Exhibit 99.1
| | | |
Starbucks Contact, Investor Relations: | | Starbucks Contact, Media: |
| JoAnn DeGrande | | T. May Kulthol |
| 206-318-7893 | | 206-318-7100 |
jdegrand@starbucks.com | | mkulthol@starbucks.com |
Starbucks Announces Record First Quarter Fiscal 2006 Results
Strong January 2006 Revenues
Raises Earnings Target
SEATTLE; February 1, 2006 —Starbucks Corporation (NASDAQ: SBUX) today announced record earnings for its fiscal first quarter for the period ended January 1, 2006, and revenues for the four-week period ended January 29, 2006.
Fiscal First Quarter 2006 Results:
| • | | First quarter consolidated net revenues increased 22 percent to a record $1.9 billion |
| |
| • | | Net earnings rose 20 percent to a record $174 million |
| |
| • | | Earnings per share increased to $0.22 from $0.17 in the comparable period in fiscal 2005 |
January 2006 Revenue Highlights:
| • | | January net revenues increased 23 percent |
| |
| • | | January comparable store sales rose 10 percent |
Updated Fiscal 2006 Target:
| • | | Earnings per share target range increased by $0.05 per share to $0.68 – $0.70 |
For the 13 weeks ended January 1, 2006, consolidated net revenues increased 22 percent to $1.9 billion from $1.6 billion for the same period in fiscal 2005, and net earnings increased 20 percent to $174 million from $145 million for the same period in fiscal 2005. Fully diluted earnings per share were $0.22 for the 13 weeks ended January 1, 2006, compared to a split-adjusted $0.17 per share for the comparable period in fiscal 2005. The Company adopted the new accounting requirements related to expensing stock-based compensation in the first fiscal quarter of 2006, which reduced net earnings by $0.02 per share in the quarter.
“I am very pleased with our first quarter performance, which demonstrated focused execution at all levels of the business and delivered the most successful first quarter in Starbucks history,” commented Howard Schultz, Starbucks chairman. “Our core beverages, coupled with a strong holiday promotion, drove results in our retail stores, while solid growth in licensed locations led to the increase in our specialty business revenues. We ended the first quarter with a strong foundation for Starbucks fiscal year 2006 which gave us the confidence to raise our full year earnings per share target range by $0.05 per share to $0.68 to $0.70 per share.”
- more -
- page 2 -
“Building on the success of our first quarter, we are proud that revenue results for the month of January were just as impressive,” commented Jim Donald, Starbucks president and ceo. “Due to the strength of the Starbucks brand and the exemplary execution of our holiday promotion, a record number of Starbucks Cards were activated during the holiday season and are bringing valued customers, both existing and new, into Starbucks stores in record numbers. We are very pleased with 10 percent comparable store sales growth in January, but we also recognize that same store sales growth at this level is not sustainable. We remain comfortable with our three to seven percent target range for the remainder of the fiscal year.”
Consolidated Financial and Operating Summary
Company-operated retail revenuesincreased 20 percent to a record $1.6 billion for the 13 weeks ended January 1, 2006, compared to $1.4 billion for the same period in fiscal 2005. The increase was primarily attributable to the opening of 803 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 six percent increase in the number of customer transactions and a one percent increase in the average value per transaction.
Specialty revenuesincreased 33 percent to a record $306 million for the 13 weeks ended January 1, 2006, compared to $231 million for the corresponding period of fiscal 2005. Licensing revenues increased 39 percent to $219 million primarily due to higher product sales and royalty revenues from opening 1,049 new licensed retail stores in the last 12 months and growth in the licensed grocery and warehouse club business. Foodservice and other revenues increased 18 percent to $87 million due to growth in both new and existing U.S. and International foodservice accounts.
Cost of sales including occupancy costsdecreased to 40.2 percent of total net revenues for the 13 weeks ended January 1, 2006, compared to 40.8 percent in the corresponding 13-week period of fiscal 2005, primarily due to higher occupancy costs in the prior year resulting from store maintenance activities, as well as fixed rent costs in the current year being distributed over an expanded revenue base.
Store operating expensesas a percentage of Company-operated retail revenues decreased to 38.2 percent for the 13 weeks ended January 1, 2006, compared to 38.3 percent for the corresponding period of fiscal 2005. This decrease was primarily due to leverage gained on payroll-related expenditures distributed over an expanded revenue base, partially offset by recognition of stock-based compensation expense in the first fiscal quarter of 2006 related to new accounting requirements. Additional details on this new accounting standard can be found on page 8.
- more -
- page 3 -
Other operating expenses(expenses associated with the Company’s specialty operations) increased to 19.3 percent of total specialty revenues for the 13 weeks ended January 1, 2006, compared to 19.2 percent in the corresponding period of fiscal 2005. The increase was primarily due to the recognition of stock-based compensation expense.
Depreciation and amortization expensesincreased to $91 million for the 13 weeks ended January 1, 2006, compared to $79 million for the corresponding period of fiscal 2005. The increase was primarily due to the opening of 803 new Company-operated retail stores in the last 12 months. As a percentage of total net revenues, depreciation and amortization expenses decreased to 4.7 percent for the 13 weeks ended January 1, 2006, compared to 4.9 percent for the corresponding 13-week period of fiscal 2005.
General and administrative expensesincreased to $123 million for the 13 weeks ended January 1, 2006, compared to $84 million for the corresponding period of fiscal 2005. This increase was primarily due to higher payroll-related expenditures from stock-based compensation and higher provisions for incentive compensation based on the Company’s strong operating results for the fiscal first quarter of 2006, as well as increased charitable contributions. As a percentage of total net revenues, general and administrative expenses increased to 6.4 percent for the 13 weeks ended January 1, 2006, compared to 5.3 percent for the corresponding period of fiscal 2005.
Income from equity investeesincreased to $20 million for the 13 weeks ended January 1, 2006, compared to $13 million for the corresponding period of fiscal 2005. The increase was primarily due to volume-driven results for The North American Coffee Partnership, which produces bottled Frappuccino® and Starbucks Doubleshot® coffee drinks, and improved results from international investees primarily as a result of new licensed retail store openings.
Operating incomeincreased 23 percent to $280 million for the 13 weeks ended January 1, 2006, compared to $227 million for the corresponding 13-week period of fiscal 2005. Operating margin increased to 14.5 percent of total net revenues for the 13 weeks ended January 1, 2006, compared to 14.3 percent for the corresponding period of fiscal 2005. This increase was primarily due to lower cost of sales including occupancy costs and store operating expenses as a percentage of total net revenues, offset in part by higher general and administrative expenses.
Interest and other income, net, decreased to $0.3 million for the 13 weeks ended January 1, 2006, compared to $5.1 million for the corresponding 13-week period of fiscal 2005, primarily due to interest expense recognized on the borrowings under the Company’s revolving credit facility, which was entered into in August of 2005.
- more -
- page 4 -
Net earningsfor the 13 weeks ended January 1, 2006, increased 20 percent to $174 million from $145 million for the same period in fiscal 2005. Earnings were $0.22 per share for the 13 weeks ended January 1, 2006, compared to $0.17 per share for the comparable period in fiscal 2005.
Updated Fiscal 2006 Targets
Looking ahead, Starbucks provided updated fiscal 2006 targets:
| • | | Starbucks plans to open at least 1,800 new stores on a global basis in fiscal 2006. In the United States, Starbucks plans to open approximately 700 Company-operated locations and 600 licensed locations. In International markets, Starbucks plans to open approximately 150 Company-operated stores and 350 licensed stores; |
| |
| • | | The Company is targeting total net revenue growth of approximately 20 percent on a quarterly and full year basis. The Company continues to expect comparable store sales growth in the range of three percent to seven percent for the remainder of fiscal 2006, with monthly anomalies; |
| |
| • | | Based on very strong first quarter results along with its current outlook for the balance of year, Starbucks is raising its fiscal 2006 earnings per share target range by $0.05 per share to $0.68 – $0.70 per share. This target range is an increase from the previous target of $0.63 – $0.65 per share. Both the new target and the previous target ranges include stock-based compensation expense estimated at approximately $0.09 per share. On a quarterly basis the Company is targeting earnings per share of $0.14 in the second quarter and is targeting a range of $0.16 – $0.17 per share for each of the third and fourth quarters; |
| |
| • | | The effective tax rate is expected to be approximately 38 percent in fiscal 2006, with quarterly variations; and, |
| |
| • | | Starbucks continues to target capital expenditures in the range of $700 million to $725 million in fiscal 2006. |
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 Thursday, February 8, 2006, by calling 1-800-642-1687, reservation number 3728089. 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, March 2, 2006, 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. This information should be reviewed in conjunction with this press release. Please refer to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 16, 2005, for additional information.
- more -
- page 5 -
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
| | | | | | | | | | | | | | | | | | | | | |
| | | 13 Weeks Ended | | 13 Weeks Ended |
| | | January 1, | | January 2, | | % | | January 1, | | January 2, |
| | | 2006 | | 2005 | | Change | | 2006 | | 2005 |
| | | (in thousands, except per share data) | | |
| | | | | | | | | | | | | | | As a % of total net revenues |
| Net revenues: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Company-operated retail | | $ | 1,627,983 | | | $ | 1,358,661 | | | | 19.8 | % | | | 84.2 | % | | | 85.5 | % |
| Specialty: | | | | | | | | | | | | | | | | | | | | |
| Licensing | | | 219,150 | | | | 157,213 | | | | 39.4 | % | | | 11.3 | % | | | 9.9 | % |
| Foodservice and other | | | 86,959 | | | | 73,670 | | | | 18.0 | % | | | 4.5 | % | | | 4.6 | % |
| | | | | | | | | |
| Total specialty | | | 306,109 | | | | 230,883 | | | | 32.6 | % | | | 15.8 | % | | | 14.5 | % |
| | | | | | | | | |
| Total net revenues | | | 1,934,092 | | | | 1,589,544 | | | | 21.7 | % | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Cost of sales including occupancy costs | | | 778,038 | | | | 647,755 | | | | | | | | 40.2 | % | | | 40.8 | % |
Store operating expenses(a) | | | 622,166 | | | | 521,006 | | | | | | | | 32.2 | % | | | 32.7 | % |
Other operating expenses(b) | | | 59,148 | | | | 44,281 | | | | | | | | 3.0 | % | | | 2.8 | % |
| Depreciation and amortization expenses | | | 91,288 | | | | 78,559 | | | | | | | | 4.7 | % | | | 4.9 | % |
| General and administrative expenses | | | 123,325 | | | | 83,599 | | | | | | | | 6.4 | % | | | 5.3 | % |
| | | | | | | | | |
| Subtotal operating expenses | | | 1,673,965 | | | | 1,375,200 | | | | 21.7 | % | | | 86.5 | % | | | 86.5 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Income from equity investees | | | 19,754 | | | | 12,847 | | | | | | | | 1.0 | % | | | 0.8 | % |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating income | | | 279,881 | | | | 227,191 | | | | 23.2 | % | | | 14.5 | % | | | 14.3 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Interest and other income, net | | | 348 | | | | 5,122 | | | | | | | | 0.0 | % | | | 0.3 | % |
| | | | | | | | | |
| |
| Earnings before income taxes | | | 280,229 | | | | 232,313 | | | | 20.6 | % | | | 14.5 | % | | | 14.6 | % |
| | | | | | | | | | | | | | | | | | | | | |
Income taxes(c) | | | 106,039 | | | | 87,603 | | | | | | | | 5.5 | % | | | 5.5 | % |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net earnings | | $ | 174,190 | | | $ | 144,710 | | | | 20.4 | % | | | 9.0 | % | | | 9.1 | % |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net earnings per common share — diluted | | $ | 0.22 | | | $ | 0.17 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Weighted average shares outstanding - diluted | | | 792,949 | | | | 830,655 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | |
| (a) | | As a percentage of related Company-operated retail revenues, store operating expenses were 38.2 percent for the 13 weeks ended January 1, 2006, and 38.3 percent for the 13 weeks ended January 2, 2005. |
| |
| (b) | | As a percentage of related total specialty revenues, other operating expenses were 19.3 percent for the 13 weeks ended January 1, 2006, and 19.2 percent for the 13 weeks ended January 2, 2005. |
| |
| (c) | | The effective tax rates were 37.8 percent for the 13 weeks ended January 1, 2006, and 37.7 percent for the 13 weeks ended January 2, 2005. |
- more -
- page 6 -
STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| | | | | | | | | |
| | | January 1, | | | October 2, | |
| | | 2006 | | | 2005 | |
| | (unaudited) | | | | |
| ASSETS | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 251,435 | | | $ | 173,809 | |
| Short-term investments — available-for-sale securities | | | 240,250 | | | | 95,379 | |
| Short-term investments — trading securities | | | 46,845 | | | | 37,848 | |
| Accounts receivable, net of allowances of $3,766 and $3,079, respectively | | | 197,765 | | | | 190,762 | |
| Inventories | | | 452,650 | | | | 546,299 | |
| Prepaid expenses and other current assets | | | 87,518 | | | | 94,429 | |
| Deferred income taxes, net | | | 77,046 | | | | 70,808 | |
| | | | | | | |
| Total current assets | | | 1,353,509 | | | | 1,209,334 | |
| | | | | | | | | |
| Long-term investments — available-for-sale securities | | | 55,659 | | | | 60,475 | |
| Equity and other investments | | | 207,470 | | | | 201,461 | |
| Property, plant and equipment, net | | | 1,870,793 | | | | 1,842,019 | |
| Other assets | | | 97,375 | | | | 72,893 | |
| Other intangible assets | | | 35,937 | | | | 35,409 | |
| Goodwill | | | 92,342 | | | | 92,474 | |
| | | | | | | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 3,713,085 | | | $ | 3,514,065 | |
| | | | | | | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 208,591 | | | $ | 220,975 | |
| Accrued compensation and related costs | | | 229,063 | | | | 232,354 | |
| Accrued occupancy costs | | | 49,049 | | | | 44,496 | |
| Accrued taxes | | | 181,585 | | | | 78,293 | |
| Short-term borrowings | | | 105,000 | | | | 277,000 | |
| Other accrued expenses | | | 187,380 | | | | 198,082 | |
| Deferred revenue | | | 310,868 | | | | 175,048 | |
| Current portion of long-term debt | | | 752 | | | | 748 | |
| | | | | | | |
| Total current liabilities | | | 1,272,288 | | | | 1,226,996 | |
| | | | | | | | | |
| Long-term debt | | | 2,681 | | | | 2,870 | |
| Other long-term liabilities | | | 205,324 | | | | 193,565 | |
| | | | | | | | | |
| Shareholders’ equity: | | | | | | | | |
| Common stock and additional paid-in capital — Authorized, 1,200,000,000 shares; issued and outstanding, 767,105,132 and 767,442,110 shares, respectively, (includes 3,394,200 common stock units in both periods) | | | 61,431 | | | | 90,968 | |
| Other additional paid-in-capital | | | 39,393 | | | | 39,393 | |
| Retained earnings | | | 2,113,549 | | | | 1,939,359 | |
| Accumulated other comprehensive income | | | 18,419 | | | | 20,914 | |
| | | | | | | |
| Total shareholders’ equity | | | 2,232,792 | | | | 2,090,634 | |
| | | | | | | |
| | | | | | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 3,713,085 | | | $ | 3,514,065 | |
| | | | | | | |
- more -
- page 7 -
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
| | | | | | | | | |
| | | 13 Weeks Ended | |
| | | January 1, | | | January 2, | |
| | | 2006 | | | 2005 | |
| OPERATING ACTIVITIES: | | | | | | | | |
| Net earnings | | $ | 174,190 | | | $ | 144,710 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 97,744 | | | | 85,332 | |
| Provision for impairments and asset disposals | | | 4,206 | | | | 2,889 | |
| Deferred income taxes, net | | | (26,291 | ) | | | (13,623 | ) |
| Equity in income of investees | | | (12,485 | ) | | | (5,781 | ) |
| Distributions from equity investees | | | 5,769 | | | | 5,743 | |
| Stock-based compensation | | | 23,189 | | | | — | |
| Tax benefit from exercise of non-qualified stock options | | | 110 | | | | 71,050 | |
| Excess tax benefit from exercise of non-qualified stock options | | | (23,724 | ) | | | — | |
| Net amortization of premium on securities | | | 545 | | | | 3,260 | |
| Cash provided/(used) by changes in operating assets and liabilities: | | | | | | | | |
| Inventories | | | 93,348 | | | | 46,487 | |
| Accounts payable | | | (8,180 | ) | | | (41,559 | ) |
| Accrued taxes | | | 127,118 | | | | 23,819 | |
| Deferred revenue | | | 135,785 | | | | 100,658 | |
| Other operating assets and liabilities | | | 17,993 | | | | (9,325 | ) |
| | | | | | | |
| Net cash provided by operating activities | | | 609,317 | | | | 413,660 | |
| | | | | | | | | |
| INVESTING ACTIVITIES: | | | | | | | | |
| Purchase of available-for-sale securities | | | (232,000 | ) | | | (366,082 | ) |
| Maturity of available-for-sale securities | | | 14,734 | | | | 129,491 | |
| Sale of available-for-sale securities | | | 76,504 | | | | 54,344 | |
| Acquisition, net of cash acquired | | | — | | | | (11,282 | ) |
| Net additions to equity, other investments and other assets | | | (4,893 | ) | | | 15,618 | |
| Net additions to property, plant and equipment | | | (147,778 | ) | | | (162,132 | ) |
| | | | | | | |
| Net cash used by investing activities | | | (293,433 | ) | | | (340,043 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES: | | | | | | | | |
| Proceeds from issuance of common stock | | | 44,412 | | | | 91,423 | |
| Excess tax benefit from exercise of non-qualified stock options | | | 23,724 | | | | — | |
| Net repayments of revolving credit facility | | | (172,000 | ) | | | — | |
| Principal payments on long-term debt | | | (186 | ) | | | (183 | ) |
| Repurchase of common stock | | | (134,301 | ) | | | — | |
| | | | | | | |
| Net cash (used)/provided by financing activities | | | (238,351 | ) | | | 91,240 | |
| Effect of exchange rate changes on cash and cash equivalents | | | 93 | | | | 4,610 | |
| | | | | | | |
| Net increase in cash and cash equivalents | | | 77,626 | | | | 169,467 | |
| | | | | | | | | |
| CASH AND CASH EQUIVALENTS: | | | | | | | | |
| Beginning of period | | | 173,809 | | | | 145,053 | |
| | | | | | | |
| | | | | | | | | |
| End of the period | | $ | 251,435 | | | $ | 314,520 | |
| | | | | | | |
| | | | | | | | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid during the 13 weeks ended: | | | | | | | | |
| Interest | | $ | 2,918 | | | $ | 47 | |
| Income taxes | | $ | 10,280 | | | $ | 10,356 | |
- more -
- page 8 -
Stock-based Compensation Expense
Effective October 3, 2005, the beginning of Starbucks first fiscal quarter of 2006, the Company adopted the fair value recognition provisions of Financial Accounting Standards Board Statement No. 123(R), “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires all stock-based compensation, including grants of employee stock options, to be recognized in the statement of earnings based on their fair values. The Company adopted this accounting treatment using the modified prospective transition method, as permitted under SFAS 123R; therefore results for prior periods have not been restated. Prior to the adoption of SFAS 123R, the Company accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, stock-based compensation was included as pro forma disclosure in the financial statement footnotes. The Company is providing the table below because management believes it provides useful information to investors regarding the Company’s results of operations by separately identifying the stock-based compensation expense and providing reported amounts on a basis comparable to that used in prior periods. In addition, the Company’s internal reporting and budgeting, as well as the calculation of its incentive compensation payments, includes the use of reported amounts excluding stock-based compensation. The amounts shown in the column below entitled “Using Previous Accounting” are considered “non-GAAP financial measures” under applicable SEC rules because they exclude the stock-based payment expense that is included in the directly comparable measures calculated in accordance with generally accepted accounting principles (“GAAP”) in the United States, which are shown in the column entitled “As Reported.” These non-GAAP financial measures are not a substitute for the reported GAAP measures.
The application of SFAS 123R had the following effect on reported amounts for the 13 weeks ended January 1, 2006 relative to the amounts that would have been reported using the intrinsic value method under the Company’s previous accounting (in thousands, except earnings per share):
| | | | | | | | | | | | | |
| | | Consolidated Statement of Earnings | |
| | | Using | | | | | | | |
| | | Previous | | | Stock-based | | | As | |
| | | Accounting | | | Compensation | | | Reported | |
| Cost of sales including occupancy costs | | $ | 775,516 | | | $ | 2,522 | | | $ | 778,038 | |
| Store operating expenses | | | 616,008 | | | | 6,158 | | | | 622,166 | |
| Other operating expenses | | | 56,953 | | | | 2,195 | | | | 59,148 | |
| General and administrative expenses | | | 111,397 | | | | 11,928 | | | | 123,325 | |
| Operating income | | | 302,684 | | | | (22,803 | ) | | | 279,881 | |
| Earnings before income taxes | | | 303,032 | | | | (22,803 | ) | | | 280,229 | |
| Income taxes | | | 113,745 | | | | (7,706 | ) | | | 106,039 | |
| Net earnings | | | 189,287 | | | | (15,097 | ) | | | 174,190 | |
| Net earnings per common share–diluted | | $ | 0.24 | | | $ | (0.02 | ) | | $ | 0.22 | |
| | | | | | | | | | |
- more -
- page 9 -
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 January 1, 2006 | | States | | Revenue | | national | | Revenue | | Corporate | | Revenues | | Consolidated |
| Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Company-operated retail | | $ | 1,370,687 | | | | 84.6 | % | | $ | 257,296 | | | | 82.1 | % | | $ | — | | | | — | % | | | $1,627,983 | |
| Specialty: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Licensing | | | 169,523 | | | | 10.5 | | | | 49,627 | | | | 15.8 | | | | — | | | | — | | | | 219,150 | |
| Foodservice and other | | | 80,371 | | | | 4.9 | | | | 6,588 | | | | 2.1 | | | | — | | | | — | | | | 86,959 | |
| | | | | | | | | | | |
| Total specialty | | | 249,894 | | | | 15.4 | | | | 56,215 | | | | 17.9 | | | | — | | | | — | | | | 306,109 | |
| | | | | | | | | | | |
| Total net revenues | | | 1,620,581 | | | | 100.0 | | | | 313,511 | | | | 100.0 | | | | — | | | | — | | | | 1,934,092 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost of sales including occupancy costs | | | 628,363 | | | | 38.8 | | | | 149,675 | | | | 47.7 | | | | — | | | | — | | | | 778,038 | |
| Store operating expenses | | | 528,775 | | | | 32.6 | (1) | | | 93,391 | | | | 29.8 | (3) | | | — | | | | — | | | | 622,166 | |
| Other operating expenses | | | 47,142 | | | | 2.9 | (2) | | | 12,006 | | | | 3.8 | (4) | | | — | | | | — | | | | 59,148 | |
| Depreciation and amortization expenses | | | 67,718 | | | | 4.2 | | | | 15,009 | | | | 4.8 | | | | 8,561 | | | | 0.4 | | | | 91,288 | |
| General and administrative expenses | | | 21,533 | | | | 1.3 | | | | 16,187 | | | | 5.2 | | | | 85,605 | | | | 4.4 | | | | 123,325 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Income from equity investees | | | 11,699 | | | | 0.7 | | | | 8,055 | | | | 2.6 | | | | — | | | | — | | | | 19,754 | |
| | | | | | | | | | | |
| Operating income/(loss) | | $ | 338,749 | | | | 20.9 | % | | $ | 35,298 | | | | 11.3 | % | | $ | (94,166 | ) | | | (4.8 | )% | | | $ 279,881 | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | % of | | | | | | % of | | | | | | % of | | |
| | | | | | | United | | | | | | Inter- | | | | | | Total | | |
| | | United | | States | | Inter- | | national | | Unallocated | | Net | | |
| 13 Weeks Ended January 2, 2005 | | States | | Revenue | | national | | Revenue | | Corporate | | Revenues | | Consolidated |
| Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Company-operated retail | | | $1,149,630 | | | | 85.9 | % | | $ | 209,031 | | | | 83.4 | % | | $ | — | | | | — | % | | | $1,358,661 | |
| Specialty: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Licensing | | | 121,135 | | | | 9.0 | | | | 36,078 | | | | 14.4 | | | | — | | | | — | | | | 157,213 | |
| Foodservice and other | | | 68,008 | | | | 5.1 | | | | 5,662 | | | | 2.2 | | | | — | | | | — | | | | 73,670 | |
| | | | | | | | | | | |
| Total specialty | | | 189,143 | | | | 14.1 | | | | 41,740 | | | | 16.6 | | | | — | | | | — | | | | 230,883 | |
| | | | | | | | | | | |
| Total net revenues | | | 1,338,773 | | | | 100.0 | | | | 250,771 | | | | 100.0 | | | | — | | | | — | | | | 1,589,544 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost of sales including occupancy costs | | | 521,713 | | | | 39.0 | | | | 126,042 | | | | 50.3 | | | | — | | | | — | | | | 647,755 | |
| Store operating expenses | | | 444,061 | | | | 33.2 | (1) | | | 76,945 | | | | 30.7 | (3) | | | — | | | | — | | | | 521,006 | |
| Other operating expenses | | | 37,103 | | | | 2.8 | (2) | | | 7,178 | | | | 2.9 | (4) | | | — | | | | — | | | | 44,281 | |
| Depreciation and amortization expenses | | | 57,335 | | | | 4.3 | | | | 13,089 | | | | 5.2 | | | | 8,135 | | | | 0.5 | | | | 78,559 | |
| General and administrative expenses | | | 21,623 | | | | 1.6 | | | | 11,899 | | | | 4.7 | | | | 50,077 | | | | 3.2 | | | | 83,599 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Income from equity investees | | | 8,708 | | | | 0.7 | | | | 4,139 | | | | 1.7 | | | | — | | | | — | | | | 12,847 | |
| | | | | | | | | | | |
| Operating income/(loss) | | | $265,646 | | | | 19.8 | % | | $ | 19,757 | | | | 7.9 | % | | $ | (58,212 | ) | | | (3.7 | )% | | | $ 227,191 | |
| | | | | | | | | | | |
| | |
| (1) | | As a percentage of related Company-operated retail revenues, United States store operating expenses were 38.6 percent for both the 13 weeks ended January 1, 2006 and January 2, 2005. |
| |
| (2) | | As a percentage of related specialty revenues, United States other operating expenses were 18.9 percent for the 13 weeks ended January 1, 2006, and 19.6 percent for the 13 weeks ended January 2, 2005. |
| |
| (3) | | As a percentage of related Company-operated retail revenues, International store operating expenses were 36.3 percent for the 13 weeks ended January 1, 2006, and 36.8 percent for the 13 weeks ended January 2, 2005. |
| |
| (4) | | As a percentage of related specialty revenues, International other operating expenses were 21.4 percent for the 13 weeks ended January 1, 2006, and 17.2 percent for the 13 weeks ended January 2, 2005. |
- more -
- page 10 -
United States
United States total net revenues increased by $282 million, or 21 percent, to $1.6 billion for the 13 weeks ended January 1, 2006, compared to $1.3 billion for the corresponding period of fiscal 2005. United States Company-operated retail revenues increased by $221 million, or 19 percent, to $1.4 billion for the 13 weeks ended January 1, 2006, compared to $1.1 billion for the corresponding period of fiscal 2005, primarily due to the opening of 634 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 six percent increase in the number of customer transactions and a one percent increase in the average value per transaction.
Total United States specialty revenues increased by $61 million, or 32 percent, to $250 million for the 13 weeks ended January 1, 2006, compared to $189 million in the corresponding period of fiscal 2005. United States licensing revenues increased 40 percent to $170 million from $121 million in fiscal 2005, primarily due to higher product sales and royalty revenues as a result of opening 651 new licensed retail stores in the last 12 months and growth in the licensed grocery and warehouse club business. United States foodservice and other revenues increased to $80 million, or 18 percent, from $68 million in fiscal 2005, primarily due to growth in new and existing foodservice accounts.
United States operating income increased by 28 percent to $339 million for the 13 weeks ended January 1, 2006, compared to $266 million for the same period in fiscal 2005. Operating margin increased to 20.9 percent of related revenues from 19.8 percent in the corresponding period of fiscal 2005, primarily due to store operating and general and administrative expenses distributed over an expanded revenue base. Although store operating expenses as a percentage of U.S. Company-operated retail revenues remained at 38.6 percent for both 13-week periods ended January 1, 2006 and January 2, 2005, these expenses as a percentage of U.S. total net revenues improved by 60 basis points compared to the corresponding 13-week period of fiscal 2005. This improvement was primarily due to the specialty revenue component of total net revenues growing at a higher rate than Company-operated retail revenues, as noted above.
International
International total net revenues increased by $63 million, or 25 percent, to $314 million for the 13 weeks ended January 1, 2006, compared to $251 million for the corresponding period of fiscal 2005. International Company-operated retail revenues increased by $48 million, or 23 percent, to $257 million for the 13 weeks ended January 1, 2006, compared to $209 million for the corresponding period of fiscal 2005, primarily due to the opening of 169 new Company-operated retail stores in the last 12 months and comparable store sales growth of eight percent for the quarter. The increase in comparable store sales resulted from a five percent increase in the number of customer transactions coupled with a three percent increase in the average value per transaction.
Total international specialty revenues increased by $14 million, or 35 percent, to $56 million for the 13 weeks ended January 1, 2006, compared to $42 million in the corresponding period of fiscal 2005. International licensing revenues increased $14 million, or 38 percent, to $50 million, compared to $36 million for the corresponding period of fiscal 2005. The increase was primarily due to higher product sales and royalty revenues from opening 398 new licensed retail stores in the last 12 months and sales of ready-to-drink coffee beverages introduced in Japan and Taiwan in September 2005, and in Korea in late October 2005. International foodservice and other revenues increased 16 percent from the corresponding period of fiscal 2005 due to growth in new and existing foodservice accounts.
International operating income increased by 79 percent to $35 million for the 13 weeks ended January 1, 2006, compared to $20 million in the corresponding period of fiscal 2005. Operating margin increased to 11.3 percent of related revenues from 7.9 percent in the corresponding period of fiscal 2005. This increase was primarily due to lower cost of sales including occupancy costs and store operating expenses as a percentage of total International net revenues. Also contributing to the margin expansion was an increase in income from equity investees, particularly from Japan and Korea, due to an increase in the Company’s store base as well as improved comparable same store sales. Partially offsetting these improvements was an increase in other operating expenses for marketing and advertising related to the recent launch of Starbucks ready-to-drink coffee beverages in Japan, Taiwan and Korea.
- more -
- page 11 -
Unallocated Corporate
Unallocated corporate expenses increased to $94 million for the 13 weeks ended January 1, 2006, compared to $58 million in the corresponding period of fiscal 2005, primarily due to higher payroll-related expenses from stock-based compensation and higher provisions for incentive compensation based on the Company’s strong operating results for the quarter, as well as increased charitable contributions. Total unallocated corporate expenses as a percentage of total net revenues increased to 4.8 percent for the 13-weeks ended January 1, 2006 compared to 3.7 percent for the corresponding period of fiscal 2005.
Fiscal First Quarter 2006 Store Data
The Company’s store data for the periods presented are as follows:
| | | | | | | | | | | | | | | | | |
| | | Net stores opened during the | | |
| | | 13 weeks ended | | Stores open as of |
| | | January 1, | | January 2, | | January 1, | | January 2, |
| | | 2006 | | 2005 | | 2006 | | 2005 |
| United States: | | | | | | | | | | | | | | | | |
| Company-operated Stores | | | 161 | | | | 101 | | | | 5,028 | | | | 4,394 | |
| Licensed Stores | | | 198 | | | | 143 | | | | 2,633 | | | | 1,982 | |
| | | | | |
| | | | 359 | | | | 244 | | | | 7,661 | | | | 6,376 | |
| | | | | | | | | | | | | | | | | |
| International: | | | | | | | | | | | | | | | | |
Company-operated Stores(1) | | | 55 | | | | 47 | | | | 1,188 | | | | 1,019 | |
Licensed Stores(1) | | | 146 | | | | 89 | | | | 1,952 | | | | 1,554 | |
| | | | | |
| | | | 201 | | | | 136 | | | | 3,140 | | | | 2,573 | |
| | | | | |
| | | | | | | | | | | | | | | | | |
| Total | | | 560 | | | | 380 | | | | 10,801 | | | | 8,949 | |
| | | | | |
| | |
| (1) | | International store data has been adjusted for the acquisitions of the Southern China and Chile licensed operations by reclassifying historical information from Licensed Stores to Company-operated Stores. |
January 2006 Revenues
Starbucks Corporation today also reported consolidated net revenues of $555 million for the four-week period ended January 29, 2006, an increase of 23 percent from consolidated net revenues of $452 million for the same period in fiscal 2005. On a comparable store sales basis (stores open for at least 13 months), sales at Company-operated stores increased ten percent for the four weeks ended January 29, 2006, as compared to the same four-week period in fiscal 2005. Handcrafted beverages continued to drive comparable store sales results, including a strong contribution from the new Cinnamon Dolce offerings.
For the 17 weeks ended January 29, 2006, consolidated net revenues were $2.5 billion, an increase of 22 percent from consolidated net revenues of $2.0 billion for the 17 weeks ended January 30, 2005. Comparable store sales increased eight percent for the 17 weeks ended January 29, 2006, as compared to the same 17 weeks in fiscal 2005.
- more -
- page 12 -
Fiscal YTD Store Data
The Company’s store data for the periods presented are as follows:
| | | | | | | | | |
| | | Net stores opened during | | | | |
| | | the 17 weeks ended | | | Stores open as of | |
| | | January 29, 2006 | | | January 29, 2006 | |
| United States: | | | | | | | | |
| Company-operated Stores | | | 189 | | | | 5,056 | |
| Licensed Stores | | | 208 | | | | 2,643 | |
| | | | | | | |
| | | | 397 | | | | 7,699 | |
| | | | | | | | | |
| International: | | | | | | | | |
Company-operated Stores(1) | | | 74 | | | | 1,269 | |
Licensed Stores(1) | | | 156 | | | | 1,900 | |
| | | | | | | |
| | | | 230 | | | | 3,169 | |
| | | | | | | | | |
| Total | | | 627 | | | | 10,868 | |
| | | | | | | |
| | |
| (1) | | International store data has been adjusted for the acquisitions of the Southern China, Chile, Hawaii and Puerto Rico licensed 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 10,500 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® espresso 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—innovative superpremium Tazo® teas and exceptional compact discs from Starbucks Hear Music™ enhance the Starbucks Experience through 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 net revenue, estimated stock based compensation expense, capital expenditures, effective tax rate, net earnings and earnings per share results. These forward-looking statements are 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 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 “Risk Factors” section of Starbucks Annual Report on Form 10-K for the fiscal year ended October 2, 2005. The Company assumes no obligation to update any of these forward-looking statements.
© 2006 Starbucks Coffee Company. All rights reserved.
# # #
