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 Reports 20 Percent Increase in Net Revenues for Third Quarter Fiscal 2007
International Segment Revenue Increases 28%
Company Sets Fiscal 2008 Growth Targets

SEATTLE; August 1, 2007 – Starbucks Corporation (NASDAQ: SBUX) today announced financial results for its fiscal third quarter ended July 1, 2007.

Reporting Fiscal Third Quarter 2007 Highlights:

• Consolidated net revenues of $2.4 billion, an increase of 20 percent

• Operating income of $245 million, an increase of 14 percent

• Net earnings per share of $0.21, compared to $0.18 per share, an increase of 17 percent

• 668 new retail store openings, a third-quarter record

• Comparable store sales growth of four percent

• International segment revenue increased 28 percent

Maintaining Fiscal 2007 Targets:

• New store openings of at least 2,400

• Comparable store sales growth in the range of three percent to seven percent

• Total net revenue growth of approximately 20 percent

• Fiscal 2007 earnings per share in the range of $0.87 to $0.89

Introducing Fiscal 2008 Targets:

• New store openings of approximately 2,600, accelerating International openings by 200 stores

• Comparable store sales growth in the range of three to seven percent

• Total net revenue growth of approximately 18 percent

• Fiscal 2008 earnings per share growth of approximately 20 percent to 22 percent

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“In the third quarter, Starbucks delivered solid financial performance while expanding globally,” said Jim Donald, Starbucks president and ceo. “Record store openings helped drive revenue growth of 20 percent. Starbucks ability to balance strong top line growth, global expansion, and delivering a solid bottom line in a challenging environment was due to the hard work and dedication of our partners across the Company. Despite the difficult operating environment of rising expenses – particularly higher dairy costs – we continued to execute on our growth strategy. We will strive to mitigate the impact of these cost pressures while remaining focused on delivering legendary service to our customers.”

Consolidated Financials and Operating Summary

Company-operated retail revenuesincreased 21 percent to $2.0 billion for the 13 weeks ended July 1, 2007, from $1.7 billion for the same period in fiscal 2006. The increase was primarily attributable to the opening of 1,369 new Company-operated retail stores in the last 12 months and comparable store sales growth of four percent for the quarter. The increase in comparable store sales was due to a three percent increase in the average value per transaction and a one percent increase in the number of customer transactions.

Specialty revenuesincreased 15 percent to $348 million for the 13 weeks ended July 1, 2007, compared to $303 million for the corresponding period of fiscal 2006. Licensing revenues increased 18 percent to $255 million primarily due to higher product sales and royalty revenues from the opening of 1,243 new licensed retail stores in the last 12 months and a 24 percent increase in licensing revenues from the Company’s Global Consumer Products business.

Cost of sales including occupancy costsincreased to 42.6 percent of total net revenues for the 13 weeks ended July 1, 2007, compared to 41.0 percent in the corresponding 13-week period of fiscal 2006. This increase was primarily due to a shift in sales to higher cost products, the rise in dairy costs,and higher rent expense.

Store operating expensesas a percentage of Company-operated retail revenues decreased to 40.7 percent for the 13 weeks ended July 1, 2007, from 41.3 percent for the corresponding period of fiscal 2006, primarily due to controlled discretionary spending.

Other operating expenses(expenses associated with the Company’s specialty operations) decreased to 22.0 percent of total specialty revenues for the 13 weeks ended July 1, 2007, compared to 23.0 percent in the corresponding period of fiscal 2006. The decline resulted primarily from lower marketing and advertising costs in fiscal 2007.

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Depreciation and amortization expensesincreased to $119 million for the 13 weeks ended July 1, 2007, compared to $99 million for the corresponding period of fiscal 2006. The increase was primarily due to the opening of 1,369 new Company-operated retail stores in the last 12 months. As a percentage of total net revenues, depreciation and amortization expenses increased slightly to 5.1 percent for the 13 weeks ended July 1, 2007, from 5.0 percent for the corresponding period in fiscal 2006.

General and administrative expensesincreased to $120 million for the 13 weeks ended July 1, 2007, compared to $115 million for the corresponding period of fiscal 2006. The increase was primarily due to higher payroll-related expenditures in support of continued global growth. As a percentage of total net revenues, general and administrative expenses decreased to 5.1 percent for the 13 weeks ended July 1, 2007, from 5.9 percent for the corresponding period of fiscal 2006.

Income from equity investeesdecreased 5 percent to $25 million for the 13 weeks ended July 1, 2007, compared to $26 million for the corresponding period of fiscal 2006, primarily due to lower sales volumes for The North American Coffee Partnership, which produces ready-to-drink beverages, including Starbucks bottled Frappuccino^®coffee drinks and Starbucks DoubleShot^®.

Operating incomeincreased 14 percent to $245 million for the 13 weeks ended July 1, 2007, compared to $215 million for the corresponding period of fiscal 2006. Operating margin decreased to 10.4 percent of total net revenues for the 13 weeks ended July 1, 2007, from 10.9 percent for the corresponding period of fiscal 2006. Higher cost of sales including occupancy costs were offset, in part, by leveraging general and administrative expenses, store operating expenses, and other operating expenses.

Net interest and other was an expense of $2.2 million for the 13 weeks ended July 1, 2007, compared to income of $5.0 million for the corresponding period of fiscal 2006, primarily due to a higher level of borrowings outstanding.

Income taxesfor the 13 weeks ended July 1, 2007 reflected an effective tax rate of 34.8 percent, compared to 33.7 percent for the corresponding period of fiscal 2006. The effective tax rate is still expected to be approximately 37 percent for the full fiscal year of 2007.

Net earningsfor the 13 weeks ended July 1, 2007 increased 9 percent to $158 million from $145 million for the corresponding period in fiscal 2006. Earnings per share increased by 17 percent to $0.21 for the 13 weeks ended July 1, 2007, compared to $0.18 per share for the comparable period in fiscal 2006.

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

	13 Weeks Ended								13 Weeks Ended
	July 1,			July 2,		%			July 1,			July 2,
	2007			2006		Change			2007			2006
	(in thousands, except per share data)								As a % of total net revenues
Net revenues:
Company-operated retail	$	2,010,772		$	1,660,977		21.1	%		85.2	%		84.6	%
Specialty:
Licensing		254,904			216,267		17.9			10.8			11.0
Foodservice and other		93,569			86,429		8.3			4.0			4.4
Total specialty		348,473			302,696		15.1			14.8			15.4
Total net revenues		2,359,245			1,963,673		20.1			100.0			100.0
Cost of sales including occupancy costs		1,003,881			804,889					42.6			41.0
Store operating expenses(a)		819,212			686,602					34.7			35.0
Other operating expenses(b)		76,507			69,478					3.2			3.5
Depreciation and amortization expenses		119,409			98,539					5.1			5.0
General and administrative expenses		119,525			115,258					5.1			5.9
Subtotal operating expenses		2,138,534			1,774,766		20.5			90.7			90.4
Income from equity investees		24,503			25,666					1.1			1.3
Operating income		245,214			214,573		14.3			10.4			10.9
Net interest and other (expense) / income		(2,241	)		5,028					(0.1	)		0.3
Earnings before income taxes		242,973			219,601		10.6			10.3			11.2
Income taxes(c)		84,630			74,103					3.6			3.8
Net earnings	$	158,343		$	145,498		8.8	%		6.7	%		7.4	%
Net earnings per common share — diluted	$	0.21		$	0.18
Weighted avg. shares outstanding — diluted		763,559			798,259

(a)	As a percentage of related Company-operated retail revenues, store operating expenses were 40.7 percent for the 13 weeks ended July 1, 2007, and 41.3 percent for the 13 weeks ended July 2, 2006.
(b)	As a percentage of related total specialty revenues, other operating expenses were 22.0 percent for the 13 weeks ended July 1, 2007, and 23.0 percent for the 13 weeks ended July 2, 2006.
(c)	The effective tax rates were 34.8 percent for the 13 weeks ended July 1, 2007, and 33.7 percent for the 13 weeks ended July 2, 2006.

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

	39 Weeks Ended							39 Weeks Ended
	July 1,		July 2,		%			July 1,			July 2,
	2007		2006		Change			2007			2006
	(in thousands, except per share data)							As a % of total net revenues
Net revenues:
Company-operated retail	$	5,940,288	$	4,888,804		21.5	%		85.2	%		84.5	%
Specialty:
Licensing		743,633		637,771		16.6			10.7			11.0
Foodservice and other		286,641		257,012		11.5			4.1			4.5
Total specialty		1,030,274		894,783		15.1			14.8			15.5
Total net revenues		6,970,562		5,783,587		20.5			100.0			100.0
Cost of sales including occupancy costs		2,933,450		2,343,800					42.1			40.5
Store operating expenses(a)		2,372,164		1,974,041					34.0			34.2
Other operating expenses(b)		224,706		192,274					3.2			3.3
Depreciation and amortization expenses		342,990		284,335					4.9			4.9
General and administrative expenses		360,857		358,194					5.2			6.2
Subtotal operating expenses		6,234,167		5,152,644		21.0			89.4			89.1
Income from equity investees		69,517		65,371					1.0			1.1
Operating income		805,912		696,314		15.7			11.6			12.0
Net interest and other (expense) / income		3,606		8,439					—			0.2
Earnings before income taxes		809,518		704,753		14.9			11.6			12.2
Income taxes(c)		295,383		257,783					4.2			4.5
Net earnings	$	514,135	$	446,970		15.0	%		7.4	%		7.7	%
Net earnings per common share — diluted	$	0.66	$	0.56
Weighted avg. shares outstanding — diluted		773,506		795,285

(a)	As a percentage of related Company-operated retail revenues, store operating expenses were 39.9 percent for the 39 weeks ended July 1, 2007, and 40.4 percent for the 39 weeks ended July 2, 2006.
(b)	As a percentage of related total specialty revenues, other operating expenses were 21.8 percent for the 39 weeks ended July 1, 2007, and 21.5 percent for the 39 weeks ended July 2, 2006.
(c)	The effective tax rates were 36.5 percent for the 39 weeks ended July 1, 2007, and 36.6 percent for the 39 weeks ended July 2, 2006.

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Segment Results

The tables below present reportable segment results net of intersegment eliminations(in thousands):

United States

	revenues
	July 1,		July 2,		%			July 1,			July 2,
	2007		2006		Change			2007			2006
								As a % of U.S. total net
								revenues
13 Weeks Ended
Net revenues:
Company-operated retail	$	1,646,234	$	1,380,901		19.2	%		89.5	%		88.7	%
Specialty:
Licensing		110,130		96,266		14.4			6.0			6.2
Foodservice and other		83,806		78,981		6.1			4.5			5.1
Total specialty		193,936		175,247		10.7			10.5			11.3
Total net revenues		1,840,170		1,556,148		18.3			100.0			100.0
Cost of sales including occupancy costs		742,232		600,597					40.3			38.6
Store operating expenses(a)		682,595		582,505					37.1			37.4
Other operating expenses(b)		51,785		50,964					2.8			3.3
Depreciation and amortization expenses		89,134		72,238					4.8			4.6
General and administrative expenses		21,214		24,510					1.2			1.6
Subtotal operating expenses		1,586,960		1,330,814		19.2			86.2			85.5
Income from equity investees		—		—					—			—
Operating income	$	253,210	$	225,334		12.4	%		13.8	%		14.5	%
39 Weeks Ended
Net revenues:
Company-operated retail	$	4,901,886	$	4,103,151		19.5	%		89.3	%		88.9	%
Specialty:
Licensing		328,229		274,000		19.8			6.0			6.0
Foodservice and other		259,384		235,936		9.9			4.7			5.1
Total specialty		587,613		509,936		15.2			10.7			11.1
Total net revenues		5,489,499		4,613,087		19.0			100.0			100.0
Cost of sales including occupancy costs		2,181,310		1,757,307					39.7			38.1
Store operating expenses(c)		1,984,763		1,679,368					36.2			36.4
Other operating expenses(d)		155,930		143,180					2.8			3.1
Depreciation and amortization expenses		254,926		209,456					4.7			4.5
General and administrative expenses		66,624		69,630					1.2			1.5
Subtotal operating expenses		4,643,553		3,858,941		20.3			84.6			83.6
Income from equity investees		—		151					—			—
Operating income	$	845,946	$	754,297		12.2	%		15.4	%		16.4	%

(a)	As a percentage of related Company-operated retail revenues, store operating expenses were 41.5 percent for the 13 weeks ended July 1, 2007, and 42.2 percent for the 13 weeks ended July 2, 2006.
(b)	As a percentage of related total specialty revenues, other operating expenses were 26.7 percent for the 13 weeks ended July 1, 2007, and 29.1 percent for the 13 weeks ended July 2, 2006.
(c)	As a percentage of related Company-operated retail revenues, store operating expenses were 40.5 percent for the 39 weeks ended July 1, 2007, and 40.9 percent for the 39 weeks ended July 2, 2006.
(d)	As a percentage of related total specialty revenues, other operating expenses were 26.5 percent for the 39 weeks ended July 1, 2007, and 28.1 percent for the 39 weeks ended July 2, 2006.

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United States total net revenues increased by $284 million, or 18 percent, to $1.8 billion for the 13 weeks ended July 1, 2007, compared to $1.6 billion for the corresponding period of fiscal 2006. United States Company-operated retail revenues increased by $265 million, or 19 percent, to $1.6 billion, primarily due to the opening of 1,116 new Company-operated retail stores in the last 12 months and comparable store sales growth of four percent for the quarter resulting from a three percent increase in the average value per transaction and growth in transactions of less than one percent.

Total United States specialty revenues increased by $19 million, or 11 percent, to $194 million for the 13 weeks ended July 1, 2007, compared to $175 million in the corresponding period of fiscal 2006. United States licensing revenues increased 14 percent to $110 million from $96 million in fiscal 2006 primarily due to higher product sales and royalty revenues as a result of opening 777 new licensed retail stores in the last 12 months.

United States operating income increased by 12 percent to $253 million for the 13 weeks ended July 1, 2007, from $225 million for the corresponding period in fiscal 2006. Operating margin decreased to 13.8 percent of related revenues from 14.5 percent in the corresponding period of fiscal 2006. The decrease was due to higher cost of sales including occupancy costs, primarily due to higher dairy costs, a shift in sales to higher cost products such as food and merchandise, and higher rent expenses. Partially offsetting these were lower other operating expenses, lower general and administrative expenses, and lower store operating expenses as a percentage of total net revenues. The decline in both other operating expenses and store operating expenses was primarily due to controlled discretionary spending. General and administrative expenses were lower, primarily due to decreased salary and related benefits expense as well as lower professional fees.

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International

	July 1,		July 2,		%			July 1,			July 2,
	2007		2006		Change			2007			2006
								As a % of International
								total net revenues
13 Weeks Ended
Net revenues:
Company-operated retail	$	364,538	$	280,076		30.2	%		84.4	%		83.1	%
Specialty:
Licensing		57,653		49,665		16.1			13.3			14.7
Foodservice and other		9,763		7,448		31.1			2.3			2.2
Total specialty		67,416		57,113		18.0			15.6			16.9
Total net revenues		431,954		337,189		28.1			100.0			100.0
Cost of sales including occupancy costs		210,247		162,711					48.7			48.3
Store operating expenses(a)		136,617		104,097					31.6			30.9
Other operating expenses(b)		18,364		13,329					4.3			3.9
Depreciation and amortization expenses		21,287		17,260					4.9			5.1
General and administrative expenses		24,861		20,795					5.8			6.2
Subtotal operating expenses		411,376		318,192		29.3			95.3			94.4
Income from equity investees		11,909		10,109					2.8			3.0
Operating income	$	32,487	$	29,106		11.6	%		7.5	%		8.6	%
39 Weeks Ended
Net revenues:
Company-operated retail	$	1,038,402	$	785,653		32.2	%		84.8	%		83.5	%
Specialty:
Licensing		158,722		134,699		17.8			13.0			14.3
Foodservice and other		27,257		21,076		29.3			2.2			2.2
Total specialty		185,979		155,775		19.4			15.2			16.5
Total net revenues		1,224,381		941,428		30.1			100.0			100.0
Cost of sales including occupancy costs		599,542		452,955					49.0			48.1
Store operating expenses(c)		387,401		294,673					31.6			31.3
Other operating expenses(d)		49,282		35,145					4.0			3.7
Depreciation and amortization expenses		62,401		48,555					5.1			5.2
General and administrative expenses		71,914		55,166					5.9			5.9
Subtotal operating expenses		1,170,540		886,494		32.0			95.6			94.2
Income from equity investees		32,849		27,012					2.7			2.9
Operating income	$	86,690	$	81,946		5.8	%		7.1	%		8.7	%

(a)	As a percentage of related Company-operated retail revenues, store operating expenses were 37.5 percent for the 13 weeks ended July 1, 2007, and 37.2 percent for the 13 weeks ended July 2, 2006.
(b)	As a percentage of related total specialty revenues, other operating expenses were 27.2 percent for the 13 weeks ended July 1, 2007, and 23.3 percent for the 13 weeks ended July 2, 2006.
(c)	As a percentage of related Company-operated retail revenues, store operating expenses were 37.3 percent for the 39 weeks ended July 1, 2007, and 37.5 percent for the 39 weeks ended July 2, 2006.
(d)	As a percentage of related total specialty revenues, other operating expenses were 26.5 percent for the 39 weeks ended July 1, 2007, and 22.6 percent for the 39 weeks ended July 2, 2006.

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International total net revenues increased by $95 million, or 28 percent, to $432 million for the 13 weeks ended July 1, 2007, compared to $337 million for the corresponding period of fiscal 2006. International Company-operated retail revenues increased by $84 million, or 30 percent, to $365 million, primarily due to the opening of 253 new Company-operated retail stores in the last 12 months, comparable store sales growth of seven percent for the quarter and favorable foreign currency exchange for the British pound sterling. The increase in comparable store sales resulted from a five percent increase in the number of customer transactions coupled with a two percent increase in the average value per transaction.

Total International specialty revenues increased by $10 million, or 18 percent, to $67 million for the 13 weeks ended July 1, 2007, compared to $57 million in the corresponding period of fiscal 2006. The increase was primarily due to higher product sales and royalty revenues from opening 466 licensed retail stores in the last 12 months.

International operating income increased by 12 percent to $32 million for the 13 weeks ended July 1, 2007, compared to $29 million in the corresponding period of fiscal 2006. Operating margin decreased to 7.5 percent of related revenues from 8.6 percent in the corresponding period of fiscal 2006, primarily due to increased costs associated with store renovation and maintenance expenses and higher rent expenses as a percentage of total net revenues.

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Global Consumer Products Group (CPG)

	July 1,		July 2,		%			July 1,			July 2,
	2007		2006		Change			2007			2006
								As a % of CPG total net
								revenues
13 Weeks Ended
Net revenues:
Specialty:
Licensing	$	87,121	$	70,336		23.9	%		100.0	%		100.0	%
Total specialty		87,121		70,336		23.9			100.0			100.0
Total net revenues		87,121		70,336		23.9			100.0			100.0
Cost of sales		51,402		41,581					59.0			59.1
Other operating expenses		6,358		5,185					7.3			7.4
Depreciation and amortization expenses		18		26					—			—
Subtotal operating expenses		57,778		46,792		23.5			66.3			66.5
Income from equity investees		12,594		15,557					14.4			22.1
Operating income	$	41,937	$	39,101		7.3	%		48.1	%		55.6	%
39 Weeks Ended
Net revenues:
Specialty:
Licensing	$	256,682	$	229,072		12.1	%		100.0	%		100.0	%
Total specialty		256,682		229,072		12.1			100.0			100.0
Total net revenues		256,682		229,072		12.1			100.0			100.0
Cost of sales		152,598		133,538					59.5			58.3
Other operating expenses		19,494		13,949					7.6			6.1
Depreciation and amortization expenses		61		87					—			—
Subtotal operating expenses		172,153		147,574		16.7			67.1			64.4
Income from equity investees		36,668		38,208					14.3			16.7
Operating income	$	121,197	$	119,706		1.2	%		47.2	%		52.3	%

CPG total net revenues increased by $17 million, or 24 percent, to $87 million for the 13 weeks ended July 1, 2007, compared to $70 million for the corresponding period of fiscal 2006. The increase was primarily due to increased sales of U.S. packaged coffee and tea as well as increased product sales and royalties in the International ready-to-drink business.

CPG operating income increased by seven percent to $42 million for the 13 weeks ended July 1, 2007, compared to $39 million in the corresponding period of fiscal 2006. Operating margin decreased to 48.1 percent of related revenues, from 55.6 percent in fiscal 2006, primarily due to lower sales volumes for The North American Coffee Partnership, which produces ready-to-drink beverages, including Starbucks bottled Frappuccino^® and Starbucks DoubleShot^® in the U.S.

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Unallocated Corporate

	July 1,			July 2,			%			July 1,			July 2,
	2007			2006			Change			2007			2006
										As a % of total net
										revenues
13 Weeks Ended
Depreciation and amortization expenses	$	8,970		$	9,015						0.4	%		0.5	%
General and administrative expenses		73,450			69,953						3.1			3.5
Operating loss	$	(82,420	)	$	(78,968	)		4.4	%		(3.5	)%		(4.0	)%
39 Weeks Ended
Depreciation and amortization expenses	$	25,602		$	26,237						0.4	%		0.5	%
General and administrative expenses		222,319			233,398						3.2			4.0
Operating loss	$	(247,921	)	$	(259,635	)		(4.5	)%		(3.6	)%		(4.5	)%

Total unallocated corporate expenses as a percentage of total net revenues decreased to 3.5 percent for the 13 weeks ended July 1, 2007, from 4.0 percent for the corresponding period of fiscal 2006, primarily due to disciplined expense management.

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

	July 1,		October 1,
	2007		2006
ASSETS
Current assets:
Cash and cash equivalents	$	172,789	$	312,606
Short-term investments — available-for-sale securities		85,956		87,542
Short-term investments — trading securities		71,278		53,496
Accounts receivable, net of allowances of $5,252 and $3,827, respectively		250,866		224,271
Inventories		657,466		636,222
Prepaid expenses and other current assets		128,370		126,874
Deferred income taxes, net		101,071		88,777
Total current assets		1,467,796		1,529,788
Long-term investments – available-for-sale securities		15,980		5,811
Equity and other investments		242,460		219,093
Property, plant and equipment, net		2,686,969		2,287,899
Other assets		235,107		186,917
Other intangible assets		40,392		37,955
Goodwill		215,219		161,478
TOTAL ASSETS	$	4,903,923	$	4,428,941
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Commercial paper and short-term borrowings	$	879,972	$	700,000
Accounts payable		314,583		340,937
Accrued compensation and related costs		324,915		288,963
Accrued occupancy costs		75,916		54,868
Accrued taxes		84,233		94,010
Other accrued expenses		233,313		224,154
Deferred revenue		309,714		231,926
Current portion of long-term debt		772		762
Total current liabilities		2,223,418		1,935,620
Long-term debt		1,356		1,958
Other long-term liabilities		323,364		262,857
Total liabilities		2,548,138		2,200,435
Shareholders’ equity:
Common stock ($0.001 par value) — authorized, 1,200,000,000 shares; issued and outstanding, 745,303,613 and 756,602,055 shares, respectively, (includes 3,394,184 common stock units in both periods)		745		756
Other additional paid-in-capital		39,393		39,393
Retained earnings		2,264,992		2,151,084
Accumulated other comprehensive income		50,655		37,273
Total shareholders’ equity		2,355,785		2,228,506
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	4,903,923	$	4,428,941

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

	39 Weeks Ended
	July 1,			July 2,
	2007			2006
OPERATING ACTIVITIES:
Net earnings	$	514,135		$	446,970
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		360,881			303,210
Provision for impairments and asset disposals		21,165			12,017
Deferred income taxes, net		(40,459	)		(75,094	)
Equity in income of investees		(38,621	)		(40,989	)
Distributions from equity investees		42,324			37,499
Stock-based compensation		78,530			78,698
Tax benefit from exercise of stock options		5,865			908
Excess tax benefit from exercise of stock options		(52,034	)		(93,327	)
Net amortization of premium on securities		604			1,643
Cash provided/(used) by changes in operating assets and liabilities:
Inventories		(16,734	)		(6,672	)
Accounts payable		(30,944	)		27,549
Accrued compensation and related costs		32,374			58,535
Accrued taxes		38,040			85,308
Deferred revenue		76,944			60,085
Other operating assets and liabilities		47,770			39,434
Net cash provided by operating activities		1,039,840			935,774
INVESTING ACTIVITIES:
Purchase of available-for-sale securities		(207,974	)		(529,764	)
Maturity of available-for-sale securities		162,212			193,184
Sale of available-for-sale securities		36,897			291,878
Acquisitions, net of cash acquired		(53,419	)		(90,578	)
Net purchases of equity, other investments and other assets		(48,363	)		(19,938	)
Net additions to property, plant and equipment		(772,133	)		(522,348	)
Net cash used by investing activities		(882,780	)		(677,566	)
FINANCING ACTIVITIES:
Repayments of commercial paper		(3,795,450	)		—
Proceeds from issuance of commercial paper		4,675,422			—
Repayments of short-term borrowings		(1,370,000	)		(455,000	)
Proceeds from short-term borrowings		670,000			378,000
Proceeds from issuance of common stock		136,603			131,824
Excess tax benefit from exercise of stock options		52,034			93,327
Principal payments on long-term debt		(592	)		(560	)
Repurchase of common stock		(670,988	)		(367,771	)
Net cash used by financing activities		(302,971	)		(220,180	)
Effect of exchange rate changes on cash and cash equivalents		6,094			3,902
Net increase/(decrease) in cash and cash equivalents		(139,817	)		41,930
CASH AND CASH EQUIVALENTS:
Beginning of period		312,606			173,809
End of the period	$	172,789		$	215,739
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	25,372		$	4,892
Income taxes	$	294,624		$	239,004

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Balance Sheet Commentary

Management is currently evaluating a range of alternatives for raising long-term financing to enable Starbucks to pay down short-term debt and take advantage of opportunities for repurchasing shares. These include a long-term bond financing and/or an interim credit facility containing terms substantially similar to those contained in the Company’s existing revolving credit facility. Any funding would be consistent with the Company’s strategy of targeting leverage and coverage levels to be roughly commensurate with a high triple B rating over the medium term.

     During the third quarter, the Company repurchased a total of 2.5 million shares. For the nine months ended July 1, 2007, Starbucks had repurchased 20.3 million shares. Under authorized plans, approximately 26 million shares remained available for repurchase at the end of the fiscal third quarter.

Company Updates

• On July 17, 2007, the Company announced the realignment of its executive management team. The new leadership structure leverages Starbucks management strength and experience to maximize operational resources and deliver a seamless, globalStarbucks Experience. The realignment, effective September 4, 2007, includes the appointment of Martin Coles, currently president, Starbucks Coffee International, to chief operating officer, reporting directly to president and ceo, Jim Donald. Additionally, Jim Alling was appointed to president, Starbucks Coffee International and Launi Skinner to president, Starbucks Coffee U.S.; both will report directly to Coles.

• Starbucks and The Hershey Company announced a development and distribution agreement on July 19, 2007, to create and market a new Starbucks-branded premium chocolate platform in the United States starting in Fall 2007.

Fiscal Third Quarter 2007 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 1,		July 2,		July 1,		July, 2		July 1,		July 2,
	2007		2006		2007		2006		2007		2006
United States:
Company-operated Stores(1)		285		211		838		532		6,566		5,450
Licensed Stores		196		187		561		517		3,729		2,952
		481		398		1,399		1,049		10,295		8,402
International:
Company-operated Stores(1)		60		44		178		158		1,613		1,360
Licensed Stores(1)		127		117		379		336		2,488		2,022
		187		161		557		494		4,101		3,382
Total		668		559		1,956		1,543		14,396		11,784

⁽¹⁾ International store data has been adjusted for the acquisition of the Beijing operations by reclassifying historical information from Licensed Stores to Company-operated Stores. United States store data was also adjusted to align with the Hawaii operations segment change by reclassifying historical information from International Company-operated stores to the United States.

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Fiscal 2007 Targets

Starbucks reaffirmed its fiscal 2007 targets:

• The Company plans to open at least 2,400 new stores on a global basis in fiscal 2007, with modest upside potential in International licensed store openings, given the strong over-performance in store development year-to-date. In the United States, Starbucks continues to plan the opening of approximately 1,000 Company-operated locations and 700 licensed locations. In International markets, Starbucks plans to open approximately 300 Company-operated stores and at least 400 licensed stores;

• Starbucks continues to target comparable store sales growth in the target range of three percent to seven percent;

• Starbucks is targeting total net revenue growth of approximately 20 percent for the full year; and,

• The Company continues to target earnings per share in the range of $0.87 to $0.89 for fiscal 2007; however, the Company has stated that the upper end of the range will be very challenging in the current operating environment, which includes, among other things, rising dairy costs and soft transaction growth in the U.S. business

Fiscal 2008 Targets

Starbucks introduces its fiscal 2008 targets:

• The Company expects to open approximately 2,600 net new stores on a global basis in fiscal 2008, an increase of 200 stores compared to its fiscal 2007 target, with all of the increase in International licensed stores;

• The Company is targeting comparable store sales growth in the range of three to seven percent;

• Starbucks is targeting total net revenue growth of approximately 18 percent; and,

• Starbucks is targeting earnings per share growth of approximately 20 percent to 22 percent.

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– page 16–

Conference Call

Starbucks will be holding a conference call today at 2:00 p.m. Pacific Time, which will be hosted by Jim Donald, president and ceo, Martin Coles, chief operating officer designate 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://investor.starbucks.com. A replay of the call will be available via telephone through 5:30 p.m. Pacific Time on Wednesday, August 8, 2007, by calling 1-800-642-1687, reservation number 4132558. 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 Friday, August 31, 2007, at the following URL: http://investor.starbucks.com.

The Company’s consolidated statements of earnings, operating segment results, and other additional information have been provided on the preceding 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 14, 2006, as amended by Amendment No.1 to Annual Report on Form 10-K/A filed on December 21, 2006, for additional information.

About Starbucks

Starbucks Coffee Company provides an uplifting experience that enriches people’s lives one moment, one human being, one extraordinary cup of coffee at a time. To share in the experience, visit www.starbucks.com.

Forward-Looking Statements

This release includes forward-looking statements about trends in or expectations regarding: store openings, comparable store sales, net revenue, earnings per share results, effective tax rate and alternatives for raising additional outside funding. 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 1, 2006. The Company assumes no obligation to update any of these forward-looking statements.

© 2007 Starbucks Coffee Company. All rights reserved.

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