Exhibit 99.1
Starbucks Contact, Investor Relations: | Starbucks Contact, Media: | |
Mary Ellen Fukuhara | Audrey Lincoff | |
206-318-4025 | 206-447-7950 ext. 52690 |
Starbucks Announces Strong Third Quarter Fiscal 2005 Results
Revenues Up 21 Percent; Net Earnings and EPS Both Increase By 29 Percent
Company Sets Fiscal 2006 Growth Targets Including 1,800 New Retail Stores
Revenues Up 21 Percent; Net Earnings and EPS Both Increase By 29 Percent
Company Sets Fiscal 2006 Growth Targets Including 1,800 New Retail Stores
SEATTLE; July 27, 2005 –Starbucks Corporation (NASDAQ: SBUX) today announced revenues and earnings for its fiscal third quarter ended July 3, 2005.
For the 13 weeks ended July 3, 2005, consolidated net revenues increased 21 percent to $1.6 billion from $1.3 billion for the same period in fiscal 2004. Net earnings for the 13 weeks ended July 3, 2005, increased 29 percent to $126 million from $98 million for the same period in fiscal 2004. Earnings were $0.31 per share for the 13 weeks ended July 3, 2005, compared to $0.24 per share for the comparable period in fiscal 2004.
“We are very pleased with the strength of both U.S. and International operations – reflected in our solid third-quarter revenue results and the expansion of our operating margin during the quarter,” commented Jim Donald, Starbucks president and ceo. “We remain committed to building shareholder value by executing our strategy and realizing the tremendous growth opportunities available to Starbucks on a global basis. Our strong performance year-to-date positions us well to achieve our fiscal 2005 goals – and gives us confidence in the aggressive store growth targets we have established for fiscal 2006.”
Consolidated Financial and Operating Summary
Company-operated retail revenuesincreased 22 percent to $1.4 billion for the 13 weeks ended July 3, 2005, from $1.1 billion for the same period in fiscal 2004. The increase was primarily attributable to the opening of 713 new Company-operated retail stores in the last 12 months and comparable store sales growth of seven percent for the quarter. The increase in comparable store sales was due to a four percent increase in the average value per transaction and a three percent increase in the number of customer transactions.
Company-operated retail revenuesincreased 22 percent to $1.4 billion for the 13 weeks ended July 3, 2005, from $1.1 billion for the same period in fiscal 2004. The increase was primarily attributable to the opening of 713 new Company-operated retail stores in the last 12 months and comparable store sales growth of seven percent for the quarter. The increase in comparable store sales was due to a four percent increase in the average value per transaction and a three percent increase in the number of customer transactions.
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Specialty revenuesincreased 16 percent to $245 million for the 13 weeks ended July 3, 2005, compared to $211 million for the corresponding period of fiscal 2004. Licensing revenues increased 17 percent to $170 million, primarily due to higher product sales and royalty revenues from the opening of 839 new licensed retail stores in the last 12 months. Foodservice and other revenues increased 14 percent to $75 million, primarily due to growth in new and existing U.S. and International foodservice accounts.
Cost of sales and related occupancy costsdecreased to 40.6 percent of total net revenues for the 13 weeks ended July 3, 2005, compared to 41.0 percent for the corresponding period of fiscal 2004. The decrease is primarily due to higher average revenue per retail transaction, offset in part by higher average rent expense in International markets. Dairy costs were moderately lower for the 13 weeks ended July 3, 2005, compared to the same period in fiscal 2004.
Store operating expensesas a percentage of Company-operated retail revenues decreased to 40.2 percent for the 13 weeks ended July 3, 2005, compared to 40.4 percent for the corresponding period of fiscal 2004, primarily due to higher average revenue per retail transaction, partially offset by higher payroll expenditures. In order to facilitate ongoing, accelerated retail store growth, the Company has been increasing the number of assistant store managers and opening a higher number of drive-thru locations over the past year, which has contributed to the higher payroll expenditures.
Other operating expenses(expenses associated with the Company’s specialty operations) decreased to 19.8 percent of total specialty revenues for the 13 weeks ended July 3, 2005, compared to 21.0 percent for the corresponding period of fiscal 2004. The decrease was primarily due to lower expenditures within the grocery and warehouse club channels, partially offset by higher costs associated with expanding emerging specialty businesses, such as music and consumer products.
Depreciation and amortization expensesincreased to $85 million for the 13 weeks ended July 3, 2005, compared to $73 million for the corresponding period of fiscal 2004. The increase was primarily due to the opening of 713 new Company-operated retail stores in the last 12 months. As a percentage of total net revenues, depreciation and amortization expenses decreased to 5.3 percent for the 13 weeks ended July 3, 2005, from 5.5 percent for the corresponding 13-week period of fiscal 2004.
General and administrative expensesincreased to $91 million for the 13 weeks ended July 3, 2005, compared to $73 million for the corresponding period of fiscal 2004. The increase was primarily due to higher provisions for incentive compensation and increased charitable commitments. As a percentage of total net revenues, general and administrative expenses increased to 5.7 percent for the 13 weeks ended July 3, 2005, from 5.6 percent for the corresponding period of fiscal 2004.
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Income from equity investeesincreased to $18 million for the 13 weeks ended July 3, 2005, compared to $13 million for the corresponding period of fiscal 2004. The increase was primarily due to volume-driven operating results for the North American Coffee Partnership, which produces bottled Frappuccino® coffee drinks and Starbucks DoubleShot® espresso drink, and improved operating results from international investees, particularly in Korea and Japan.
Operating incomeincreased 30 percent to $200 million for the 13 weeks ended July 3, 2005, compared to $153 million for the corresponding 13-week period of fiscal 2004. As a result of lower store and other operating expenses as a percentage of related revenues, operating margin increased to 12.5 percent of total net revenues for the 13 weeks ended July 3, 2005, compared to 11.6 percent for the corresponding period of fiscal 2004.
Net earningsfor the 13 weeks ended July 3, 2005, increased 29 percent to $126 million from $98 million for the same period in fiscal 2004. Earnings were $0.31 per share for the 13 weeks ended July 3, 2005, compared to $0.24 per share for the comparable period in fiscal 2004.
Fiscal 2005 Targets
The Company also provided updated fiscal 2005 targets:
The Company also provided updated fiscal 2005 targets:
• | Starbucks continues to plan to open approximately 1,500 new stores on a global basis in fiscal 2005. In the United States, Starbucks plans to open approximately 550 Company-operated locations and 525 licensed locations. In International markets, Starbucks plans to open approximately 100 Company-operated stores and 325 licensed stores; | ||
• | The Company targets total net revenue growth of approximately 20 percent for fiscal 2005. As a reminder, fiscal year 2004 included an extra week of operations in the fourth quarter and, as a result, total reported net revenue growth for fourth quarter 2005 will be lower than 20 percent. Starbucks expects comparable store sales growth to be at the high end of its three percent to seven percent target range for the remainder of fiscal 2005, with monthly anomalies; | ||
• | The Company continues to target earnings per share of $0.29 to $0.30 for the fiscal fourth quarter and, based on its strong third quarter performance, along with its current outlook for the fourth quarter of 2005, Starbucks is raising its full year earnings per share target range to $1.19 to $1.20 for fiscal 2005, from its previous target range of $1.17 to $1.19. Both the new and previous target ranges exclude any impact from expensing stock options. Excluding the $0.03 per share impact of the 53rd week in fiscal 2004, Starbucks new fiscal 2005 target range represents 29 percent to 30 percent growth over $0.92 earnings per share in fiscal 2004; | ||
• | Consistent with the actual effective tax rate for the third quarter, the Company is now targeting a fourth quarter effective tax rate of approximately 38 percent, and; | ||
• | Starbucks now projects capital expenditures to be at the low end of its original fiscal 2005 target range of $600 million to $650 million. |
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Fiscal 2006 Targets
Looking ahead, Starbucks introduced the following fiscal 2006 targets:
Looking ahead, Starbucks introduced the following fiscal 2006 targets:
• | The Company is accelerating its store development plans and expects to open approximately 1,800 new stores on a global basis in fiscal 2006, an increase of 300 stores compared to the current fiscal 2005 target. 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; | ||
• | Starbucks is targeting total net revenue growth of approximately 20 percent. The Company expects comparable store sales growth in the range of three percent to seven percent, with monthly anomalies in fiscal 2006; | ||
• | Excluding any impact from expensing stock options, Starbucks is targeting earnings per share of $1.44 to $1.47 for fiscal 2006, consistent with the Company’s previously stated goal for longer-term earnings per share growth in the range of 20 percent to 25 percent; | ||
• | 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 $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 Wednesday, August 3, 2005, by calling 1-800-642-1687, reservation number 4093399. 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, August 25, 2005, at the following URL: http://www.starbucks.com/aboutus/investor.asp.
The Company’s consolidated financial statements, operating segment results, and other additional information have been provided on the following pages in accordance with current year classifications, including the reclassification of auction rate securities from “Cash and cash equivalents” to “Short-term investments — available-for-sale securities” on the consolidated balance sheets. This information should be reviewed in conjunction with this press release. Please refer to the Company’s Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on February 18, 2005, for additional information.
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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
13 Weeks Ended | 13 Weeks Ended | |||||||||||||||||||
July 3, | June 27, | % | July 3, | June 27, | ||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | ||||||||||||||||
(as restated1) | (as restated1) | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
As a % of total net revenues | ||||||||||||||||||||
(unless otherwise indicated) | ||||||||||||||||||||
Net revenues: | ||||||||||||||||||||
Company-operated retail | $ | 1,356,605 | $ | 1,108,055 | 22.4 | % | 84.7 | % | 84.0 | % | ||||||||||
Specialty: | ||||||||||||||||||||
Licensing | 170,330 | 145,021 | 17.5 | % | 10.6 | % | 11.0 | % | ||||||||||||
Foodservice and other | 74,864 | 65,615 | 14.1 | % | 4.7 | % | 5.0 | % | ||||||||||||
Total specialty | 245,194 | 210,636 | 16.4 | % | 15.3 | % | 16.0 | % | ||||||||||||
Total net revenues | 1,601,799 | 1,318,691 | 21.5 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of sales including occupancy costs | 649,831 | 540,175 | 40.6 | % | 41.0 | % | ||||||||||||||
Store operating expenses | 546,008 | 448,029 | (a) 40.2 | % | (a) 40.4 | % | ||||||||||||||
Other operating expenses | 48,464 | 44,259 | (b) 19.8 | % | (b) 21.0 | % | ||||||||||||||
Depreciation and amortization expenses | 85,363 | 72,886 | 5.3 | % | 5.5 | % | ||||||||||||||
General and administrative expenses | 90,637 | 73,357 | 5.7 | % | 5.6 | % | ||||||||||||||
Subtotal operating expenses | 1,420,303 | 1,178,706 | 20.5 | % | ||||||||||||||||
Income from equity investees | 18,136 | 13,163 | 1.1 | % | 1.0 | % | ||||||||||||||
Operating income | 199,632 | 153,148 | 30.4 | % | 12.5 | % | 11.6 | % | ||||||||||||
Interest and other income, net | 3,235 | 4,424 | 0.2 | % | 0.3 | % | ||||||||||||||
Earnings before income taxes | 202,867 | 157,572 | 28.7 | % | 12.7 | % | 11.9 | % | ||||||||||||
Income taxes(c) | 77,292 | 59,992 | 4.9 | % | 4.5 | % | ||||||||||||||
Net earnings | $ | 125,575 | $ | 97,580 | 28.7 | % | 7.8 | % | 7.4 | % | ||||||||||
Net earnings per common share — diluted | $ | 0.31 | $ | 0.24 | ||||||||||||||||
Weighted average shares outstanding - diluted | 404,019 | 412,289 | ||||||||||||||||||
(a) | Calculated as a percentage of Company-operated retail revenues. | |
(b) | Calculated as a percentage of total specialty revenues. | |
(c) | The effective tax rate was 38.1 percent for both the 13 weeks ended July 3, 2005, and June 27, 2004. | |
(1) | Amounts have been restated for lease accounting corrections. Please refer to Note 2 in the Company’s Annual Report on Form 10-K/A for the fiscal year ended October 3, 2004, for additional information. |
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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
39 Weeks Ended | 39 Weeks Ended | |||||||||||||||||||
July 3, | June 27, | % | July 3, | June 27, | ||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | ||||||||||||||||
(as restated1) | (as restated1) | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
As a % of total net revenues | ||||||||||||||||||||
(unless otherwise indicated) | ||||||||||||||||||||
Net revenues: | ||||||||||||||||||||
Company-operated retail | $ | 3,999,213 | $ | 3,239,031 | 23.5 | % | 84.9 | % | 84.3 | % | ||||||||||
Specialty: | ||||||||||||||||||||
Licensing | 488,835 | 401,037 | 21.9 | % | 10.4 | % | 10.5 | % | ||||||||||||
Foodservice and other | 222,011 | 200,882 | 10.5 | % | 4.7 | % | 5.2 | % | ||||||||||||
Total specialty | 710,846 | 601,919 | 18.1 | % | 15.1 | % | 15.7 | % | ||||||||||||
Total net revenues | 4,710,059 | 3,840,950 | 22.6 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of sales including occupancy costs | 1,926,326 | 1,577,152 | 40.9 | % | 41.1 | % | ||||||||||||||
Store operating expenses | 1,599,958 | 1,279,826 | (a) 40.0 | % | (a) 39.5 | % | ||||||||||||||
Other operating expenses | 139,092 | 128,759 | (b) 19.6 | % | (b) 21.4 | % | ||||||||||||||
Depreciation and amortization expenses | 251,694 | 215,040 | 5.3 | % | 5.6 | % | ||||||||||||||
General and administrative expenses | 256,165 | 223,756 | 5.4 | % | 5.8 | % | ||||||||||||||
Subtotal operating expenses | 4,173,235 | 3,424,533 | 21.9 | % | ||||||||||||||||
Income from equity investees | 47,395 | 35,151 | 1.0 | % | 0.9 | % | ||||||||||||||
Operating income | 584,219 | 451,568 | 29.4 | % | 12.4 | % | 11.8 | % | ||||||||||||
Interest and other income, net | 12,371 | 11,317 | 0.3 | % | 0.3 | % | ||||||||||||||
Earnings before income taxes | 596,590 | 462,885 | 28.9 | % | 12.7 | % | 12.1 | % | ||||||||||||
Income taxes(c) | 225,726 | 176,285 | 4.8 | % | 4.6 | % | ||||||||||||||
Net earnings | $ | 370,864 | $ | 286,600 | 29.4 | % | 7.9 | % | 7.5 | % | ||||||||||
Net earnings per common share — diluted | $ | 0.90 | $ | 0.70 | ||||||||||||||||
Weighted average shares outstanding - diluted | 411,122 | 410,587 | ||||||||||||||||||
(a) | Calculated as a percentage of Company-operated retail revenues. | |
(b) | Calculated as a percentage of total specialty revenues. | |
(c) | The effective tax rates were 37.8 percent for the 39 weeks ended July 3, 2005, and 38.1 percent for the 39 weeks ended June 27, 2004. | |
(1) | Amounts have been restated for lease accounting corrections. Please refer to Note 2 in the Company’s Annual Report on Form 10-K/A for the fiscal year ended October 3, 2004, for additional information. |
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STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
July 3, | October 3, | |||||||
2005 | 2004 | |||||||
ASSETS | (unaudited) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 130,112 | $ | 145,053 | ||||
Short-term investments — available-for-sale securities | 183,782 | 483,157 | ||||||
Short-term investments — trading securities | 34,647 | 24,799 | ||||||
Accounts receivable, net of allowances of $3,149 and $2,231, respectively | 148,982 | 140,226 | ||||||
Inventories | 495,542 | 422,663 | ||||||
Prepaid expenses and other current assets | 80,770 | 71,347 | ||||||
Deferred income taxes, net | 66,540 | 63,650 | ||||||
Total current assets | 1,140,375 | 1,350,895 | ||||||
Long-term investments — available-for-sale securities | 83,894 | 135,179 | ||||||
Equity and other investments | 182,067 | 168,177 | ||||||
Property, plant and equipment, net | 1,738,830 | 1,551,416 | ||||||
Deferred income taxes, net | 11,884 | — | ||||||
Other assets | 63,490 | 85,561 | ||||||
Other intangible assets | 34,898 | 26,800 | ||||||
Goodwill | 72,543 | 68,950 | ||||||
TOTAL ASSETS | $ | 3,327,981 | $ | 3,386,978 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 185,084 | $ | 199,346 | ||||
Accrued compensation and related costs | 216,390 | 208,927 | ||||||
Accrued occupancy costs | 41,657 | 29,231 | ||||||
Accrued taxes | 96,514 | 62,959 | ||||||
Other accrued expenses | 167,929 | 123,684 | ||||||
Deferred revenue | 172,976 | 121,377 | ||||||
Current portion of long-term debt | 745 | 735 | ||||||
Total current liabilities | 881,295 | 746,259 | ||||||
Deferred income taxes, net | — | 21,770 | ||||||
Long-term debt | 3,058 | 3,618 | ||||||
Other long-term liabilities | 167,771 | 144,683 | ||||||
Shareholders’ equity: | ||||||||
Common stock and additional paid-in capital — Authorized, 600,000,000 shares; issued and outstanding, 389,541,200 and 397,405,844 shares, respectively, (includes 1,697,100 common stock units in both periods) | 395,333 | 956,685 | ||||||
Other additional paid-in capital | 39,393 | 39,393 | ||||||
Retained earnings | 1,816,193 | 1,445,329 | ||||||
Accumulated other comprehensive income | 24,938 | 29,241 | ||||||
Total shareholders’ equity | 2,275,857 | 2,470,648 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 3,327,981 | $ | 3,386,978 | ||||
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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
39 Weeks Ended | ||||||||
July 3, | June 27, | |||||||
2005 | 2004 | |||||||
(as restated1) | ||||||||
OPERATING ACTIVITIES: | ||||||||
Net earnings | $ | 370,864 | $ | 286,600 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 271,795 | 233,586 | ||||||
Provision for impairments and asset disposals | 14,765 | 9,703 | ||||||
Deferred income taxes, net | (25,600 | ) | (4,994 | ) | ||||
Equity in income of investees | (27,861 | ) | (16,708 | ) | ||||
Tax benefit from exercise of non-qualified stock options | 99,798 | 45,045 | ||||||
Net amortization of premium on securities | 9,248 | 8,049 | ||||||
Cash provided/(used) by changes in operating assets and liabilities: | ||||||||
Inventories | (72,292 | ) | (41,278 | ) | ||||
Accounts payable | (15,695 | ) | (28,617 | ) | ||||
Accrued compensation and related costs | 7,393 | 45,185 | ||||||
Accrued taxes | 32,994 | (5,188 | ) | |||||
Deferred revenue | 51,616 | 50,864 | ||||||
Other accrued expenses | 35,286 | 28,968 | ||||||
Other operating assets and liabilities | 13,965 | 5,450 | ||||||
Net cash provided by operating activities | 766,276 | 616,665 | ||||||
INVESTING ACTIVITIES: | ||||||||
Purchase of available-for-sale securities | (616,093 | ) | (685,102 | ) | ||||
Maturity of available-for-sale securities | 449,524 | 108,943 | ||||||
Sale of available-for-sale securities | 507,589 | 215,759 | ||||||
Acquisitions, net of cash acquired | (18,976 | ) | — | |||||
Net additions to equity, other investments and other assets | (4,697 | ) | (29,786 | ) | ||||
Distribution from equity investees | 23,831 | 25,097 | ||||||
Net additions to property, plant and equipment | (459,962 | ) | (236,791 | ) | ||||
Net cash used by investing activities | (118,784 | ) | (601,880 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of common stock | 145,870 | 103,345 | ||||||
Principal payments on long-term debt | (550 | ) | (540 | ) | ||||
Repurchase of common stock | (807,021 | ) | (82,204 | ) | ||||
Net cash (used)/provided by financing activities | (661,701 | ) | 20,601 | |||||
Effect of exchange rate changes on cash and cash equivalents | (732 | ) | 2,493 | |||||
Net (decrease)/increase in cash and cash equivalents | (14,941 | ) | 37,879 | |||||
CASH AND CASH EQUIVALENTS: | ||||||||
Beginning of period | 145,053 | 99,462 | ||||||
End of the period | $ | 130,112 | $ | 137,341 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the 39 weeks ended: | ||||||||
Interest | $ | 333 | $ | 409 | ||||
Income taxes | $ | 129,530 | $ | 144,999 |
(1) | Amounts have been restated for lease accounting corrections. Please refer to Note 2 in the Company’s Annual Report on Form 10-K/A for the fiscal year ended October 3, 2004, for additional information. |
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Stock Compensation Expense
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123R, “Share-Based Payment” (“SFAS 123R”), a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” SFAS 123R will require Starbucks to measure all employee stock-based compensation awards using the fair value method and record compensation expense in the Company’s consolidated financial statements. Starbucks is continuing to evaluate the impact of SFAS 123R and all related interpretive guidance. In the interim, the Company will continue to regularly disclose the pro forma impact of stock compensation on the Company’s net earnings and earnings per share within its periodic filings with the SEC in accordance with current accounting rules. The pro forma impacts for the 13 and 39 weeks ended July 3, 2005, and June 27, 2004, were as follows for the information presented (in thousands, except earnings per share):
13 Weeks Ended | 39 Weeks Ended | |||||||||||||||
July 3, | June 27, | July 3, | June 27, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net earnings | $ | 125,575 | $ | 97,580 | $ | 370,864 | $ | 286,600 | ||||||||
Deduct: stock-based compensation expense determined under fair value method, net of tax | (15,276 | ) | (11,299 | ) | (43,553 | ) | (31,838 | ) | ||||||||
Pro forma net income | $ | 110,299 | $ | 86,281 | $ | 327,311 | $ | 254,762 | ||||||||
Earnings per share: | ||||||||||||||||
Diluted — as reported | $ | 0.31 | $ | 0.24 | $ | 0.90 | $ | 0.70 | ||||||||
Deduct: stock-based compensation expense determined under fair value method, net of tax | (0.04 | ) | (0.03 | ) | (0.11 | ) | (0.08 | ) | ||||||||
Diluted — pro forma | $ | 0.27 | $ | 0.21 | $ | 0.79 | $ | 0.62 | ||||||||
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Segment Results
Segment information is prepared on the basis that the Company’s management reviews financial information for operational decision-making purposes. The tables below present, by operating segment, total net revenues, operating income and operating income as a percentage of related revenues, net of intersegment eliminations for the periods ended(in thousands):
% of | % of | % of | ||||||||||||||||||||||||||
United | Inter- | Total | ||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Net | |||||||||||||||||||||||
13 Weeks Ended July 3, 2005 | States | Revenue | national | Revenue | Corporate | Revenues | Consolidated | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Company-operated retail | $ | 1,141,555 | 85.2 | % | $ | 215,050 | 82.0 | % | $ | — | — | % | $ | 1,356,605 | ||||||||||||||
Specialty: | ||||||||||||||||||||||||||||
Licensing | 129,355 | 9.7 | 40,975 | 15.6 | — | — | 170,330 | |||||||||||||||||||||
Foodservice and other | 68,530 | 5.1 | 6,334 | 2.4 | — | — | 74,864 | |||||||||||||||||||||
Total specialty | 197,885 | 14.8 | 47,309 | 18.0 | — | — | 245,194 | |||||||||||||||||||||
Total net revenues | 1,339,440 | 100.0 | 262,359 | 100.0 | — | — | 1,601,799 | |||||||||||||||||||||
Cost of sales and related occupancy costs | 516,368 | 38.6 | 133,463 | 50.9 | — | — | 649,831 | |||||||||||||||||||||
Store operating expenses | 465,021 | 40.7 | (1) | 80,987 | 37.7 | (1) | — | — | 546,008 | |||||||||||||||||||
Other operating expenses | 40,793 | 20.6 | (2) | 7,671 | 16.2 | (2) | — | — | 48,464 | |||||||||||||||||||
Depreciation and amortization expenses | 63,027 | 4.7 | 14,015 | 5.3 | 8,321 | 0.5 | 85,363 | |||||||||||||||||||||
General and administrative expenses | 19,266 | 1.4 | 15,332 | 5.8 | 56,039 | 3.5 | 90,637 | |||||||||||||||||||||
Income from equity investees | 10,105 | 0.8 | 8,031 | 3.1 | — | — | 18,136 | |||||||||||||||||||||
Operating income/(loss) | $ | 245,070 | 18.3 | % | $ | 18,922 | 7.2 | % | $ | (64,360 | ) | (4.0 | )% | $ | 199,632 | |||||||||||||
% of | % of | % of | ||||||||||||||||||||||||||
United | Inter- | Total | ||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Net | |||||||||||||||||||||||
13 Weeks Ended June 27, 2004 | States | Revenue | national | Revenue | Corporate | Revenues | Consolidated | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Company-operated retail | $ | 947,379 | 84.6 | % | $ | 160,676 | 81.0 | % | $ | — | — | % | $ | 1,108,055 | ||||||||||||||
Specialty: | ||||||||||||||||||||||||||||
Licensing | 111,857 | 10.0 | 33,164 | 16.7 | — | — | 145,021 | |||||||||||||||||||||
Foodservice and other | 61,033 | 5.4 | 4,582 | 2.3 | — | — | 65,615 | |||||||||||||||||||||
Total specialty | 172,890 | 15.4 | 37,746 | 19.0 | — | — | 210,636 | |||||||||||||||||||||
Total net revenues | 1,120,269 | 100.0 | 198,422 | 100.0 | — | — | 1,318,691 | |||||||||||||||||||||
Cost of sales and related occupancy costs | 440,515 | 39.3 | 99,660 | 50.2 | — | — | 540,175 | |||||||||||||||||||||
Store operating expenses | 388,337 | 41.0 | (1) | 59,692 | 37.2 | (1) | — | — | 448,029 | |||||||||||||||||||
Other operating expenses | 37,711 | 21.8 | (2) | 6,548 | 17.3 | (2) | — | — | 44,259 | |||||||||||||||||||
Depreciation and amortization expenses | 53,097 | 4.7 | 11,696 | 5.9 | 8,093 | 0.6 | 72,886 | |||||||||||||||||||||
General and administrative expenses | 20,260 | 1.8 | 12,032 | 6.1 | 41,065 | 3.1 | 73,357 | |||||||||||||||||||||
Income from equity investees | 8,530 | 0.8 | 4,633 | 2.3 | — | — | 13,163 | |||||||||||||||||||||
Operating income/(loss) | $ | 188,879 | 16.9 | % | $ | 13,427 | 6.8 | % | $ | (49,158 | ) | (3.7 | )% | $ | 153,148 | |||||||||||||
(1) | Shown as a percentage of related Company-operated retail revenues. | |
(2) | Shown as a percentage of related total specialty revenues. |
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The tables below present, by operating segment, total net revenues, operating income and operating income as a percentage of related revenues, net of intersegment eliminations for the periods ended(in thousands):
% of | % of | % of | ||||||||||||||||||||||||||
United | Inter- | Total | ||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Net | |||||||||||||||||||||||
39 Weeks Ended July 3, 2005 | States | Revenue | national | Revenue | Corporate | Revenues | Consolidated | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Company-operated retail | $ | 3,375,922 | 85.4 | % | $ | 623,291 | 82.5 | % | $ | — | — | % | $ | 3,999,213 | ||||||||||||||
Specialty: | ||||||||||||||||||||||||||||
Licensing | 374,626 | 9.5 | 114,209 | 15.1 | — | — | 488,835 | |||||||||||||||||||||
Foodservice and other | 204,083 | 5.1 | 17,928 | 2.4 | — | — | 222,011 | |||||||||||||||||||||
Total specialty | 578,709 | 14.6 | 132,137 | 17.5 | — | — | 710,846 | |||||||||||||||||||||
Total net revenues | 3,954,631 | 100.0 | 755,428 | 100.0 | — | — | 4,710,059 | |||||||||||||||||||||
Cost of sales and related occupancy costs | 1,542,157 | 39.0 | 384,169 | 50.9 | — | — | 1,926,326 | |||||||||||||||||||||
Store operating expenses | 1,365,920 | 40.5 | (1) | 234,038 | 37.5 | (1) | — | — | 1,599,958 | |||||||||||||||||||
Other operating expenses | 116,737 | 20.2 | (2) | 22,355 | 16.9 | (2) | — | — | 139,092 | |||||||||||||||||||
Depreciation and amortization expenses | 185,181 | 4.7 | 41,232 | 5.5 | 25,281 | 0.5 | 251,694 | |||||||||||||||||||||
General and administrative expenses | 65,239 | 1.6 | 37,447 | 5.0 | 153,479 | 3.3 | 256,165 | |||||||||||||||||||||
Income from equity investees | 27,377 | 0.7 | 20,018 | 2.6 | — | — | 47,395 | |||||||||||||||||||||
Operating income/(loss) | $ | 706,774 | 17.9 | % | $ | 56,205 | 7.4 | % | $ | (178,760 | ) | (3.8 | )% | $ | 584,219 | |||||||||||||
% of | % of | % of | ||||||||||||||||||||||||||
United | Inter- | Total | ||||||||||||||||||||||||||
United | States | Inter- | national | Unallocated | Net | |||||||||||||||||||||||
39 Weeks Ended June 27, 2004 | States | Revenue | national | Revenue | Corporate | Revenues | Consolidated | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Company-operated retail | $ | 2,770,172 | 84.8 | % | $ | 468,859 | 81.6 | % | $ | — | — | % | $ | 3,239,031 | ||||||||||||||
Specialty: | ||||||||||||||||||||||||||||
Licensing | 307,630 | 9.4 | 93,407 | 16.3 | — | — | 401,037 | |||||||||||||||||||||
Foodservice and other | 188,557 | 5.8 | 12,325 | 2.1 | — | — | 200,882 | |||||||||||||||||||||
Total specialty | 496,187 | 15.2 | 105,732 | 18.4 | — | — | 601,919 | |||||||||||||||||||||
Total net revenues | 3,266,359 | 100.0 | 574,591 | 100.0 | — | — | 3,840,950 | |||||||||||||||||||||
Cost of sales and related occupancy costs | 1,284,162 | 39.3 | 292,990 | 51.0 | — | — | 1,577,152 | |||||||||||||||||||||
Store operating expenses | 1,106,830 | 40.0 | (1) | 172,996 | 36.9 | (1) | — | — | 1,279,826 | |||||||||||||||||||
Other operating expenses | 109,411 | 22.1 | (2) | 19,348 | 18.3 | (2) | — | — | 128,759 | |||||||||||||||||||
Depreciation and amortization expenses | 156,352 | 4.8 | 34,041 | 5.9 | 24,647 | 0.6 | 215,040 | |||||||||||||||||||||
General and administrative expenses | 55,261 | 1.7 | 36,514 | 6.4 | 131,981 | 3.5 | 223,756 | |||||||||||||||||||||
Income from equity investees | 21,647 | 0.7 | 13,504 | 2.4 | — | — | 35,151 | |||||||||||||||||||||
Operating income/(loss) | $ | 575,990 | 17.6 | % | $ | 32,206 | 5.6 | % | $ | (156,628 | ) | (4.1 | )% | $ | 451,568 | |||||||||||||
(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 $219 million, or 20 percent, to $1.3 billion for the 13 weeks ended July 3, 2005, compared to $1.1 billion for the corresponding period of fiscal 2004. United States Company-operated retail revenues increased by $194 million, or 20 percent, to $1.1 billion for the 13 weeks ended July 3, 2005, compared to $947 million for the corresponding period of fiscal 2004, primarily due to the opening of 585 new Company-operated retail stores in the last 12 months and comparable store sales growth of seven percent for the quarter. The increase in comparable store sales was due to a four percent increase in the average value per transaction, including three percent attributable to a beverage price increase in October 2004, and a three percent increase in the number of customer transactions.
United States total net revenues increased by $219 million, or 20 percent, to $1.3 billion for the 13 weeks ended July 3, 2005, compared to $1.1 billion for the corresponding period of fiscal 2004. United States Company-operated retail revenues increased by $194 million, or 20 percent, to $1.1 billion for the 13 weeks ended July 3, 2005, compared to $947 million for the corresponding period of fiscal 2004, primarily due to the opening of 585 new Company-operated retail stores in the last 12 months and comparable store sales growth of seven percent for the quarter. The increase in comparable store sales was due to a four percent increase in the average value per transaction, including three percent attributable to a beverage price increase in October 2004, and a three percent increase in the number of customer transactions.
Total United States specialty revenues increased by $25 million, or 14 percent, to $198 million for the 13 weeks ended July 3, 2005, compared to $173 million in the corresponding period of fiscal 2004. United States licensing revenues increased $17 million, or 16 percent, to $129 million, compared to $112 million for the corresponding period of fiscal 2004. The increase was primarily due to higher product sales and royalty revenues as a result of opening 519 new licensed retail stores in the last 12 months, and, to a lesser extent, growth in the grocery and warehouse club business. United States foodservice and other revenues increased 12 percent to $69 million from $61 million in fiscal 2004, primarily due to growth in new and existing foodservice accounts.
United States operating income increased by 30 percent to $245 million for the 13 weeks ended July 3, 2005, from $189 million for the same period in fiscal 2004. Operating margin increased to 18.3 percent of related revenues from 16.9 percent in the corresponding period of fiscal 2004, primarily due to leverage from strong revenue growth and excellent cost control throughout all areas of the business.
International
International total net revenues increased by $64 million, or 32 percent, to $262 million for the 13 weeks ended July 3, 2005, compared to $198 million for the corresponding period of fiscal 2004. International Company-operated retail revenues increased by $54 million, or 34 percent, to $215 million for the 13 weeks ended July 3, 2005, compared to $161 million for the corresponding period for fiscal 2004, primarily due to the opening of 128 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 rates for both the Canadian dollar and British pound sterling. The increase in comparable store sales resulted from a four percent increase in the number of customer transactions coupled with a three percent increase in the average value per transaction.
International total net revenues increased by $64 million, or 32 percent, to $262 million for the 13 weeks ended July 3, 2005, compared to $198 million for the corresponding period of fiscal 2004. International Company-operated retail revenues increased by $54 million, or 34 percent, to $215 million for the 13 weeks ended July 3, 2005, compared to $161 million for the corresponding period for fiscal 2004, primarily due to the opening of 128 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 rates for both the Canadian dollar and British pound sterling. The increase in comparable store sales resulted from a four percent increase in the number of customer transactions coupled with a three percent increase in the average value per transaction.
Total international specialty revenues increased by 25 percent to $47 million for the 13 weeks ended July 3, 2005, compared to $38 million in the corresponding period of fiscal 2004. The increase was primarily due to higher product sales and royalty revenues from opening 320 licensed retail stores in the last 12 months and growth in new and existing international foodservice accounts.
International operating income increased by 41 percent to $19 million for the 13 weeks ended July 3, 2005, compared to $13 million in the corresponding period of fiscal 2004. Operating margin increased to 7.2 percent of related revenues from 6.8 percent in the corresponding period of fiscal 2004, due to leverage gained on fixed costs distributed over an expanded revenue base and increased income from equity investees, particularly in Korea and Japan.
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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 3, | June 27, | July 3, | June 27, | July 3, | June 27, | ||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||||
United States: | |||||||||||||||||||||||||
Company-operated Stores | 141 | 99 | 373 | 302 | 4,666 | 4,081 | |||||||||||||||||||
Licensed Stores | 142 | 84 | 383 | 281 | 2,222 | 1,703 | |||||||||||||||||||
283 | 183 | 756 | 583 | 6,888 | 5,784 | ||||||||||||||||||||
International: | |||||||||||||||||||||||||
Company-operated Stores(1) | 31 | 29 | 92 | 94 | 1,049 | 921 | |||||||||||||||||||
Licensed Stores(1) | 96 | 73 | 254 | 217 | 1,734 | 1,414 | |||||||||||||||||||
127 | 102 | 346 | 311 | 2,783 | 2,335 | ||||||||||||||||||||
Total | 410 | 285 | 1,102 | 894 | 9,671 | 8,119 | |||||||||||||||||||
(1) | International store data has been adjusted for the 100% acquisition of the Germany and Singapore operations by reclassifying historical information from Licensed Stores to Company-operated Stores. |
Starbucks Corporation is the leading retailer, roaster and brand of specialty coffee in the world, with more than 9,500 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 theStarbucks Experiencethrough best-of-class products. The Seattle’s Best Coffee® and Torrefazione Italia® coffee brands enable Starbucks to appeal to a broader consumer base by offering an alternative variety of coffee flavor profiles.
This release includes the following forward-looking statements: anticipated store openings, comparable store sales expectations, trends in or expectations regarding the Company’s net revenue and expense growth, capital expenditures, effective tax rate, net earnings and earnings per share results. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors including but not limited to, coffee, dairy and other raw 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 “Certain Additional Risks and Uncertainties” section of Starbucks Annual Report on Form 10-K/A for the fiscal year ended October 3, 2004. The Company assumes no obligation to update any of these forward-looking statements.
© 2005 Starbucks Coffee Company. All rights reserved.
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