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” SFAS 123R will require Starbucks to measure all employee stock-based compensation awards using the fair value method and record compensation expense in the Company’s consolidated financial statements. Starbucks is continuing to evaluate the impact of SFAS 123R and the Securities and Exchange Commission’s (“SEC”) interpretive guidance released in late March 2005. In the interim, the Company will continue to regularly disclose the pro forma impact of stock compensation on the Company’s net earnings and earnings per share within its periodic filings with the SEC in accordance with current accounting rules. The pro forma impacts for the 13 and 26 weeks ended April 3, 2005, and March 28, 2004, were as follows for the information presented (in thousands, except earnings per share):
13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
April 3, | March 28, | April 3, | March 28, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net earnings | $ | 100,536 | $ | 78,885 | $ | 245,289 | $ | 189,020 | ||||||||
Deduct: stock-based compensation expense determined under fair value method, net of tax | (15,983 | ) | (12,407 | ) | (28,059 | ) | (20,828 | ) | ||||||||
Pro forma net income | $ | 84,553 | $ | 66,478 | $ | 217,230 | $ | 168,192 | ||||||||
Earnings per share: | ||||||||||||||||
Diluted – as reported | $ | 0.24 | $ | 0.19 | $ | 0.59 | $ | 0.46 | ||||||||
Diluted – pro forma | $ | 0.21 | $ | 0.16 | $ | 0.53 | $ | 0.41 | ||||||||
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Segment Results
Segment information is prepared on the basis that the Company’s management reviews financial information for operational decision-making purposes. 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 periods ended(in thousands):
% of | % of | % of | ||||||||||||||||||||||||||
United | Inter- | Total | ||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Net | |||||||||||||||||||||||
13 Weeks Ended April 3, 2005 | States | Revenue | national | Revenue | Corporate | Revenues | Consolidated | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Company-operated retail | $ | 1,084,737 | 85.0 | % | $ | 199,210 | 82.2 | % | $ | — | — | % | $ | 1,283,947 | ||||||||||||||
Specialty: | ||||||||||||||||||||||||||||
Licensing | 124,136 | 9.7 | 37,156 | 15.3 | — | — | 161,292 | |||||||||||||||||||||
Foodservice and other | 67,545 | 5.3 | 5,932 | 2.5 | — | — | 73,477 | |||||||||||||||||||||
Total specialty | 191,681 | 15.0 | 43,088 | 17.8 | — | — | 234,769 | |||||||||||||||||||||
Total net revenues | 1,276,418 | 100.0 | 242,298 | 100.0 | — | — | 1,518,716 | |||||||||||||||||||||
Cost of sales and related occupancy costs | 504,076 | 39.5 | 124,664 | 51.5 | — | — | 628,740 | |||||||||||||||||||||
Store operating expenses | 456,838 | 42.1 | (1) | 76,106 | 38.2 | (1) | — | — | 532,944 | |||||||||||||||||||
Other operating expenses | 38,841 | 20.3 | (2) | 7,506 | 17.4 | (2) | — | — | 46,347 | |||||||||||||||||||
Depreciation and amortization expenses | 64,819 | 5.1 | 14,128 | 5.8 | 8,825 | 0.6 | 87,772 | |||||||||||||||||||||
General and administrative expenses | 24,350 | 1.9 | 10,216 | 4.2 | 47,363 | 3.1 | 81,929 | |||||||||||||||||||||
Income from equity investees | 8,564 | 0.7 | 7,805 | 3.2 | — | — | 16,369 | |||||||||||||||||||||
Operating income/(loss) | $ | 196,058 | 15.4 | % | $ | 17,483 | 7.2 | % | $ | (56,188 | ) | (3.7 | )% | $ | 157,353 | |||||||||||||
% of | % of | % of | ||||||||||||||||||||||||||
United | Inter- | Total | ||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Net | |||||||||||||||||||||||
13 Weeks Ended March 28, 2004 | States | Revenue | national | Revenue | Corporate | Revenues | Consolidated | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Company-operated retail | $ | 898,249 | 85.1 | % | $ | 152,232 | 82.0 | % | $ | — | — | % | $ | 1,050,481 | ||||||||||||||
Specialty: | ||||||||||||||||||||||||||||
Licensing | 93,157 | 8.8 | 29,360 | 15.8 | — | — | 122,517 | |||||||||||||||||||||
Foodservice and other | 64,067 | 6.1 | 4,003 | 2.2 | — | — | 68,070 | |||||||||||||||||||||
Total specialty | 157,224 | 14.9 | 33,363 | 18.0 | — | — | 190,587 | |||||||||||||||||||||
Total net revenues | 1,055,473 | 100.0 | 185,595 | 100.0 | — | — | 1,241,068 | |||||||||||||||||||||
Cost of sales and related occupancy costs | 412,315 | 39.1 | 95,953 | 51.7 | — | — | 508,268 | |||||||||||||||||||||
Store operating expenses | 369,348 | 41.1 | (1) | 56,628 | 37.2 | (1) | — | — | 425,976 | |||||||||||||||||||
Other operating expenses | 34,743 | 22.1 | (2) | 6,059 | 18.2 | (2) | — | — | 40,802 | |||||||||||||||||||
Depreciation and amortization expenses | 54,217 | 5.1 | 11,647 | 6.3 | 8,361 | 0.7 | 74,225 | |||||||||||||||||||||
General and administrative expenses | 18,362 | 1.7 | 12,495 | 6.7 | 49,125 | 3.9 | 79,982 | |||||||||||||||||||||
Income from equity investees | 6,682 | 0.6 | 5,262 | 2.8 | — | — | 11,944 | |||||||||||||||||||||
Operating income/(loss) | $ | 173,170 | 16.4 | % | $ | 8,075 | 4.4 | % | $ | (57,486 | ) | (4.6 | )% | $ | 123,759 | |||||||||||||
(1) | Shown as a percentage of related Company-operated retail revenues. | |
(2) | Shown as a percentage of related total specialty revenues. |
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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 periods ended(in thousands):
% of | % of | % of | |||||||||||||||||||||||||||||
United | Inter- | Total | |||||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Net | ||||||||||||||||||||||||||
26 Weeks Ended April 3, 2005 | States | Revenue | national | Revenue | Corporate | Revenues | Consolidated | ||||||||||||||||||||||||
Net revenues: | |||||||||||||||||||||||||||||||
Company-operated retail | $ | 2,234,367 | 85.4 | % | $ | 408,241 | 82.8 | % | $ | — | — | % | $ | 2,642,608 | |||||||||||||||||
Specialty: | |||||||||||||||||||||||||||||||
Licensing | 245,271 | 9.4 | 73,234 | 14.9 | — | — | 318,505 | ||||||||||||||||||||||||
Foodservice and other | 135,553 | 5.2 | 11,594 | 2.3 | — | — | 147,147 | ||||||||||||||||||||||||
Total specialty | 380,824 | 14.6 | 84,828 | 17.2 | — | — | 465,652 | ||||||||||||||||||||||||
Total net revenues | 2,615,191 | 100.0 | 493,069 | 100.0 | — | — | 3,108,260 | ||||||||||||||||||||||||
Cost of sales and related occupancy costs | 1,025,789 | 39.2 | 250,706 | 50.8 | — | — | 1,276,495 | ||||||||||||||||||||||||
Store operating expenses | 900,899 | 40.3 | (1) | 153,051 | 37.5 | (1) | — | — | 1,053,950 | ||||||||||||||||||||||
Other operating expenses | 75,944 | 19.9 | (2) | 14,684 | 17.3 | (2) | — | — | 90,628 | ||||||||||||||||||||||
Depreciation and amortization expenses | 122,154 | 4.7 | 27,217 | 5.5 | 16,960 | 0.6 | 166,331 | ||||||||||||||||||||||||
General and administrative expenses | 45,973 | 1.8 | 22,115 | 4.5 | 97,440 | 3.1 | 165,528 | ||||||||||||||||||||||||
Income from equity investees | 17,272 | 0.7 | 11,987 | 2.4 | — | — | 29,259 | ||||||||||||||||||||||||
Operating income/(loss) | $ | 461,704 | 17.7 | % | $ | 37,283 | 7.6 | % | $ | (114,400 | ) | (3.7 | )% | $ | 384,587 | ||||||||||||||||
% of | % of | % of | |||||||||||||||||||||||||||||
United | Inter- | Total | |||||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Net | ||||||||||||||||||||||||||
26 Weeks Ended March 28, 2004 | States | Revenue | national | Revenue | Corporate | Revenues | Consolidated | ||||||||||||||||||||||||
Net revenues: | |||||||||||||||||||||||||||||||
Company-operated retail | $ | 1,822,793 | 84.9 | % | $ | 308,183 | 81.9 | % | $ | — | — | % | $ | 2,130,976 | |||||||||||||||||
Specialty: | |||||||||||||||||||||||||||||||
Licensing | 195,773 | 9.1 | 60,243 | 16.0 | — | — | 256,016 | ||||||||||||||||||||||||
Foodservice and other | 127,524 | 6.0 | 7,743 | 2.1 | — | — | 135,267 | ||||||||||||||||||||||||
Total specialty | 323,297 | 15.1 | 67,986 | 18.1 | — | — | 391,283 | ||||||||||||||||||||||||
Total net revenues | 2,146,090 | 100.0 | 376,169 | 100.0 | — | — | 2,522,259 | ||||||||||||||||||||||||
Cost of sales and related occupancy costs | 843,647 | 39.3 | 193,330 | 51.4 | — | — | 1,036,977 | ||||||||||||||||||||||||
Store operating expenses | 718,493 | 39.4 | (1) | 113,304 | 36.8 | (1) | — | — | 831,797 | ||||||||||||||||||||||
Other operating expenses | 71,700 | 22.2 | (2) | 12,800 | 18.8 | (2) | — | — | 84,500 | ||||||||||||||||||||||
Depreciation and amortization expenses | 103,255 | 4.8 | 22,345 | 5.9 | 16,554 | 0.7 | 142,154 | ||||||||||||||||||||||||
General and administrative expenses | 35,001 | 1.6 | 24,482 | 6.5 | 90,916 | 3.6 | 150,399 | ||||||||||||||||||||||||
Income from equity investees | 13,117 | 0.6 | 8,871 | 2.4 | — | — | 21,988 | ||||||||||||||||||||||||
Operating income/(loss) | $ | 387,111 | 18.0 | % | $ | 18,779 | 5.0 | % | $ | (107,470 | ) | (4.3 | )% | $ | 298,420 | ||||||||||||||||
(1) | Shown as a percentage of related Company-operated retail revenues. | |
(2) | Shown as a percentage of related total specialty revenues. |
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United States
United States total net revenues increased by $221 million, or 21 percent, to $1.3 billion for the 13 weeks ended April 3, 2005, compared to $1.1 billion for the corresponding period of fiscal 2004. United States Company-operated retail revenues increased by $186 million, or 21 percent, to $1.1 billion for the 13 weeks ended April 3, 2005, compared to $898 million for the corresponding period of fiscal 2004, primarily due to the opening of 543 new Company-operated retail stores in the last 12 months and comparable store sales growth of seven percent for the quarter. The increase in comparable store sales was due to a four percent increase in the number of customer transactions and a three percent increase in the average value per transaction.
Total United States specialty revenues increased by $34 million, or 22 percent, to $192 million for the 13 weeks ended April 3, 2005, compared to $157 million in the corresponding period of fiscal 2004. United States licensing revenues increased $31 million, or 33 percent, to $124 million, compared to $93 million for the corresponding period of fiscal 2004. The increase was primarily due to higher product sales and royalty revenues as a result of opening 461 new licensed retail stores in the last 12 months and the national rollout of the Starbucks™ Coffee Liqueur during the fiscal second quarter of 2005. United States foodservice and other revenues increased five percent to $68 million from $64 million in fiscal 2004, primarily due to growth in new and existing foodservice accounts.
United States operating income increased by 13 percent to $196 million for the 13 weeks ended April 3, 2005, from $173 million for the same period in fiscal 2004. Operating margin decreased to 15.4 percent of related revenues from 16.4 percent in the corresponding period of fiscal 2004, primarily due to higher payroll-related expenditures related to future planned acceleration in Company-operated store openings, extended store operating hours and a higher number of drive-thru locations opened in the past year, as well as higher maintenance and repair expenditures to ensure a consistent Starbucks Experience in existing stores.
International
International total net revenues increased by $57 million, or 31 percent, to $242 million for the 13 weeks ended April 3, 2005, compared to $186 million for the corresponding period of fiscal 2004. International Company-operated retail revenues increased by $47 million, or 31 percent, to $199 million for the 13 weeks ended April 3, 2005, compared to $152 million for the corresponding period for fiscal 2004, primarily due to the opening of 126 new Company-operated retail stores in the last 12 months, comparable store sales growth of five percent for the quarter and favorable foreign currency exchange rates for both the Canadian dollar and British pound sterling. The increase in comparable store sales resulted from a four percent increase in the number of customer transactions coupled with a one percent increase in the average value per transaction.
Total international specialty revenues increased by $10 million, or 29 percent, to $43 million for the 13 weeks ended April 3, 2005, compared to $33 million in the corresponding period of fiscal 2004. The increase was primarily due to higher product sales and royalty revenues from opening 297 licensed retail stores in the last 12 months and expansion of the Canadian grocery and warehouse club business.
International operating income increased to $17 million for the 13 weeks ended April 3, 2005, compared to $8 million in the corresponding period of fiscal 2004. Operating margin increased to 7.2 percent of related revenues from 4.4 percent in the corresponding period of fiscal 2004, primarily due to leverage gained on fixed costs distributed over an expanded revenue base.
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Store Data
The Company’s store data for the periods presented are as follows:
Net stores opened during the period | ||||||||||||||||||||||||
13-week period | 26-week period | Stores open as of | ||||||||||||||||||||||
April 3, | March 28, | April 3, | March 28, | April 3, | March 28, | |||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||||||||||||||
United States: | ||||||||||||||||||||||||
Company-operated Stores | 131 | 103 | 232 | 203 | 4,525 | 3,982 | ||||||||||||||||||
Licensed Stores | 98 | 87 | 241 | 197 | 2,080 | 1,619 | ||||||||||||||||||
229 | 190 | 473 | 400 | 6,605 | 5,601 | |||||||||||||||||||
International: | ||||||||||||||||||||||||
Company-operated Stores(1) | 21 | 22 | 61 | 65 | 1,018 | 892 | ||||||||||||||||||
Licensed Stores(1) | 62 | 55 | 158 | 144 | 1,638 | 1,341 | ||||||||||||||||||
83 | 77 | 219 | 209 | 2,656 | 2,233 | |||||||||||||||||||
Total | 312 | 267 | 692 | 609 | 9,261 | 7,834 | ||||||||||||||||||
(1) | International store data has been adjusted for the 100% acquisition of the Germany and Singapore operations by reclassifying historical information from Licensed Stores to Company-operated Stores. |
Starbucks Corporation is the leading retailer, roaster and brand of specialty coffee in the world, with more than 9,000 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 superpremium 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 the following forward-looking statements: anticipated store openings, comparable store sales expectations, trends in or expectations regarding the Company’s revenue and expense growth, capital expenditures, effective tax rate, net earnings and earnings per share results. These forward-looking statements 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 materials prices and availability, successful execution of internal performance and expansion plans, fluctuations in U.S. and international economies and currencies, 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/A for the fiscal year ended October 3, 2004. The Company assumes no obligations to update any of these forward-looking statements.
© 2005 Starbucks Coffee Company. All rights reserved.
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