Starbucks (SBUX) 8-K Results of Operations and Financial Condition

EXHIBIT 99.1

Starbucks Contact, Investor Relations:	Starbucks Contact, Media:
JoAnn DeGrande	Valerie O’Neil
206-318-7893	206-318-8953
jdegrand@starbucks.com	voneil@starbucks.com

Starbucks Announces Q3 2006 Results and July 2006 Revenues
Company Increases New Store Opening Pace for Fiscal 2006 and Fiscal 2007
Maintains 2006 Financial Outlook and Announces Strong Fiscal 2007 Growth Targets

SEATTLE; August 2, 2006 –Starbucks Corporation (NASDAQ: SBUX) today announced earnings for its fiscal third quarter ended July 2, 2006, revenues for the four-week period ended July 30, 2006, and introduced targets for fiscal 2007.

Fiscal Third Quarter 2006 Results:

• Record quarterly consolidated net revenues of $2 billion, an increase of 23 percent

• Third quarter net earnings of $145 million, an increase of 16 percent

• Earnings per share of $0.18, compared to $0.16 in the third quarter of fiscal 2005

• Q3 2006 earnings per share includes $0.01 related to a one-time tax benefit

July 2006 Revenue Highlights:

• Net revenues increased 20 percent, to $596 million

• Comparable store sales rose four percent

Fiscal 2006 Targets:

• New store openings target raised from 1,800 to at least 2,000 net new stores on a global basis

• Fiscal Q4 earnings per share target maintained at $0.16 — $0.17 per share

• Fiscal 2006 earnings per share target maintained at $0.71 — $0.72, excluding $0.01 related to fiscal Q3 one-time tax benefit

Introducing Fiscal 2007 Targets:

• New store openings targeted at approximately 2,400 net new stores on a global basis in fiscal 2007, up from 2,000 new stores in fiscal 2006

• Total net revenue growth target set at approximately 20 percent; comparable store sales growth of three to seven percent

• Fiscal 2007 earnings per share target range set at $0.87 — $0.89, reflecting growth of approximately 20 to 25 percent over fiscal 2006, excluding FY 2006 one-time tax benefit of $0.01

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“Our third quarter financial results demonstrate the continued strength in both our U.S. and International operations,” commented Jim Donald, Starbucks president and ceo. “Record third-quarter store openings helped drive robust revenue growth and our strong year-to-date results position us well to achieve our fiscal 2006 targets. We are confident in our growth potential and our ability to execute on that growth potential.”

Added Donald, “July marked our 175^th consecutive month of comparable store sales growth and 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 22 percent to $1.7 billion for the 13 weeks ended July 2, 2006, from $1.4 billion for the same period in fiscal 2005. The increase was primarily attributable to the opening of 955 new Company-operated retail stores in the last 12 months and comparable store sales growth of six 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 two percent increase in the average value per transaction.

Specialty revenuesincreased 23 percent to $303 million for the 13 weeks ended July 2, 2006, compared to $245 million for the corresponding period of fiscal 2005. Licensing revenues increased 27 percent to $216 million primarily due to higher product sales and royalty revenues from the opening of 1,158 new licensed retail stores in the last 12 months and, to a lesser extent, growth in the licensed grocery and warehouse club business. Foodservice and other revenues increased 15 percent to $86 million primarily due to growth in the U.S. foodservice business.

Cost of sales including occupancy costsincreased to 41.0 percent of total net revenues for the 13 weeks ended July 2, 2006, compared to 40.6 percent in the corresponding 13-week period of fiscal 2005. This increase was due to higher green coffee costs.

Store operating expensesas a percentage of Company-operated retail revenues increased to 41.3 percent for the 13 weeks ended July 2, 2006, from 40.2 percent for the corresponding period of fiscal 2005, primarily due to higher payroll-related expenditures from the recognition of stock-based compensation expense and higher employee benefits costs. In addition, the Company held regional leadership conferences for its retail management employees during its third fiscal quarter of 2006, which replaced a North American leadership conference held during the fiscal second quarter of 2005.

Other operating expense(expenses associated with the Company’s specialty operations) increased to 23.0 percent of total specialty revenues for the 13 weeks ended July 2, 2006, compared to 19.8 percent in the corresponding period of fiscal 2005. The increase was primarily due to higher marketing and advertising costs related to Starbucks ready-to-drink coffee beverages in Japan, Taiwan and Korea as well as in our

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emerging U.S. Entertainment business. In addition, the recognition of stock-based compensation expense increased payroll-related expenditures.

Depreciation and amortization expensesincreased to $99 million for the 13 weeks ended July 2, 2006, compared to $85 million for the corresponding period of fiscal 2005. The increase was primarily due to the opening of 955 new Company-operated retail stores in the last 12 months. As a percentage of total net revenues, depreciation and amortization expenses decreased to 5.0 percent for the 13 weeks ended July 2, 2006, from 5.3 percent for the corresponding 13-week period of fiscal 2005.

General and administrative expensesincreased to $115 million for the 13 weeks ended July 2, 2006, compared to $91 million for the corresponding period of fiscal 2005. The increase was primarily due to higher payroll-related expenditures from stock-based compensation and additional employees to support continued global growth. As a percentage of total net revenues, general and administrative expenses increased to 5.9 percent for the 13 weeks ended July 2, 2006, from 5.7 percent for the corresponding period of fiscal 2005.

Income from equity investeesincreased 42 percent to $26 million for the 13 weeks ended July 2, 2006, compared to $18 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, particularly in Japan.

Operating incomeincreased 8 percent to $215 million for the 13 weeks ended July 2, 2006, compared to $200 million for the corresponding 13-week period of fiscal 2005. Operating margin decreased to 10.9 percent of total net revenues for the 13 weeks ended July 2, 2006, compared to 12.5 percent for the corresponding period of fiscal 2005, primarily due to the recognition of stock-based compensation.

Income taxesfor the 13 weeks ended July 2, 2006, resulted in an effective tax rate of 33.7 percent, compared to 38.1 percent for the corresponding 13-week period of fiscal 2005. The decline in the effective tax rate was primarily due to the settlement in the current period of a multi-year income tax audit in a foreign jurisdiction for which the Company had established a contingent liability.

Net earningsfor the 13 weeks ended July 2, 2006, increased 16 percent to $145 million from $126 million for the same period in fiscal 2005. Earnings per share were $0.18 for the 13 weeks ended July 2, 2006, including a $0.01 per share benefit from the tax settlement discussed above, compared to $0.16 per share for the comparable period in fiscal 2005.

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Updated Fiscal 2006 Targets:

Starbucks provided updated fiscal 2006 targets:

• Starbucks now expects to open at least 2,000 net new stores on a global basis in fiscal 2006, an increase of 200 new stores from the Company’s previous target of 1,800. In the United States, Starbucks now plans to open approximately 750 Company-operated locations and 650 licensed locations. In International markets, Starbucks now plans to open approximately 200 Company-operated stores and 400 licensed stores;

• The Company continues to target total net revenue growth of approximately 20 percent and comparable store sales growth in the range of three percent to seven percent, with monthly anomalies;

• Based on third quarter results along with its current outlook for the balance of year, Starbucks is now targeting earnings per share in the range of $0.72 to $0.73 for fiscal 2006. This target includes $0.01 per share related to a one-time tax benefit recorded in the fiscal third quarter and, excluding that benefit, is consistent with the Company’s previous target range of $0.71 — $0.72 per share. Both the new target and the previous target ranges include stock-based compensation expense estimated at approximately $0.09 per share;

• The effective tax rate is expected to be approximately 38 percent for the fiscal fourth quarter, and;

• Starbucks is now targeting capital expenditures of approximately $800 million in fiscal 2006, an increase from the previous target of $750 million — $775 million, primarily driven by the acceleration in new store development.

Fiscal 2007 Targets:

Looking ahead, Starbucks introduced the following fiscal 2007 targets:

• The Company is again accelerating its store development plans and expects to open approximately 2,400 net new stores on a global basis in fiscal 2007, an increase of 400 stores compared to its newly raised fiscal 2006 target. In the United States, Starbucks plans to open approximately 1,000 Company-operated locations and 700 licensed locations. In International markets, Starbucks plans to open approximately 300 Company-operated stores and 400 licensed stores;

• Starbucks is targeting total net revenue growth of approximately 20 percent and comparable store sales growth in the range of three percent to seven percent, with monthly anomalies, again in fiscal 2007;

• Starbucks is targeting earnings per share of $0.87 to $0.89 for fiscal 2007, which reflects growth of approximately 20 percent to 25 percent compared to the Company’s fiscal 2006 earnings per share target range of $0.72 to $0.73 when adjusted to exclude the one-time tax benefit of $0.01 recorded in the fiscal 2006 third quarter;

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• The Company is targeting an effective tax rate of approximately 38 percent, with quarterly variations, and;

• Capital expenditures are expected to be in the range of $950 million to $1.0 billion in fiscal 2007.

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, August 2, 2006, by calling 1-800-642-1687, reservation number 3728558. 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 Wednesday, August 30, 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.

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

	13 Weeks Ended							13 Weeks Ended
	July 2,		July 3,		%			July 2,			July 3,
	2006		2005		Change			2006			2005
	(in thousands, except per share data)							As a % of total net revenues
Net revenues:
Company-operated retail	$	1,660,977	$	1,356,605		22.4	%		84.6	%		84.7	%
Specialty:
Licensing		216,267		170,330		27.0	%		11.0	%		10.6	%
Foodservice and other		86,429		74,864		15.4	%		4.4	%		4.7	%
Total specialty		302,696		245,194		23.5	%		15.4	%		15.3	%
Total net revenues		1,963,673		1,601,799		22.6	%		100.0	%		100.0	%
Cost of sales including occupancy costs		804,889		649,831					41.0	%		40.6	%
Store operating expenses(a)		686,602		546,008					35.0	%		34.1	%
Other operating expenses(b)		69,478		48,464					3.5	%		2.9	%
Depreciation and amortization expenses		98,539		85,363					5.0	%		5.3	%
General and administrative expenses		115,258		90,637					5.9	%		5.7	%
Subtotal operating expenses		1,774,766		1,420,303		25.0	%		90.4	%		88.6	%
Income from equity investees		25,666		18,074					1.3	%		1.1	%
Operating income		214,573		199,570		7.5	%		10.9	%		12.5	%
Interest and other income, net		5,028		3,235					0.3	%		0.2	%
Earnings before income taxes		219,601		202,805		8.3	%		11.2	%		12.7	%
Income taxes(c)		74,103		77,292					3.8	%		4.9	%
Net earnings	$	145,498	$	125,513		15.9	%		7.4	%		7.8	%
Net earnings per common share — diluted	$	0.18	$	0.16
Weighted avg. shares outstanding — diluted		798,259		808,037

(a)	As a percentage of related Company-operated retail revenues, store operating expenses were 41.3 percent for the 13 weeks ended July 2, 2006, and 40.2 percent for the 13 weeks ended July 3, 2005.
(b)	As a percentage of related total specialty revenues, other operating expenses were 23.0 percent for the 13 weeks ended July 2, 2006, and 19.8 percent for the 13 weeks ended July 3, 2005.
(c)	The effective tax rates were 33.7 percent for the 13 weeks ended July 2, 2006, and 38.1 percent for the 13 weeks ended July 3, 2005.

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

	39 Weeks Ended							39 Weeks Ended
	July 2,		July 3,		%			July 2,			July 3,
	2006		2005		Change			2006			2005
	(in thousands, except per share data)							As a % of total net revenues
Net revenues:
Company-operated retail	$	4,888,804	$	3,999,213		22.2	%		84.5	%		84.9	%
Specialty:
Licensing		637,771		488,835		30.5	%		11.0	%		10.4	%
Foodservice and other		257,012		222,011		15.8	%		4.5	%		4.7	%
Total specialty		894,783		710,846		25.9	%		15.5	%		15.1	%
Total net revenues		5,783,587		4,710,059		22.8	%		100.0	%		100.0	%
Cost of sales including occupancy costs		2,343,800		1,926,326					40.5	%		40.9	%
Store operating expenses(a)		1,974,041		1,599,958					34.2	%		34.0	%
Other operating expenses(b)		192,274		139,092					3.3	%		3.0	%
Depreciation and amortization expenses		284,335		251,694					4.9	%		5.3	%
General and administrative expenses		358,194		256,165					6.2	%		5.4	%
Subtotal operating expenses		5,152,644		4,173,235		23.5	%		89.1	%		88.6	%
Income from equity investees		65,371		47,179					1.1	%		1.0	%
Operating income		696,314		584,003		19.2	%		12.0	%		12.4	%
Interest and other income, net		8,439		12,371					0.2	%		0.3	%
Earnings before income taxes		704,753		596,374		18.2	%		12.2	%		12.7	%
Income taxes(c)		257,783		225,726					4.5	%		4.8	%
Net earnings	$	446,970	$	370,648		20.6	%		7.7	%		7.9	%
Net earnings per common share — diluted	$	0.56	$	0.45
Weighted avg. shares outstanding — diluted		795,285		822,245

(a)	As a percentage of related Company-operated retail revenues, store operating expenses were 40.4 percent for the 39 weeks ended July 2, 2006, and 40.0 percent for the 39 weeks ended July 3, 2005.
(b)	As a percentage of related total specialty revenues, other operating expenses were 21.5 percent for the 39 weeks ended July 2, 2006, and 19.6 percent for the 39 weeks ended July 3, 2005.
(c)	The effective tax rates were 36.6 percent for the 39 weeks ended July 2, 2006, and 37.8 percent for the 39 weeks ended July 3, 2005.

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STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

	July 2,		October 2,
	2006		2005
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	215,739	$	173,809
Short-term investments — available-for-sale securities		175,851		95,379
Short-term investments — trading securities		50,389		37,848
Accounts receivable, net of allowances of $5,985 and $3,079, respectively		184,941		190,762
Inventories		557,359		546,299
Prepaid expenses and other current assets		95,424		94,429
Deferred income taxes, net		89,969		70,808
Total current assets		1,369,672		1,209,334
Long-term investments — available-for-sale securities		24,045		60,475
Equity and other investments		217,306		201,089
Property, plant and equipment, net		2,090,903		1,842,019
Other assets		147,648		72,893
Other intangible assets		36,821		35,409
Goodwill		166,047		92,474
TOTAL ASSETS	$	4,052,442	$	3,513,693
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	255,158	$	220,975
Accrued compensation and related costs		293,186		232,354
Accrued occupancy costs		51,797		44,496
Accrued taxes		70,543		78,293
Short-term borrowings		200,000		277,000
Other accrued expenses		215,810		198,082
Deferred revenue		235,528		175,048
Current portion of long-term debt		758		748
Total current liabilities		1,322,780		1,226,996
Long-term debt		2,300		2,870
Other long-term liabilities		222,267		193,565
Shareholders’ equity:
Common stock — Authorized, 1,200,000,000 shares; issued and outstanding 768,376,679 and 767,442,110 shares, respectively, (includes 3,394,200 common stock units in both periods)		768		767
Additional paid-in-capital		42,065		90,201
Other additional paid-in-capital		39,393		39,393
Retained earnings		2,385,957		1,938,987
Accumulated other comprehensive income		36,912		20,914
Total shareholders’ equity		2,505,095		2,090,262
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	4,052,442	$	3,513,693

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)

	39 Weeks Ended
	July 2,			July 3,
	2006			2005
OPERATING ACTIVITIES:
Net earnings	$	446,970		$	370,648
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		303,210			271,795
Provision for impairments and asset retirements		12,017			15,159
Deferred income taxes		(75,094	)		(37,484	)
Equity in income of investees		(40,989	)		(27,644	)
Distribution from equity investees		37,499			24,342
Stock-based compensation		78,698			—
Tax benefit from exercise of non-qualified stock options		908			99,798
Excess tax benefit from exercise of non-qualified stock options		(93,327	)		—
Net amortization of premium on securities		1,643			9,248
Cash provided/(used) by changes in operating assets and liabilities:
Inventories		(6,672	)		(72,292	)
Accounts payable		27,549			(16,440	)
Accrued compensation and related costs		58,535			7,393
Accrued taxes		85,308			32,994
Deferred revenue		60,085			51,616
Other operating assets and liabilities		39,434			30,191
Net cash provided by operating activities		935,774			759,324
INVESTING ACTIVITIES:
Purchase of available-for-sale securities		(529,764	)		(616,093	)
Maturity of available-for-sale securities		193,184			449,524
Sale of available-for-sale securities		291,878			507,589
Acquisitions, net of cash acquired		(90,578	)		(18,976	)
Net (purchases)/sales of equity, other investments and other assets		(19,938	)		6,676
Net additions to property, plant and equipment		(522,348	)		(469,916	)
Net cash used by investing activities		(677,566	)		(141,196	)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock		131,824			145,870
Excess tax benefit from exercise of non-qualified stock options		93,327			—
Net repayments of revolving credit facility		(77,000	)		—
Repurchase of common stock		(367,771	)		(777,657	)
Principal payments on long-term debt		(560	)		(550	)
Net cash used by financing activities		(220,180	)		(632,337	)
Effect of exchange rate changes on cash and cash equivalents		3,902			(732	)
Net increase/(decrease) in cash and cash equivalents		41,930			(14,941	)
CASH AND CASH EQUIVALENTS:
Beginning of period		173,809			145,053
End of the period	$	215,739		$	130,112
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the 39 weeks ended:
Interest	$	4,892		$	333
Income taxes	$	239,004		$	129,530

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Stock 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, excludes stock-based compensation expense from reported amounts. 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 and 39 weeks ended July 2, 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 Statements of Earnings
	13 Weeks Ended July 2, 2006							39 Weeks Ended July 2, 2006
								Using
	Using Previous		Stock-based			As		Previous		Stock-based			As
	Accounting		Compensation			Reported		Accounting		Compensation			Reported
Cost of sales including occupancy costs	$	802,372	$	2,517		$	804,889	$	2,335,978	$	7,822		$	2,343,800
Store operating expenses		678,624		7,978			686,602		1,953,227		20,814			1,974,041
Other operating expenses		66,930		2,548			69,478		184,353		7,921			192,274
General and administrative expenses		100,900		14,358			115,258		316,717		41,477			358,194
Operating income		241,974		(27,401	)		214,573		774,348		(78,034	)		696,314
Earnings before income taxes		247,002		(27,401	)		219,601		782,787		(78,034	)		704,753
Income taxes		83,402		(9,299	)		74,103		284,364		(26,581	)		257,783
Net earnings		163,600		(18,102	)		145,498		498,423		(51,453	)		446,970
Net earnings per common share—diluted	$	0.20	$	(0.02	)	$	0.18	$	0.63	$	(0.07	)	$	0.56

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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 operating segment results net of intersegment eliminations for the 13 weeks ended July 2, 2006(in thousands):

	13 Weeks Ended									13 Weeks Ended
	July 2,			July 3,			%			July 2,			July 3,
	2006			2005			Change			2006			2005
										As a % of U.S. total
										net revenues
United States
Net revenues:
Company-operated retail	$	1,364,075		$	1,141,555			19.5	%		85.0	%		85.2	%
Specialty:
Licensing		162,421			129,355			25.6	%		10.1	%		9.7	%
Foodservice and other		78,981			68,530			15.3	%		4.9	%		5.1	%
Total specialty		241,402			197,885			22.0	%		15.0	%		14.8	%
Total net revenues		1,605,477			1,339,440			19.9	%		100.0	%		100.0	%
Cost of sales including occupancy costs		633,782			516,368						39.5	%		38.6	%
Store operating expenses		574,460			465,021						42.1	%(1)		40.7	%(1)
Other operating expenses		53,588			40,793						22.2	%(2)		20.6	%(2)
Depreciation and amortization expenses		71,435			63,027						4.4	%		4.7	%
General and administrative expenses		23,427			19,266						1.5	%		1.4	%
Income from equity investees		15,478			10,105						1.0	%		0.8	%
Operating income	$	264,263		$	245,070			7.8	%		16.5	%		18.3	%
										As a % of International
										total net revenues
International
Net revenues:
Company-operated retail	$	296,902		$	215,050			38.1	%		82.9	%		82.0	%
Specialty:
Licensing		53,846			40,975			31.4	%		15.0	%		15.6	%
Foodservice and other		7,448			6,334			17.6	%		2.1	%		2.4	%
Total specialty		61,294			47,309			29.6	%		17.1	%		18.0	%
Total net revenues		358,196			262,359			36.5	%		100.0	%		100.0	%
Cost of sales including occupancy costs		171,107			133,463						47.8	%		50.9	%
Store operating expenses		112,142			80,987						37.8	%(1)		37.7	%(1)
Other operating expenses		15,890			7,671						25.9	%(2)		16.2	%(2)
Depreciation and amortization expenses		18,089			14,015						5.1	%		5.3	%
General and administrative expenses		21,878			15,332						6.1	%		5.8	%
Income from equity investees		10,188			7,969						2.9	%		3.0	%
Operating income	$	29,278		$	18,860			55.2	%		8.2	%		7.2	%
										As a % of total net
										revenues
Unallocated Corporate
Depreciation and amortization expenses	$	9,015		$	8,321						0.5	%		0.5	%
General and administrative expenses		69,953			56,039						3.5	%		3.5	%
Operating loss	$	(78,968	)	$	(64,360	)					(4.0	)%		(4.0	)%

(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 operating segment results net of intersegment eliminations for the 39 weeks ended July 2, 2006(in thousands):

	39 Weeks Ended									39 Weeks Ended
	July 2,			July 3,			%			July 2,			July 3,
	2006			2005			Change			2006			2005
										As a % of U.S. total
										net revenues
United States
Net revenues:
Company-operated retail	$	4,072,880		$	3,375,922			20.6	%		84.9	%		85.4	%
Specialty:
Licensing		487,738			374,626			30.2	%		10.2	%		9.5	%
Foodservice and other		235,936			204,083			15.6	%		4.9	%		5.1	%
Total specialty		723,674			578,709			25.0	%		15.1	%		14.6	%
Total net revenues		4,796,554			3,954,631			21.3	%		100.0	%		100.0	%
Cost of sales including occupancy costs		1,871,313			1,542,157						39.0	%		39.0	%
Store operating expenses		1,665,664			1,365,920						40.9	%(1)		40.5	%(1)
Other operating expenses		152,169			116,737						21.0	%(2)		20.2	%(2)
Depreciation and amortization expenses		208,255			185,181						4.3	%		4.7	%
General and administrative expenses		68,161			65,239						1.4	%		1.6	%
Income from equity investees		37,938			27,377						0.8	%		0.7	%
Operating income	$	868,930		$	706,774			22.9	%		18.1	%		17.9	%
										As a % of International
										total net revenues
International
Net revenues:
Company-operated retail	$	815,924		$	623,291			30.9	%		82.7	%		82.5	%
Specialty:
Licensing		150,033			114,209			31.4	%		15.2	%		15.1	%
Foodservice and other		21,076			17,928			17.6	%		2.1	%		2.4	%
Total specialty		171,109			132,137			29.5	%		17.3	%		17.5	%
Total net revenues		987,033			755,428			30.7	%		100.0	%		100.0	%
Cost of sales including occupancy costs		472,487			384,169						47.9	%		50.9	%
Store operating expenses		308,377			234,038						37.8	%(1)		37.5	%(1)
Other operating expenses		40,105			22,355						23.4	%(2)		16.9	%(2)
Depreciation and amortization expenses		49,843			41,232						5.0	%		5.5	%
General and administrative expenses		56,635			37,447						5.7	%		5.0	%
Income from equity investees		27,433			19,802						2.8	%		2.6	%
Operating income	$	87,019		$	55,989			55.4	%		8.8	%		7.4	%
										As a % of total net
										revenues
Unallocated Corporate
Depreciation and amortization expenses	$	26,237		$	25,281						0.5	%		0.5	%
General and administrative expenses		233,398			153,479						4.0	%		3.3	%
Operating loss	$	(259,635	)	$	(178,760	)					(4.5	)%		(3.8	)%

(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 $266 million, or 20 percent, to $1.6 billion for the 13 weeks ended July 2, 2006, compared to $1.3 billion for the corresponding period of fiscal 2005. United States Company-operated retail revenues increased by $223 million, or 19 percent, to $1.4 billion, primarily due to the opening of 727 new Company-operated retail stores in the last 12 months and comparable store sales growth of six percent for the quarter. The increase in comparable store sales was due to a five 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 $44 million, or 22 percent, to $241 million for the 13 weeks ended July 2, 2006, compared to $198 million in the corresponding period of fiscal 2005. United States licensing revenues increased 26 percent to $162 million from $129 million in fiscal 2005, primarily due to higher product sales and royalty revenues as a result of opening 730 new licensed retail stores in the last 12 months and, to a lesser extent, growth in the licensed grocery and warehouse club business. United States foodservice and other revenues increased to $79 million, or 15 percent, from $69 million in fiscal 2005, primarily due to growth in new and existing foodservice accounts.

United States operating income increased by 8 percent to $264 million for the 13 weeks ended July 2, 2006, from $245 million for the same period in fiscal 2005. Operating margin decreased to 16.5 percent of related revenues from 18.3 percent in the corresponding period of fiscal 2005. The decrease was primarily due to higher store operating expenses from increased payroll-related expenditures and costs incurred related to regional leadership conferences, which were held during the third fiscal quarter of fiscal 2006, compared to the second quarter in fiscal 2005. Additionally, costs of sales including occupancy increased due to higher green coffee costs and higher distribution and utilities costs.

International

International total net revenues increased by $96 million, or 37 percent, to $358 million for the 13 weeks ended July 2, 2006, compared to $262 million for the corresponding period of fiscal 2005. International Company-operated retail revenues increased by $82 million, or 38 percent, to $297 million, primarily due to the opening of 228 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 resulted from a four 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 30 percent, to $61 million for the 13 weeks ended July 2, 2006, compared to $47 million in the corresponding period of fiscal 2005. The increase was primarily due to higher product sales and royalty revenues from opening 428 licensed retail stores in the last 12 months and sales of ready-to-drink coffee beverages introduced in Japan, Taiwan and Korea in the fall of 2005.

International operating income increased by 55 percent to $29 million for the 13 weeks ended July 2, 2006, compared to $19 million in the corresponding period of fiscal 2005. Operating margin increased to 8.2 percent of related revenues from 7.2 percent in the corresponding period of fiscal 2005. This improvement was primarily due to lower costs of sales including occupancy costs due primarily to leverage gained from fixed costs distributed over an expanded revenue base. The improvement was offset in part by higher marketing expenditures in support of the re-introduction of one of the Company’s ready-to-drink coffee beverages in Japan and higher payroll-related expenditures to support global expansion.

Unallocated Corporate

Unallocated corporate expenses increased to $79 million for the 13 weeks ended July 2, 2006, compared to $64 million in the corresponding period of fiscal 2005, primarily due to higher payroll-related expenses from stock-based compensation and additional employees to support continued rapid global growth. Total unallocated corporate expenses as a percentage of total net revenues were 4.0 percent for both the 13 weeks ended July 2, 2006 and July 3, 2005.

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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				39-week period				Stores open as of
	July 2,		July 3,		July 2,		July 3,		July 2,		July 3,
	2006		2005		2006		2005		2006		2005
United States:
Company-operated Stores		208		141		526		373		5,393		4,666
Licensed Stores		187		142		517		383		2,952		2,222
		395		283		1,043		756		8,345		6,888
International:
Company-operated Stores(1)		47		33		162		106		1,357		1,129
Licensed Stores(1)		117		94		338		240		2,082		1,654
		164		127		500		346		3,439		2,783
Total		559		410		1,543		1,102		11,784		9,671

⁽¹⁾ International store data has been adjusted for the acquisitions of the Southern China, Chile, Hawaii and Puerto Rico operations by reclassifying historical information from Licensed Stores to Company-operated Stores.

July 2006 Revenues

Starbucks Corporation today also reported consolidated net revenues of $596 million for the four-week period ended July 30, 2006, an increase of 20 percent from consolidated net revenues of $496 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 four percent for the four weeks ended July 30, 2006, as compared to the same four-week period in fiscal 2005.

For the 43 weeks ended July 30, 2006, consolidated net revenues were $6.4 billion, an increase of 23 percent from consolidated net revenues of $5.2 billion for the same 43 week period in 2005. Comparable store sales increased seven percent for the 43 weeks ended July 30, 2006, as compared to the same 43 weeks in fiscal 2005.

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Fiscal YTD Store Data

The Company’s store data for the periods presented are as follows:

	Net stores opened during
	the 43 weeks ended		Stores open as of
	July 30, 2006		July 30, 2006
United States:
Company-operated Stores		575		5,442
Licensed Stores		594		3,029
		1,169		8,471
International:
Company-operated Stores		179		1,374
Licensed Stores		357		2,101
		536		3,475
Total		1,705		11,946

Through the dedication of our passionate partners (employees), Starbucks Coffee Company has transformed the way people in 37 countries enjoy their coffee, one cup at a time. Starbucks is the premier purveyor of the finest coffee in the world, with nearly 12,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim. The Company is committed to offering its customers the highest quality coffee and human connection through theStarbucks Experience, while striving to improve the social, environmental and economic well being of its partners, coffee farmers, countries of coffee origin, and the communities which it serves. Through Ethos Water, Starbucks demonstrates its long history of integrating a social conscience into all aspects of its business. The Company surprises and delights its customers by producing and selling bottled Starbucks Frappuccino^® coffee drinks, Starbucks DoubleShot^® espresso drink and Starbucks^® superpremium ice creams through its joint venture partnerships, and Starbucks™ Coffee and Cream Liqueurs through a marketing and distribution agreement, in other convenient locations outside its retail operations. The Company’s brand portfolio includes superpremium Tazo^® teas, Starbucks Hear Music™ compact discs, Seattle’s Best Coffee and Torrefazione Italia. These brands’ unique and innovative personalities allow Starbucks to appeal to a broad consumer base.

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, expected capital expenditures, expected effective tax rate, 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.

###