Starbucks Investor Relations

Financial Release

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Starbucks Reports Strong Fourth Quarter and Record Full Year 2007 Results

Revenue Growth of 22 Percent for the Quarter and 21 Percent for Fiscal 2007

Comparable Store Sales Growth of Four Percent for the Quarter and Five Percent for Fiscal Year 2007

Significant Q4 International Operating Margin Expansion

EPS of $0.21 for the Quarter and $0.87 for Fiscal 2007

SEATTLE--(BUSINESS WIRE)--Nov. 15, 2007--Starbucks Corporation (NASDAQ:SBUX) today announced financial results for its fiscal fourth quarter and fiscal year ended September 30, 2007.

Fiscal Fourth Quarter 2007 Highlights:

  • Consolidated net revenues of $2.4 billion, a 22 percent increase
  • Comparable store sales growth of four percent
  • Operating margin improved 30 basis points to 10.2 percent
  • Earnings per share of $0.21, compared to $0.15 per share

Fiscal Year End 2007 Highlights:

  • 2,571 new store openings; 70 percent in the U.S. and 30 percent in International markets
  • Consolidated net revenues of $9.4 billion, a 21 percent increase
  • Comparable store sales growth of five percent
  • Operating margin contracted 30 basis points to 11.2 percent
  • Earnings per share of $0.87, compared to $0.71 per share

"For the year, we delivered solid results, in spite of a difficult economic and operating environment," said Jim Donald, president and CEO. "Looking ahead, we believe in the global opportunity for Starbucks, and we remain focused on delivering the highest quality beverages and legendary service, while driving innovation and extending the Starbucks Experience to more customers throughout the world."

Consolidated net revenues increased 22 percent to $2.4 billion for the 13 weeks ended September 30, 2007, compared to $2.0 billion for the fiscal fourth quarter of 2006. Net earnings totaled $159 million in the fourth quarter 2007 versus $117 million for the same period a year ago. Earnings per share for the fourth quarter rose to $0.21 from $0.15 in the prior year period. Net earnings and earnings per share in fiscal 2006 included a one-time cumulative accounting charge of $17 million or $0.02 per share recorded in the fourth quarter of fiscal 2006 resulting from the company's adoption of the new accounting requirements of FIN 47, which addresses asset retirement obligations. Excluding the cumulative effect of the adjustment, fiscal 2007 fourth quarter earnings grew 18 percent and earnings per share increased 24 percent.

Fiscal Year 2007 in Review

Fiscal year 2007 consolidated net revenues increased 21 percent to $9.4 billion, compared to $7.8 billion for the 52 weeks ended October 1, 2006. Company-operated retail revenues in fiscal 2007 rose 21 percent to $8.0 billion from $6.6 billion in fiscal 2006, predominantly due to the opening of 1,342 stores and comparable store sales growth of five percent. The increase in comparable store sales was due to a four percent increase in the average value per transaction and one percent growth in the number of customer transactions. Specialty revenues grew 17 percent to $1.4 billion from $1.2 billion in fiscal 2006.

For fiscal 2007, operating income increased to $1.1 billion, compared to $894 million for fiscal 2006. Operating margin contracted 30 basis points to 11.2 percent of total net revenues for the full year ended September 30, 2007, from 11.5 percent for the same period a year ago. Margin compression was due to higher costs of sales and occupancy costs as a percentage of total net revenues due to a shift in sales to higher cost products and higher distribution costs, rent expense and dairy costs. These cost pressures were offset in part by lower general and administrative and store operating expenses as a percentage of total net revenues.

Net earnings rose to $673 million in fiscal 2007 from $564 million for the previous year. Earnings per share for the period increased to $0.87 compared to $0.71 a year ago. Excluding the adjustment for FIN 47 in fourth quarter 2006, earnings grew 16 percent and earnings per share increased 19 percent.

Fourth Quarter Summary of Results

Company-operated retail revenues increased 21 percent to $2.1 billion for the 13 weeks ended September 30, 2007, from $1.7 billion for the same period in fiscal 2006, resulting primarily from opening 1,342 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 four percent increase in the average value per transaction.

Specialty revenues increased 24 percent to $383 million for the 13 weeks ended September 30, 2007, compared to $309 million for the corresponding period of fiscal 2006. Licensing revenues increased 27 percent to $283 million for the 13 weeks ended September 30, 2007, driven by revenue growth of 44 percent from the company's Global Consumer Products business, and from higher product sales and royalty revenues from the opening of 1,229 new licensed retail stores in the last 12 months.

Cost of sales including occupancy increased to 43.7 as a percent of total net revenues for the 13 weeks ended September 30, 2007, compared to 41.7 percent in the corresponding 13-week period of fiscal 2006. The increase was primarily due to a shift in sales to higher cost products and higher dairy costs.

Store operating expenses as a percentage of company-operated retail revenues improved to 41.0 percent for the 13 weeks ended September 30, 2007, from 42.1 percent for the corresponding period of fiscal 2006. The improvement was due to the benefit gained from price increases coupled with leverage on regional overhead, partially offset by higher payroll expenditures from wage increases for retail store partners.

Other operating expenses (expenses associated with the company's specialty operations) decreased to 19.5 percent of total specialty revenues for the 13 weeks ended September 30, 2007, compared to 21.4 percent in the corresponding period of fiscal 2006. The improvement resulted primarily from lower payroll-related expenditures as a percentage of total specialty revenues.

General and administrative expenses as a percentage of total net revenues decreased to 5.0 percent for the fourth quarter fiscal 2007, from 5.8 percent for the corresponding period of fiscal 2006. The improvement was a result of leveraging of the company's scale and infrastructure against continued global growth.

Operating income increased to $248 million for the 13 weeks ended September 30, 2007, compared to $198 million for the corresponding period of fiscal 2006. Operating margin increased 30 basis points to 10.2 percent of total net revenues for the 13 weeks ended September 30, 2007, from 9.9 percent for the corresponding period of fiscal 2006. Lower store operating expenses, general and administrative expenses, and other operating expenses as a percentage of total net revenues more than offset the increase in cost of sales including occupancy.

Net interest and other was an expense of $1.2 million for the 13 weeks ended September 30, 2007, compared to income of $3.9 million for the corresponding period of fiscal 2006, primarily due to a higher level of borrowings outstanding, which include the $550 million senior notes issued in August 2007.

Fourth Quarter Results - United States

United States total net revenues increased 19 percent to $1.9 billion for the 13 weeks ended September 30, 2007, compared to $1.6 billion for the corresponding period of fiscal 2006. United States company-operated retail revenues increased 19 percent to $1.7 billion, primarily due to the opening of 1,065 new company-operated retail stores in the last 12 months and comparable store sales growth of four percent for the quarter. Comparable store sales growth was due to a five percent increase in the average value per transaction, which included the impact of price increases taken during the fiscal year, partially offset by a one percent decrease in number of transactions.

Total United States specialty revenues increased 16 percent to $201 million for the 13 weeks ended September 30, 2007, compared to $173 million in the corresponding period of fiscal 2006. United States licensing revenues in the fourth quarter 2007 increased 17 percent to $111 million from $95 million for the same period a year ago. The growth was primarily due to higher product sales and royalty revenues as a result of opening 723 new licensed retail stores in the last 12 months.

United States operating income increased 12 percent to $225 million for the 13 weeks ended September 30, 2007, from $201 million for the corresponding period in fiscal 2006. Operating margin decreased 70 basis points to 12.1 percent of related revenues from 12.8 percent in the corresponding period of fiscal 2006. The decrease was driven by higher cost of sales including occupancy costs, primarily due to higher dairy costs.

Fourth Quarter Results - International

International total net revenues increased 31 percent to $472 million for the 13 weeks ended September 30, 2007, compared to $361 million for the corresponding period of fiscal 2006. International company-operated retail revenues increased 32 percent to $399 million, primarily due to the opening of 277 new company-operated retail stores in the last 12 months, favorable foreign currency exchange for the British pound sterling and Canadian dollar, and comparable store sales growth of six percent for the quarter. The increase in comparable store sales resulted from a five percent increase in the number of customer transactions coupled with a one percent increase in the average value per transaction.

Total International specialty revenues increased by $13 million, or 23 percent, to $73 million for the 13 weeks ended September 30, 2007, compared to $59 million in the corresponding period of fiscal 2006. The growth was primarily due to higher product sales and royalty revenues from opening 506 licensed retail stores in the last 12 months.

International operating income increased to $51 million for the 13 weeks ended September 30, 2007, compared to $27 million in the corresponding period of fiscal 2006. Operating margin increased 350 basis points to 10.8 percent of related revenues from 7.3 percent in the corresponding period of fiscal 2006, primarily due to lower general and administrative expenses and lower store operating expenses as a percentage of related revenues, as well as higher income from equity investees.

Fourth Quarter Results - Global Consumer Products Group

For the Global Consumer Products Group (CPG), total net revenues increased by $33 million, or 44 percent, to $110 million for the 13 weeks ended September 30, 2007, compared to $76 million for the corresponding period of fiscal 2006. The increase in revenues was primarily due to higher sales of U.S. packaged coffee and tea and increased product sales and royalties in the international ready-to-drink business.

CPG operating income increased to $62 million for the 13 weeks ended September 30, 2007, compared to $47 million in the same period of fiscal 2006. Operating margin decreased to 56.9 percent of related revenues from 61.8 percent in fiscal fourth quarter 2006. Contraction of operating margin for the quarter was due to slower growth in income from equity investees from The North American Coffee Partnership, which produces ready-to-drink beverages.

Fourth Quarter Results - Unallocated Corporate Expenses

Total unallocated corporate expenses as a percentage of total net revenues improved to 3.7 percent for the 13-weeks ended September 30, 2007, from 3.8 percent for the corresponding period of fiscal 2006, primarily due to leverage from growth.

Cash Flow and Balance Sheet

For the 52 weeks ended September 30, 2007, net cash flow from operating activities totaled $1.3 billion, compared to $1.1 billion in the same period a year ago. Capital expenditures for fiscal year 2007 were $1.1 billion, of which approximately 80 percent was used to fund new store openings and existing store remodels.

On August 23rd, the company issued $550 million of 6.25% Senior Notes due in August 2017. The proceeds were primarily used to repay short-term borrowings and fund additional share repurchases.

During the fourth quarter, the company repurchased a total of 12.6 million shares at a cost of $342 million. During fiscal year 2007, Starbucks repurchased 33.0 million shares at a cost of $1.0 billion. At the end of the fiscal fourth quarter, 13.5 million shares remained available for repurchase under the current authorization.

Fiscal 2008 Targets

During the fourth quarter, Starbucks evaluated its plan for fiscal 2008 given the challenging operating environment. As a result, the company has established the following fiscal 2008 targets:

  • The company has adjusted its new store opening target to approximately 2,500 net new stores on a global basis in fiscal 2008; approximately 900 company-operated locations and 700 licensed locations in the U.S., and approximately 300 company-operated stores and 600 licensed stores in international markets;
  • Comparable store sales growth in the range of three to five percent;
  • Total net revenue growth of approximately 17 to 18 percent;
  • Total company operating margin to expand slightly year-over-year, with improvement expected to be in the second half of fiscal 2008;
  • U.S. operating margin relatively stable and International operating margin improvement of at least 100 basis points over fiscal 2007;
  • Diluted earnings per share in the range of $1.02 to $1.05 representing 17 percent to 21 percent growth, with earningsper share expansion expected to be greater in the second half of fiscal 2008;

    • First quarter fiscal 2008 earnings per share of $0.28; impacted by ongoing dairy cost pressure coupled with expectations of continued softness in the U.S. consumer and economic environment compared to first quarter fiscal 2007;
  • Effective tax rate in-line with fiscal 2007; and,
  • Capital expenditures in-line with the $1.1 billion invested in fiscal 2007.

    Pete Bocian, chief financial officer, commented, "Given the current economic environment, and the commodity costs that are not expected to ease until the latter part of the year, we expect EPS expansion to be greater in the second half of fiscal 2008."

    Conference Call

    Starbucks will be holding a conference call today at 2:00 p.m. PST, which will be hosted by Jim Donald, president and ceo, Martin Coles, chief operating officer, and Pete Bocian, 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. PST on Thursday, November 22, 2007, by calling 1-800-642-1687, reservation number 4132564. 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. PST on Friday, December 14, 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 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 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, operating margin, commodity costs, effective tax rate, and capital expenditures. 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.

                            STARBUCKS CORPORATION
                     CONSOLIDATED STATEMENTS OF EARNINGS
                                 (unaudited)
    
                                  13 Weeks Ended          13 Weeks Ended
                           ----------------------------  ----------------
                            Sept 30,     Oct 1,    %     Sept 30,  Oct 1,
                              2007        2006   Change   2007      2006
                           ----------- ----------------  --------- ------
                            (in thousands, except per    As a % of total
                                    share data)            net revenues
                                                         ----------------
    Net revenues:
      Company-operated
       retail              $2,057,977  $1,694,294  21.5%    84.3 %   84.6%
      Specialty:
        Licensing             282,705     222,905  26.8     11.6     11.1
        Foodservice and
         other                100,253      86,156  16.4      4.1      4.3
                           ----------------------        ----------------
          Total specialty     382,958     309,061  23.9     15.7     15.4
                           ----------------------        ----------------
    Total net revenues      2,440,935   2,003,355  21.8    100.0    100.0
    
    Cost of sales
     including occupancy
     costs                  1,065,674     834,991  27.6     43.7     41.7
    Store operating
     expenses (a)             843,725     713,774  18.2     34.6     35.6
    Other operating
     expenses (b)              74,510      66,230  12.5      3.0      3.3
    Depreciation and
     amortization expenses    124,170     102,876  20.7      5.1      5.1
    General and
     administrative
     expenses                 123,312     116,412   5.9      5.0      5.8
                           ----------------------        ----------------
        Subtotal operating
         expenses           2,231,391   1,834,283  21.6     91.4     91.5
    
    Income from equity
     investees                 38,489      28,566  34.7      1.6      1.4
                           ----------------------        ----------------
        Operating income      248,033     197,638  25.5     10.2      9.9
    
    Net interest and other
     (expense) / income        (1,187)      3,852           (0.1)     0.2
                           ----------------------        ----------------
        Earnings before
         income taxes         246,846     201,490  22.5     10.1     10.1
    
    Income taxes (c)           88,343      66,987            3.6      3.4
                           ----------------------        ----------------
        Earnings before
         cumulative effect    158,503     134,503  17.8      6.5      6.7
    
    Cumulative effect of
     accounting change              -      17,214              -      0.8
                           ----------------------        --------- ------
        Net earnings       $  158,503  $  117,289  35.1      6.5 %    5.9%
                           =========== ==========        ========= ======
    
    Earnings before
     cumulative effect of
     change in accounting
     principle - diluted         0.21        0.17  23.5
    Cumulative effect of
     accounting change              -        0.02
                           -----------  ---------
    Net earnings per
     common share -
     diluted               $     0.21  $     0.15  40.0%
                           ===========  =========
    Weighted avg. shares
     outstanding - diluted    759,113     784,196
    
    (a) As a percentage of related company-operated retail revenues, store
     operating expenses were 41.0 percent for the 13 weeks ended September
     30, 2007, and 42.1 percent for the 13 weeks ended October 1, 2006.
    
    (b) As a percentage of related total specialty revenues, other
     operating expenses were 19.5 percent for the 13 weeks ended September
     30, 2007, and 21.4 percent for the 13 weeks ended October 1, 2006.
    
    (c) The effective tax rates were 35.8 percent for the 13 weeks ended
     September 30, 2007, and 33.2 percent for the 13 weeks ended October
     1, 2006.
    
                            STARBUCKS CORPORATION
                     CONSOLIDATED STATEMENTS OF EARNINGS
                                 (unaudited)
    
                                  52 Weeks Ended          52 Weeks Ended
                            ---------------------------  ----------------
                             Sept 30,    Oct 1,    %     Sept 30,  Oct 1,
                               2007       2006   Change    2007     2006
                            ---------- ----------------  --------- ------
                            (in thousands, except per    As a % of total
                                    share data)             net revenues
                                                         -----------------
    Net revenues:
      Company-operated
       retail               $7,998,265 $6,583,098  21.5%     85.0%   84.5%
      Specialty:
        Licensing            1,026,338    860,676  19.2      10.9    11.1
        Foodservice and
         other                 386,894    343,168  12.7       4.1     4.4
                            ---------------------        ----------------
          Total specialty    1,413,232  1,203,844  17.4      15.0    15.5
                            ---------------------        ----------------
    Total net revenues       9,411,497  7,786,942  20.9     100.0   100.0
    
    Cost of sales including
     occupancy costs         3,999,124  3,178,791  25.8      42.5    40.8
    Store operating
     expenses (a)            3,215,889  2,687,815  19.6      34.2    34.5
    Other operating
     expenses (b)              294,136    253,724  15.9       3.1     3.3
    Depreciation and
     amortization expenses     467,160    387,211  20.6       4.9     5.0
    General and
     administrative
     expenses                  489,249    479,386   2.1       5.2     6.1
                            ---------------------        ----------------
        Subtotal operating
         expenses            8,465,558  6,986,927  21.2      89.9    89.7
    
    Income from equity
     investees                 108,006     93,937  15.0       1.1     1.2
                            ---------------------        ----------------
        Operating income     1,053,945    893,952  17.9      11.2    11.5
    
    Net interest and other
     (expense) / income          2,419     12,291               -     0.1
                            ---------------------        ----------------
        Earnings before
         income taxes        1,056,364    906,243  16.6      11.2    11.6
    
    Income taxes (c)           383,726    324,770             4.1     4.1
                            ---------------------        ----------------
        Earnings before
         cumulative effect     672,638    581,473  15.7       7.1     7.5
    
    Cumulative effect of
     accounting change               -     17,214               -     0.3
                             --------------------        ----------------
        Net earnings        $  672,638 $  564,259  19.2       7.1%    7.2%
                            =====================        ================
    
    Earnings before
     cumulative effect of
     accounting change -
     diluted                      0.87       0.73  19.2
    Cumulative effect of
     accounting change               -       0.02
                             ---------  ---------
    Net earnings per common
     share - diluted        $     0.87 $     0.71  22.5%
                             =========  =========
    Weighted avg. shares
     outstanding - diluted     770,091    792,556
    
    (a) As a percentage of related company-operated retail revenues, store
     operating expenses were 40.2 percent for the 52 weeks ended September
     30, 2007, and 40.8 percent for the 52 weeks ended October 1, 2006.
    
    (b) As a percentage of related total specialty revenues, other
     operating expenses were 20.8 percent for the 52 weeks ended September
     30, 2007, and 21.1 percent for the 52 weeks ended October 1, 2006.
    
    (c) The effective tax rates were 36.3 percent for the 52 weeks ended
     September 30, 2007, and 35.8 percent for the 52 weeks ended October
     1, 2006.
    

    Segment Results

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

    United States           Sept 30,    Oct 1,     %     Sept 30,  Oct 1,
                              2007       2006    Change    2007     2006
                           ---------- ---------- ------  --------- ------
                                                          As a % of U.S.
                                                             total net
    13 Weeks Ended                                            revenues
    ----------------------                               -----------------
    Net revenues:
      Company-operated
       retail              $1,658,978 $1,392,089  19.2 %     89.2%   88.9%
      Specialty:
        Licensing             110,932     95,155  16.6        6.0     6.1
        Foodservice and
         other                 89,584     78,226  14.5        4.8     5.0
                           ---------------------         ----------------
          Total specialty     200,516    173,381  15.7       10.8    11.1
                           ---------------------         ----------------
    Total net revenues      1,859,494  1,565,470  18.8      100.0   100.0
    
    Cost of sales
     including occupancy
     costs                    774,921    617,178  25.6       41.7    39.4
    Store operating
     expenses (a)             699,433    600,676  16.4       37.6    38.4
    Other operating
     expenses (b)              48,742     47,444   2.7        2.6     3.1
    Depreciation and
     amortization expenses     93,273     75,169  24.1        5.0     4.8
    General and
     administrative
     expenses                  19,324     24,124 (19.9)       1.0     1.5
                           ---------------------         ----------------
        Total operating
         expenses           1,635,693  1,364,591  19.9       87.9    87.2
    
    Income from equity
     investees                    768          -     nm         -       -
                           ---------------------         ----------------
        Operating income   $  224,569 $  200,879  11.8 %     12.1%   12.8%
                           =====================         ================
    
    52 Weeks Ended
    ----------------------
    Net revenues:
      Company-operated
       retail              $6,560,864 $5,495,240  19.4 %     89.3%   88.9%
      Specialty:
        Licensing             439,161    369,155  19.0        6.0     6.0
        Foodservice and
         other                348,968    314,162  11.1        4.7     5.1
                           ---------------------         ----------------
          Total specialty     788,129    683,317  15.3       10.7    11.1
                           ---------------------         ----------------
    Total net revenues      7,348,993  6,178,557  18.9      100.0   100.0
    
    Cost of sales
     including occupancy
     costs                  2,956,231  2,374,485  24.5       40.2    38.4
    Store operating
     expenses (c)           2,684,196  2,280,044  17.7       36.5    36.9
    Other operating
     expenses (d)             204,672    190,624   7.4        2.8     3.1
    Depreciation and
     amortization expenses    348,199    284,625  22.3        4.7     4.6
    General and
     administrative
     expenses                  85,948     93,754  (8.3)       1.2     1.5
                           ---------------------         ----------------
        Total operating
         expenses           6,279,246  5,223,532  20.2       85.4    84.5
    
    Income from equity
     investees                    768        151     nm         -       -
                           ---------------------         ----------------
        Operating income   $1,070,515 $  955,176  12.1 %     14.6%   15.5%
                           =====================         ================
    
    (a) As a percentage of related company-operated retail revenues, store
     operating expenses were 42.2 percent for the 13 weeks ended September
     30, 2007, and 43.1 percent for the 13 weeks ended October 1, 2006.
    
    (b) As a percentage of related total specialty revenues, other
     operating expenses were 24.3 percent for the 13 weeks ended September
     30, 2007, and 27.4 percent for the 13 weeks ended October 1, 2006.
    
    (c) As a percentage of related company-operated retail revenues, store
     operating expenses were 40.9 percent for the 52 weeks ended September
     30, 2007, and 41.5 percent for the 52 weeks ended October 1, 2006.
    
    (d) As a percentage of related total specialty revenues, other
     operating expenses were 26.0 percent for the 52 weeks ended September
     30, 2007, and 27.9 percent for the 52 weeks ended October 1, 2006.
    
    International           Sept 30,    Oct 1,     %     Sept 30,  Oct 1,
                              2007       2006    Change    2007     2006
                           ---------- ---------- ------  --------- ------
                                                            As a % of
                                                           International
                                                             total net
    13 Weeks Ended                                            revenues
    -----------------------                              -----------------
    Net revenues:
      Company-operated
       retail              $  398,999 $  302,205  32.0 %     84.6%   83.6%
      Specialty:
        Licensing              62,110     51,351  21.0       13.2    14.2
        Foodservice and
         other                 10,669      7,930  34.5        2.2     2.2
                           ---------------------         ----------------
          Total specialty      72,779     59,281  22.8       15.4    16.4
                           ---------------------         ----------------
    Total net revenues        471,778    361,486  30.5      100.0   100.0
    
    Cost of sales including
     occupancy costs          225,052    172,053  30.8       47.7    47.6
    Store operating
     expenses (a)             144,292    113,098  27.6       30.6    31.3
    Other operating
     expenses (b)              20,599     15,755  30.7        4.4     4.4
    Depreciation and
     amortization expenses     21,764     18,245  19.3        4.6     5.0
    General and
     administrative
     expenses                  21,892     23,171  (5.5)       4.6     6.4
                           ---------------------         ----------------
        Total operating
         expenses             433,599    342,322  26.7       91.9    94.7
    
    Income from equity
     investees                 12,874      7,358  75.0        2.7     2.0
                           ---------------------         ----------------
        Operating income   $   51,053 $   26,522  92.5 %     10.8%    7.3%
                           =====================         ================
    
    52 Weeks Ended
    -----------------------
    Net revenues:
      Company-operated
       retail              $1,437,401 $1,087,858  32.1 %     84.7%   83.5%
      Specialty:
        Licensing             220,832    186,050  18.7       13.0    14.3
        Foodservice and
         other                 37,926     29,006  30.8        2.3     2.2
                           ---------------------         ----------------
          Total specialty     258,758    215,056  20.3       15.3    16.5
                           ---------------------         ----------------
    Total net revenues      1,696,159  1,302,914  30.2      100.0   100.0
    
    Cost of sales including
     occupancy costs          824,594    625,008  31.9       48.6    48.0
    Store operating
     expenses (c)             531,693    407,771  30.4       31.4    31.3
    Other operating
     expenses (d)              69,881     50,900  37.3        4.1     3.9
    Depreciation and
     amortization expenses     84,165     66,800  26.0        5.0     5.1
    General and
     administrative
     expenses                  93,806     78,337  19.7        5.5     6.0
                           ---------- ----------         --------- ------
        Total operating
         expenses           1,604,139  1,228,816  30.5       94.6    94.3
    
    Income from equity
     investees                 45,723     34,370  33.0        2.7     2.6
                           ---------------------         ----------------
        Operating income   $  137,743 $  108,468  27.0 %      8.1%    8.3%
                           =====================         ================
    
    (a) As a percentage of related company-operated retail revenues, store
     operating expenses were 36.2 percent for the 13 weeks ended September
     30, 2007, and 37.4 percent for the 13 weeks ended October 1, 2006.
    
    (b) As a percentage of related total specialty revenues, other
     operating expenses were 28.3 percent for the 13 weeks ended September
     30, 2007, and 26.6 percent for the 13 weeks ended October 1, 2006.
    
    (c) As a percentage of related company-operated retail revenues, store
     operating expenses were 37.0 percent for the 52 weeks ended September
     30, 2007, and 37.5 percent for the 52 weeks ended October 1, 2006.
    
    (d) As a percentage of related total specialty revenues, other
     operating expenses were 27.0 percent for the 52 weeks ended September
     30, 2007, and 23.7 percent for the 52 weeks ended October 1, 2006.
    
    Global Consumer Products
     Group (CPG)               Sept 30,  Oct 1,    %     Sept 30,  Oct 1,
                                 2007     2006   Change    2007     2006
                               ------------------------  ----------------
                                                          As a % of CPG
                                                             total net
    13 Weeks Ended                                            revenues
    --------------------------                           -----------------
    Net revenues:
      Specialty:
        Licensing              $109,663 $ 76,399   43.5%    100.0%  100.0%
                               -----------------         ----------------
          Total specialty       109,663   76,399   43.5     100.0   100.0
                               -----------------         ----------------
    Total net revenues          109,663   76,399   43.5     100.0   100.0
    
    Cost of sales                65,701   45,760   43.6      59.9    59.9
    Other operating expenses      5,169    3,031   70.5       4.7     4.0
    Depreciation and
     amortization expenses           15       21 (28.6)         -       -
    General and administrative
     expenses                     1,269    1,583 (19.8)       1.2     2.1
                               -----------------         ----------------
        Total operating
         expenses                72,154   50,395   43.2      65.8    66.0
    
    Income from equity
     investees                   24,847   21,208   17.2      22.7    27.8
                               -----------------         ----------------
        Operating income       $ 62,356 $ 47,212   32.1%     56.9%   61.8%
                               =================         ================
    
    52 Weeks Ended
    --------------------------
    Net revenues:
      Specialty:
        Licensing              $366,345 $305,471   19.9%    100.0%  100.0%
                               -----------------         ----------------
          Total specialty       366,345  305,471   19.9     100.0   100.0
                               -----------------         ----------------
    Total net revenues          366,345  305,471   19.9     100.0   100.0
    
    Cost of sales               218,299  179,298   21.8      59.6    58.7
    Other operating expenses     19,583   12,200   60.5       5.4     4.0
    Depreciation and
     amortization expenses           76      108 (29.6)         -       -
    General and administrative
     expenses                     6,349    6,363  (0.2)       1.7     2.1
                               -----------------         ----------------
        Total operating
         expenses               244,307  197,969   23.4      66.7    64.8
    
    Income from equity
     investees                   61,515   59,416    3.5      16.8    19.4
                               -----------------         ----------------
        Operating income       $183,553 $166,918   10.0%     50.1%   54.6%
                               =================         ================
    
       Unallocated Corporate
                            ---------------------------  ----------------
                             Sept 30,    Oct 1,    %     Sept 30,  Oct 1,
                               2007       2006   Change   2007     2006
                            ---------------------------  ----------------
                                                         As a % of total
    13 Weeks Ended                                         net revenues
    ------------------------                             ----------------
    Depreciation and
     amortization expenses  $   9,118  $   9,441  (3.4)%     0.4 %   0.4 %
    General and
     administrative expenses   80,827     67,534  19.7       3.3     3.4
                            ---------------------        ----------------
      Operating loss        $ (89,945) $ (76,975) 16.8 %    (3.7)%  (3.8)%
                            =====================        ================
    
    52 Weeks Ended
    ------------------------
    Depreciation and
     amortization expenses  $  34,720  $  35,678  (2.7)%     0.4 %   0.4 %
    General and
     administrative expenses  303,146    300,932   0.7       3.2     3.9
                            ---------------------        ----------------
      Operating loss        $(337,866) $(336,610)  0.4 %    (3.6)%  (4.3)%
                            =====================        ================
    
                            STARBUCKS CORPORATION
                         CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share data)
                                 (unaudited)
    
                                                 September 30,  October 1,
                                                       2007        2006
                                                 ------------- -----------
    ASSETS
    Current assets:
      Cash and cash equivalents                    $   281,261 $   312,606
      Short-term investments - available-for-
       sale securities                                  83,845      87,542
      Short-term investments - trading
       securities                                       73,588      53,496
      Accounts receivable, net                         287,925     224,271
      Inventories                                      691,658     636,222
      Prepaid expenses and other current assets        148,757     126,874
      Deferred income taxes, net                       129,453      88,777
                                                 ------------- -----------
        Total current assets                         1,696,487   1,529,788
    
    Long-term investments - available-for-sale
     securities                                         21,022       5,811
    Equity and other investments                       258,846     219,093
    Property, plant and equipment, net               2,890,433   2,287,899
    Other assets                                       219,422     186,917
    Other intangible assets                             42,043      37,955
    Goodwill                                           215,625     161,478
                                                 ------------- -----------
      TOTAL ASSETS                                 $ 5,343,878 $ 4,428,941
                                                 ============= ===========
    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
      Commercial paper and short-term borrowings   $   710,248 $   700,000
      Accounts payable                                 390,836     340,937
      Accrued compensation and related costs           332,331     288,963
      Accrued occupancy costs                           74,591      54,868
      Accrued taxes                                     92,516      94,010
      Other accrued expenses                           257,369     224,154
      Deferred revenue                                 296,900     231,926
      Current portion of long-term debt                    775         762
                                                 ------------- -----------
        Total current liabilities                    2,155,566   1,935,620
    
    Long-term debt                                     550,121       1,958
    Other long-term liabilities                        354,074     262,857
                                                 ------------- -----------
        Total liabilities                            3,059,761   2,200,435
    
    Shareholders' equity:
      Common stock ($0.001 par value) -
       authorized, 1,200,000,000 shares; issued
       and outstanding, 738,285,285 and
       756,602,055 shares, respectively,
       (includes 3,420,448 common stock units in
       both periods)                                       738         756
      Other additional paid-in-capital                  39,393      39,393
      Retained earnings                              2,189,366   2,151,084
      Accumulated other comprehensive income            54,620      37,273
                                                 ------------- -----------
        Total shareholders' equity                   2,284,117   2,228,506
                                                 ------------- -----------
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 5,343,878 $ 4,428,941
                                                 ============= ===========
    
                            STARBUCKS CORPORATION
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (unaudited and in thousands)
    
                                                      52 Weeks Ended
                                                 -------------------------
                                                   Sept 30,      Oct 1,
                                                      2007         2006
                                                 ------------- -----------
    OPERATING ACTIVITIES:
    Net earnings                                 $    672,638  $  564,259
    Adjustments to reconcile net earnings to net
     cash provided by operating activities:
      Cumulative effect of accounting change for
       FIN47, net of taxes                                  -      17,214
      Depreciation and amortization                   491,238     412,625
      Provision for impairments and asset
       disposals                                       26,032      19,622
      Deferred income taxes, net                      (37,326)    (84,324)
      Equity in income of investees                   (65,743)    (60,570)
      Distributions from equity investees              65,927      49,238
      Stock-based compensation                        103,865     105,664
      Tax benefit from exercise of stock options        7,705       1,318
      Excess tax benefit from exercise of stock
       options                                        (93,055)   (117,368)
      Net amortization of premium on securities           653       2,013
      Cash provided/(used) by changes in
       operating assets and liabilities:
        Inventories                                   (48,576)    (85,527)
        Accounts payable                               36,068     104,966
        Accrued compensation and related costs         38,628      54,424
        Accrued taxes                                  86,371     132,725
        Deferred revenue                               63,233      56,547
        Other operating assets and liabilities        (16,437)    (41,193)
                                                 ------------- -----------
    Net cash provided by operating activities       1,331,221   1,131,633
    
    INVESTING ACTIVITIES:
      Purchase of available-for-sale securities      (237,422)   (639,192)
      Maturity of available-for-sale securities       178,167     269,134
      Sale of available-for-sale securities            47,497     431,181
      Acquisitions, net of cash acquired              (53,293)    (91,734)
      Net purchases of equity, other investments
       and other assets                               (56,552)    (39,199)
      Net additions to property, plant and
       equipment                                   (1,080,348)   (771,230)
                                                 ------------- -----------
    Net cash used by investing activities          (1,201,951)   (841,040)
    
    FINANCING ACTIVITIES:
      Repayments of commercial paper              (16,600,841)          -
      Proceeds from issuance of commercial paper   17,311,089           -
      Repayments of short-term borrowings          (1,470,000)   (993,093)
      Proceeds from short-term borrowings             770,000   1,416,093
      Proceeds from issuance of common stock          176,937     159,249
      Excess tax benefit from exercise of stock
       options                                         93,055     117,368
      Principal payments on long-term debt               (784)       (898)
      Proceeds from issuance of long-term debt        548,960           -
      Repurchase of common stock                     (996,798)   (854,045)
      Other                                            (3,505)          -
                                                 ------------- -----------
    Net cash used by financing activities            (171,887)   (155,326)
    Effect of exchange rate changes on cash and
     cash equivalents                                  11,272       3,530
                                                 ------------- -----------
    Net increase/(decrease) in cash and cash
     equivalents                                      (31,345)    138,797
    
    CASH AND CASH EQUIVALENTS:
    Beginning of period                               312,606     173,809
                                                 ------------- -----------
    
    End of the period                            $    281,261  $  312,606
                                                 ============= ===========
    
    SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:
    Cash paid during the period for:
      Interest, net of capitalized interest      $     35,294  $   10,576
      Income taxes                               $    342,223  $  274,134
    

    Fiscal Fourth 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  52-week period  Stores open as of
                         --------------- --------------- -----------------
                         Sept 30, Oct 1, Sept 30, Oct 1,  Sept 30,  Oct 1,
                           2007    2006    2007    2006     2007     2006
                         --------------- --------------- -----------------
    United States:
      Company-operated
       Stores (1)             227    278    1,065    810      6,793  5,728
      Licensed Stores         162    216      723    733      3,891  3,168
                         --------------- --------------- -----------------
                              389    494    1,788  1,543     10,684  8,896
                         --------------- --------------- -----------------
    International:
      Company-operated
       Stores (1)              99     75      277    233      1,712  1,435
      Licensed Stores (1)     127     87      506    423      2,615  2,109
                         --------------- --------------- -----------------
                              226    162      783    656      4,327  3,544
                         --------------- --------------- -----------------
    
    Total                     615    656    2,571  2,199     15,011 12,440
                         =============== =============== =================
    
    (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.
    

    (C) 2007 Starbucks Coffee Company. All rights reserved.

    CONTACT:
    Starbucks Contact, Investor Relations:
    JoAnn DeGrande, 206-318-7893
    jdegrand@starbucks.com
    or
    Starbucks Contact, Media:
    Valerie O'Neil, 206-318-8953
    voneil@starbucks.com
    or
    http://www.businesswire.com/cnn/sbux.shtml

    SOURCE: Starbucks Corporation