Q2 Results Reflect Consumer Economic Pressures as well as
Transformation Expenses
U.S. Store Openings to be Sharply Curtailed; International Unit
Growth to Accelerate
Robust Pipeline of Innovation; First New Beverages to be in Stores
Beginning in Summer 2008
SEATTLE--(BUSINESS WIRE)--April 30, 2008--Starbucks Corporation
(NASDAQ:SBUX) today reported financial results for its fiscal second
quarter ended March 30, 2008 and provided updated information about
its revenue expectations for fiscal 2008, expanding on the preliminary
results announced by the company on April 23, 2008. The company also
announced its financial targets for the three-year period of fiscal
year 2009 through fiscal year 2011.
Consolidated net revenues increased 12 percent to $2.5 billion for
the second quarter of 2008, compared to $2.3 billion for the second
quarter of 2007. For the 13-week period ended March 30, 2008, net
earnings totaled $108.7 million versus $150.8 million for the same
period a year ago, a decline of 28 percent. Earnings per share (EPS)
for the quarter was $0.15, down 21 percent from the $0.19 per share
earned in the prior year period. The company estimates that costs
associated with the implementation of its transformation agenda and
charges related to the rationalization of its store portfolio
negatively impacted EPS by approximately $0.03 per share.
"Fiscal 2008 is a transitional year for Starbucks and, while our
financial results are clearly being impacted by reduced frequency to
our U.S. stores, we believe that as we continue to execute on the
initiatives generated by our transformation agenda, we will
reinvigorate the Starbucks Experience for our customers, and in doing
so, deliver increased value to our shareholders," commented Howard
Schultz, chairman, president and ceo.
Schultz continued, "Over the past several months, we have
evaluated our business to assess the opportunities to better leverage
resources and gain efficiencies in our cost structure, while
continuing to invest in our innovation pipeline to create customer
demand. We believe this balanced approach, which includes
substantially reducing our planned U.S. store openings and lowering
our capital spending, will allow us to set the stage for the next
evolution of Starbucks and lead to significant improvement in our
long-term financial performance."
Second Quarter Financials
The 12 percent growth in consolidated net revenues in the second
quarter 2008 was heavily influenced by the U.S. business, which
contributed 77 percent of total net revenue. Lower than expected
revenue was driven by a mid-single-digit decline in U.S. comparable
store sales, driven by decreased traffic. For the quarter, U.S. total
net revenues increased by $146.9 million, or 8 percent, to $1.9
billion mainly due to increased revenues from company-operated retail
stores. International total net revenues expanded 27 percent, or
$106.1 million, to $493.4 million for the 13 weeks ended March 30,
2008 as the company continued to expand its store presence in its 43
markets outside the U.S. For the Global Consumer Products Group (CPG),
total net revenues increased by $17.4 million, or 22 percent, to $96.3
million for the second quarter fiscal 2008, primarily due to increased
sales of packaged coffee and tea.
Consolidated cost of sales including occupancy costs increased 190
basis points to 43.8 percent of total net revenues for the 13 weeks
ended March 30, 2008, compared to 41.9 percent in the corresponding
period in fiscal 2007. The increase was primarily due to higher
occupancy costs and higher dairy costs as a percent of revenues, in
the U.S. business.
Store operating expenses as a percentage of related
company-operated retail revenues rose 270 basis points to 43.3 percent
in the second quarter 2008, from 40.6 percent for the prior year
period. In addition to softer revenues, expenses rose during the
period, which contributed to the increase as a percent of related
revenues. The largest expense drivers were charges associated with
rationalization of the company's store portfolio and costs related to
its transformation agenda initiatives.
General and administrative expenses as a percentage of total net
revenues improved 100 basis points to 4.7 percent for the second
quarter 2008, from 5.7 percent for the corresponding period of fiscal
2007. The favorability was primarily due to lower payroll-related
expenses.
Consolidated operating income declined 26 percent to $178.2
million for the 13 weeks ended March 30, 2008. Operating margin
contracted 360 basis points to 7.1 percent of total net revenues in
the second quarter, from 10.7 percent for the same period a year ago,
due to the softness in U.S. revenues along with higher store operating
expenses and cost of sales including occupancy costs.
For second quarter fiscal 2008, United States operating income
declined by 27.5 percent to $193.9 million. Operating margin
contracted 500 basis points to 10.0 percent of related revenues from
15.0 percent in the corresponding period of fiscal 2007. The decrease
was driven by lower than expected revenues, higher store operating
expenses and higher cost of sales including occupancy costs.
International operating income declined 15.6 percent to $17.8
million for the second quarter 2008. Operating margin contracted 180
basis points to 3.6 percent of related revenues from 5.4 percent in
the second quarter of fiscal 2007. The primary reasons for this
decline were costs associated with rationalization of the store
portfolio and higher cost of sales including occupancy costs.
Operating income for the CPG segment increased to $42.7 million
for the 13 weeks ended March 30, 2008, a 13.3 percent increase over
second quarter 2007. Operating margin contracted 350 basis points to
44.3 percent of related revenues from 47.8 percent for the prior year
period, due to lower income from equity investees resulting from
product write-offs within the NACP partnership.
For the first half of fiscal 2008, consolidated net revenues
increased 15 percent to $5.3 billion, compared to $4.6 billion for the
same period a year ago. Net earnings totaled $316.8 million for the
26-week period ended March 30, 2008, versus $355.8 million for the
first half of fiscal 2007, down 11 percent, while EPS for the period
decreased 7 percent to $0.43 from $0.46 in the first half of fiscal
2007.
Full-Year 2008 Updates
As indicated in the April 23, 2008 announcement, Starbucks expects
full-year fiscal 2008 EPS to be somewhat lower than the $0.87 reported
in fiscal 2007. The company is not providing a more precise
expectation, due to the lack of visibility into near-term economic
conditions. In line with this revised view, Starbucks anticipates
total net revenue growth of 13 percent to 14 percent in fiscal year
2008.
In the second quarter, Starbucks continued to refine its planned
fiscal 2008 U.S. store openings given the current economic environment
and its impact on financial results. The company lowered its U.S.
store opening targets for fiscal 2008 to approximately 1,020 net new
stores; 620 company-operated and 400 licensed stores. International
store openings are expected to remain as previously announced at 975
stores. Capital expenditures for fiscal year 2008 are still expected
to be approximately $1.1 billion, as the reduction in store opening
investment is being offset by investment in the company's
transformation agenda around innovation.
Schultz added, "The second half of 2008 marks the beginning of an
exciting wave of meaningful innovation coming to life in our stores.
The summer launch of our new, distinctive cold beverage platform will
bring the excitement and uniqueness that our customers expect, deserve
and will continue to see more of as we execute on our transformation
agenda and reaffirm our leadership position."
Longer-Term Financial Targets: 2009 - 2011
Today, Starbucks is announcing the following key financial and
operational metrics to provide more clarity regarding its financial
targets beyond 2008. The company believes this will assist investors
in measuring Starbucks progress against the transformation and
evolution of the company.
Pete Bocian, executive vice president and cfo, commented, "Despite
the challenges of the current operating environment, we are focused on
the parts of the business we can control such as: store count, use of
capital, and controlling expenses, while still investing for the long
term. We believe our plan balances these key objectives and drives
long-term shareholder value."
Investment in Stores
Starbucks plans to open significantly fewer new stores in the
U.S., over the 2009 to 2011 period, to less than 400 net new stores
per year, opening approximately 250 company-operated stores in each of
the three years. At the same time, the company plans to continue to
accelerate its International unit expansion, targeting net new store
openings as follows; approximately 1,050 in 2009, 1,150 in 2010, and
1,300 in 2011. Including a somewhat lower 2008 store target for the
U.S., total store count will be approximately 21,500 stores by the end
of fiscal 2011, with the company's international presence growing from
approximately 30 percent to over 40 percent of the global store
portfolio.
Use of Capital
The company expects capital expenditures of roughly $800 million
per year, beginning in fiscal 2009. Of this amount, approximately 70
percent will be for investment in stores.
Revenue Growth
Starbucks is targeting International revenue growth at a compound
annual growth rate of 20 percent over the three-year period, driven by
new store openings and continued growth in existing stores. CPG is
expected to grow at least 15 percent per year, through product and
channel expansion. The U.S. segment is expected to continue to grow,
but at a slower pace than in previous years, in line with the slowing
of new store openings, and more conservative expectations of same
store sales growth that assumes a continued difficult consumer
economic environment. For the U.S. segment, Starbucks is expecting
revenue growth of about 5 percent in 2011, with a three-year compound
annual growth rate of just over 6 percent. Total company revenues are
expected to be just over $14 billion in 2011, representing a 10
percent three-year compound annual growth rate, with growth moderating
slightly over the three-year period.
Earnings Per Share (EPS) Expansion
The company is providing EPS target ranges for each year, with
broader ranges reflecting both greater uncertainty of projecting years
farther out, as well as the near-term uncertainty of the economic
environment. For fiscal 2011, EPS is expected to be in the range of
$1.35 to $1.50. For fiscal 2010, Starbucks anticipates EPS in the
range of $1.10 to $1.20. In 2009, the company is targeting an EPS
range of $0.90 to $1.00, as it will continue to invest in its
transformation agenda, with the benefits still in the early stages.
Operating Margin Targets
Starbucks expects International operating margin improvements of
approximately 100 basis points per year, reaching about 12 percent in
2011. CPG operating margin is expected to remain flat with fiscal 2007
at 50 percent each year over the 2009 to 2011 period. Operating margin
for the U.S. segment is expected to stabilize after 2008, at an
average of approximately 11.5 percent from 2009 to 2011. Total company
operating margin is expected to improve over the three-year period
from the 2008 level, but will remain below 2007 operating margin of
11.2 percent, driven by the erosion in the U.S. business.
In addition, the company expects to gain leverage of approximately
one percent of revenues from unallocated corporate general and
administrative expenses by 2011 from the level in fiscal 2007, with
improvement proportionately over the four-year period due to the
company's cost saving initiatives. Starbucks also expects its tax rate
to continue to improve over the horizon with an effective tax rate of
34 percent in fiscal 2009, and 33 percent in 2010 and 2011, due to a
greater contribution to operating income from the International
segment.
Free Cash Flow Generation
In line with the targets referenced above, the company expects to
generate over $4.4 billion in cash from operating activities and have
$2.4 billion in capital expenditures, leading to $2 billion in
cumulative free cash flow from 2009 through 2011. This compares to an
aggregate expected free cash flow of close to $800 million from 2006
through 2008, derived from an expected $3.8 billion of cash from
operating activities and $3 billion in capital expenditures. Starbucks
defines free cash flow as cash from operations less capital
expenditures. The company intends to use this excess cash to return
value to shareholders through share repurchases, or drive increased
value through investment in new opportunities with attractive expected
returns on capital.
The table below summarizes Starbucks longer-term targets.
Three-Year Targets
FY2009 FY2010 FY2011
-----------------------------------------
Net new store openings
Company-operated 250 250 250
Licensed up to 150 up to 150 up to 150
-----------------------------------------
Total United States up to 400 up to 400 up to 400
Total International 1,050 1,150 1,300
-----------------------------------------
Consolidated about 1,450 about 1,550 about 1,700
=========================================
Capital expenditures $800M $800M $800M
EPS range $0.90 - $1.00 $1.10 - $1.20 $1.35 - $1.50
----------------------------------------------------------------------
Additional Longer -Term Targets Detail
Revenue three-year compound annual growth rate
United States 6%
International 20%
Global Consumer Product
Group 15%
Consolidated 10%
Operating margin
United States - Expect to stabilize after 2008 at an average of 11.5%
from 2009 to 2011
International - 100 basis point improvement per year, reaching 12% in
2011
Global Consumer Product Group - 50% margin each year
Consolidated - Expected to improve over 3-year period from 2008
level, but will remain below 2007 operating margin
Unallocated Corporate G&A expense - Gain leverage of 1% of revenues
by 2011 from 2007 level
Effective tax rate - 34% in 2009 and 33% in 2010 and 2011
Cumulative free cash flow - over $2B from 2009 through 2011
----------------------------------------------------------------------
Conference Call
Starbucks will be holding a conference call today at 2:00 p.m.
PDT, which will be hosted by Howard Schultz, chairman, president and
ceo, 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 9:00 p.m. PDT on Friday, May 2, 2008, by calling
1-800-642-1687, reservation number 22250367. 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. PDT on Friday, May 30, 2008, 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 for the fiscal year ended September 30, 2007 for
additional information.
Non-GAAP Disclosure
Free cash flow is a non-GAAP number and may not be comparable to
similar measures used by other companies. The disclosure of free cash
flow is intended to supplement investors' understanding of the
company's operating performance.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to
ethically sourcing and roasting the highest quality arabica coffee in
the world. Today, with over 16,000 stores in 44 countries, the company
is the premier roaster and retailer of specialty coffee in the world.
Through our unwavering commitment to excellence and our guiding
principles, we bring the unique Starbucks Experience to life for every
customer through every cup. To share in the experience, please visit
us in our stores or online at www.starbucks.com.
Forward-Looking Statements
This release contains forward-looking statements relating to the
company's 2008-2011 fiscal years, including the expected effects of
its transformation agenda and other initiatives, growth in net
revenue, earnings per share, store openings, operating margins,
capital expenditures and free cash flow, as well as expense control
and the company's effective tax rate. These forward-looking statements
are based on currently available operating, financial and competitive
information and are subject to a number of significant risks and
uncertainties. Actual future results 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 the company's transformation plan and other initiatives,
fluctuations in U.S. and international economies and currencies, the
impact of competition, the effect of legal proceedings, and other
risks detailed in the company filing with the Securities and Exchange
Commission, including the "Risk Factors" section of Starbucks Annual
Report on Form 10-K for the fiscal year ended September 30, 2007 and
of Starbucks Quarterly Report on Form 10-Q for the fiscal quarter
ended December 30, 2007. 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
-------------------------- ---------------
Mar 30, Apr 1, % Mar 30, Apr 1,
2008 2007 Change 2008 2007
-------------------------- ---------------
(in millions, except per
share data)
As a % of total
net revenues
---------------
Net revenues:
Company-
operated
retail $2,142.9 $1,922.7 11.5 % 84.8 % 85.2 %
Specialty:
Licensing 274.4 234.8 16.9 10.9 10.4
Foodservice
and other 108.7 98.1 10.8 4.3 4.3
------------------- ---------------
Total
specialty 383.1 332.9 15.1 15.2 14.8
------------------- ---------------
Total net revenues 2,526.0 2,255.6 12.0 100.0 100.0
Cost of sales including
occupancy costs 1,106.7 944.7 17.1 43.8 41.9
Store operating expenses
(a) 927.1 781.0 18.7 36.7 34.6
Other operating expenses
(b) 82.8 74.0 11.9 3.3 3.3
Depreciation and
amortization expenses 138.1 113.4 21.8 5.5 5.0
General and
administrative expenses 117.6 127.8 (8.0) 4.7 5.7
------------------- ---------------
Subtotal
operating
expenses 2,372.3 2,040.9 16.2 93.9 90.5
Income from equity
investees 24.5 26.3 (6.8) 1.0 1.2
------------------- ---------------
Operating
income 178.2 241.0 (26.1) 7.1 10.7
Interest income and
other, net 0.2 6.0 - 0.3
Interest expense (11.2) (6.7) (0.4) (0.3)
------------------- ---------------
Earnings
before
income
taxes 167.2 240.3 (30.4) 6.6 10.7
Income taxes (c) 58.5 89.5 2.3 4.0
------------------- ---------------
Net
earnings $ 108.7 $ 150.8 (27.9) 4.3 % 6.7 %
=================== ===============
Net earnings per common
share - diluted $ 0.15 $ 0.19 (21.1)%
===================
Weighted avg. shares
outstanding - diluted 739.3 774.1
(a) As a percentage of related company-operated retail
revenues, store operating expenses were 43.3 percent for
the 13 weeks ended March 30, 2008, and 40.6 percent for
the 13 weeks ended April 1, 2007.
(b) As a percentage of related total specialty revenues,
other operating expenses were 21.6 percent for the 13
weeks ended March 30, 2008, and 22.2 percent for the 13
weeks ended April 1, 2007.
(c) The effective tax rates were 35.0 percent for the 13
weeks ended March 30, 2008, and 37.2 percent for the 13
weeks ended April 1, 2007.
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
26 Weeks Ended 26 Weeks Ended
-------------------------- ---------------
Mar 30, Apr 1, % Mar 30, Apr 1,
2008 2007 Change 2008 2007
-------------------------- ---------------
(in millions, except per
share data)
As a % of total
net revenues
----------------
Net revenues:
Company-operated
retail $4,494.4 $3,929.5 14.4 % 84.9 % 85.2 %
Specialty:
Licensing 579.2 488.7 18.5 10.9 10.6
Foodservice and other 220.0 193.1 13.9 4.2 4.2
------------------- ---------------
Total specialty 799.2 681.8 17.2 15.1 14.8
------------------- ---------------
Total net revenues 5,293.6 4,611.3 14.8 100.0 100.0
Cost of sales including
occupancy costs 2,292.7 1,929.5 18.8 43.3 41.8
Store operating expenses
(a) 1,854.4 1,553.0 19.4 35.0 33.7
Other operating expenses
(b) 168.5 144.9 16.3 3.2 3.1
Depreciation and
amortization expenses 271.3 223.6 21.3 5.1 4.8
General and
administrative expenses 243.5 244.6 (0.4) 4.6 5.3
------------------- ---------------
Subtotal operating
expenses 4,830.4 4,095.6 17.9 91.2 88.8
Income from equity
investees 48.1 45.0 6.9 0.9 1.0
------------------- ---------------
Operating income 511.3 560.7 (8.8) 9.7 12.2
Interest income and
other, net 10.9 19.5 0.2 0.4
Interest expense (28.3) (13.7) (0.5) (0.3)
------------------- ---------------
Earnings before
income taxes 493.9 566.5 (12.8) 9.3 12.3
Income taxes (c) 177.1 210.7 3.3 4.6
------------------- ---------------
Net earnings $ 316.8 $ 355.8 (11.0) 6.0 % 7.7 %
=================== ---------------
Net earnings per common
share - diluted $ 0.43 $ 0.46 (6.5)%
===================
Weighted avg. shares
outstanding - diluted 742.2 778.5
(a)As a percentage of related company-operated retail revenues, store
operating expenses were 41.3 percent for the 26 weeks ended March
30, 2008, and 39.5 percent for the 26 weeks ended April 1, 2007.
(b)As a percentage of related total specialty revenues, other
operating expenses were 21.1 percent for the 26 weeks ended March
30, 2008, and 21.3 percent for the 26 weeks ended April 1, 2007.
(c)The effective tax rates were 35.9 percent for the 26 weeks ended
March 30, 2008, and 37.2 percent for the 26 weeks ended April 1,
2007.
Segment Results
----------------------------------------------------------------------
The tables below present reportable segment results net of
intersegment eliminations (in millions):
------------------------- ---------------
United States Mar 30, Apr 1, % Mar 30, Apr 1,
13 weeks ended 2008 2007 Change 2008 2007
------------------------- ---------------
As a % of U.S.
total net
13 Weeks Ended revenues
-------------------------- ---------------
Net revenues:
Company-operated retail $1,725.5 $1,595.3 8.2 % 89.1% 89.2%
Specialty:
Licensing 115.1 104.8 9.8 5.9 5.9
Foodservice and other 95.7 89.3 7.2 4.9 5.0
------------------ ---------------
Total specialty 210.8 194.1 8.6 10.9 10.8
------------------ ---------------
Total net revenues 1,936.3 1,789.4 8.2 100.0 100.0
Cost of sales including
occupancy costs 802.0 707.9 13.3 41.4 39.6
Store operating expenses
(a) 762.1 653.8 16.6 39.4 36.5
Other operating expenses
(b) 55.5 52.0 6.7 2.9 2.9
Depreciation and
amortization expenses 102.2 84.4 21.1 5.3 4.7
General and administrative
expenses 19.9 23.7 (16.0) 1.0 1.3
------------------ ---------------
Total operating
expenses 1,741.7 1,521.8 14.4 89.9 85.0
Income from equity
investees (0.7) - nm - -
------------------ ---------------
Operating income $ 193.9 $ 267.6 (27.5)% 10.0% 15.0%
================== ===============
26 Weeks Ended
--------------------------
Net revenues:
Company-operated retail $3,615.8 $3,255.6 11.1 % 89.0% 89.2%
Specialty:
Licensing 253.0 218.1 16.0 6.2 6.0
Foodservice and other 193.7 175.6 10.3 4.8 4.8
------------------ ---------------
Total specialty 446.7 393.7 13.5 11.0 10.8
------------------ ---------------
Total net revenues 4,062.5 3,649.3 11.3 100.0 100.0
Cost of sales including
occupancy costs 1,674.9 1,439.0 16.4 41.2 39.4
Store operating expenses
(c) 1,527.0 1,302.2 17.3 37.6 35.7
Other operating expenses
(d) 114.5 104.2 9.9 2.8 2.9
Depreciation and
amortization expenses 200.6 165.8 21.0 4.9 4.5
General and administrative
expenses 40.4 45.4 (11.0) 1.0 1.2
------------------ ---------------
Total operating
expenses 3,557.4 3,056.6 16.4 87.6 83.8
Income from equity
investees (0.3) - nm - -
------------------ ---------------
Operating income $ 504.8 $ 592.7 (14.8)% 12.4% 16.2%
================== ===============
(a)As a percentage of related company-operated retail revenues, store
operating expenses were 44.2 percent for the 13 weeks ended March
30, 2008, and 41.0 percent for the 13 weeks ended April 1, 2007.
(b)As a percentage of related total specialty revenues, other
operating expenses were 26.3 percent for the 13 weeks ended March
30, 2008, and 26.8 percent for the 13 weeks ended April 1, 2007.
(c)As a percentage of related company-operated retail revenues, store
operating expenses were 42.2 percent for the 26 weeks ended March
30, 2008, and 40.0 percent for the 26 weeks ended April 1, 2007.
(d)As a percentage of related total specialty revenues, other
operating expenses were 25.6 percent for the 26 weeks ended March
30, 2008, and 26.5 percent for the 26 weeks ended April 1, 2007.
---------------------------- --------------
International Mar 30, Apr 1, % Mar 30, Apr 1,
13 weeks ended 2008 2007 Change 2008 2007
---------------------------- --------------
As a % of
International
total net
13 Weeks Ended revenues
------------------------- --------------
Net revenues:
Company-operated
retail $ 417.4 $ 327.4 27.5% 84.6% 84.5%
Specialty:
Licensing 63.0 51.1 23.3 12.8 13.2
Foodservice and other 13.0 8.8 47.7 2.6 2.3
--------------------- -------------
Total specialty 76.0 59.9 26.9 15.4 15.5
--------------------- -------------
Total net revenues 493.4 387.3 27.4 100.0 100.0
Cost of sales including
occupancy costs 247.8 189.2 31.0 50.2 48.9
Store operating expenses
(a) 165.0 127.2 29.7 33.4 32.8
Other operating expenses
(b) 22.5 16.8 33.9 4.6 4.3
Depreciation and
amortization expenses 26.5 20.7 28.0 5.4 5.3
General and
administrative expenses 29.0 25.3 14.6 5.9 6.5
--------------------- -------------
Total operating
expenses 490.8 379.2 29.4 99.5 97.9
Income from equity
investees 15.2 13.0 16.9 3.1 3.4
--------------------- -------------
Operating income $ 17.8 $ 21.1 (15.6)% 3.6% 5.4%
===================== =============
26 Weeks Ended
-------------------------
Net revenues:
Company-operated
retail $ 878.6 $ 673.9 30.4% 85.0% 85.0%
Specialty:
Licensing 129.3 101.0 28.0 12.5 12.7
Foodservice and other 26.3 17.5 50.3 2.5 2.2
--------------------- -------------
Total specialty 155.6 118.5 31.3 15.0 15.0
--------------------- -------------
Total net revenues 1,034.2 792.4 30.5 100.0 100.0
Cost of sales including
occupancy costs 507.8 389.3 30.4 49.1 49.1
Store operating expenses
(c) 327.4 250.8 30.5 31.7 31.7
Other operating expenses
(d) 43.3 30.9 40.1 4.2 3.9
Depreciation and
amortization expenses 52.2 41.2 26.7 5.0 5.2
General and
administrative expenses 58.9 47.0 25.3 5.7 5.9
--------------------- -------------
Total operating
expenses 989.6 759.2 30.3 95.7 95.8
Income from equity
investees 27.3 21.0 30.0 2.6 2.7
--------------------- -------------
Operating income $ 71.9 $ 54.2 32.7% 7.0% 6.8%
===================== =============
(a)As a percentage of related company-operated retail revenues, store
operating expenses were 39.5 percent for the 13 weeks ended March
30, 2008, and 38.9 percent for the 13 weeks ended April 1, 2007.
(b)As a percentage of related total specialty revenues, other
operating expenses were 29.6 percent for the 13 weeks ended March
30, 2008, and 28.0 percent for the 13 weeks ended April 1, 2007.
(c)As a percentage of related company-operated retail revenues, store
operating expenses were 37.3 percent for the 26 weeks ended March
30, 2007, and 37.2 percent for the 26 weeks ended April 1, 2007.
(d)As a percentage of related total specialty revenues, other
operating expenses were 27.8 percent for the 26 weeks ended March
30, 2007, and 26.1 percent for the 26 weeks ended April 1, 2007.
Global Consumer Products Group (CPG)
------------------------ ---------------
Mar 30, Apr 1, % Mar 30, Apr 1,
2008 2007 Change 2008 2007
------------------------ ---------------
As a % of CPG
total net
13 Weeks Ended revenues
---------------------------- ---------------
Net revenues:
Specialty:
Licensing $ 96.3 $ 78.9 22.1 % 100.0 % 100.0 %
---------------- --------------
Total specialty 96.3 78.9 22.1 100.0 100.0
---------------- --------------
Cost of sales 56.9 47.6 19.5 59.1 60.3
Other operating expenses 4.8 5.2 (7.7) 5.0 6.6
General and administrative
expenses 1.9 1.7 11.8 2.0 2.2
---------------- --------------
Total operating expenses 63.6 54.5 16.7 66.0 69.1
Income from equity investees 10.0 13.3 (24.8) 10.4 16.9
---------------- --------------
Operating income $ 42.7 $ 37.7 13.3 % 44.3 % 47.8 %
================ ==============
26 Weeks Ended
----------------------------
Net revenues:
Specialty:
Licensing $ 196.9 $ 169.6 16.1 % 100.0 % 100.0 %
---------------- --------------
Total specialty 196.9 169.6 16.1 100.0 100.0
---------------- --------------
Cost of sales 110.0 101.2 8.7 55.9 59.7
Other operating expenses 10.7 9.8 9.2 5.4 5.8
General and administrative
expenses 4.0 3.3 21.2 2.0 1.9
---------------- --------------
Total operating expenses 124.7 114.3 9.1 63.3 67.4
Income from equity investees 21.1 24.0 (12.1) 10.7 14.2
---------------- --------------
Operating income $ 93.3 $ 79.3 17.7 % 47.4 % 46.8 %
================ ==============
------------------------ --------------
Unallocated Corporate Mar 30, Apr 1, % Mar 30, Apr 1,
2008 2007 Change 2008 2007
------------------------ ---------------
As a % of
total net
revenues
--------------
13 Weeks Ended
----------------------------
Depreciation and
amortization expenses $ 9.4 $ 8.3 13.3 % 0.4 % 0.4 %
General and administrative
expenses 66.8 77.1 (13.4) 2.6 3.4
----------------- --------------
Operating loss $ (76.2) $ (85.4) (10.8)% (3.0)% (3.8)%
================= ==============
26 Weeks Ended
----------------------------
Depreciation and
amortization expenses $ 18.5 $ 16.6 11.4 % 0.3 % 0.4 %
General and administrative
expenses 140.2 148.9 (5.8) 2.6 3.2
----------------- --------------
Operating loss $(158.7) $(165.5) (4.1)% (3.0)% (3.6)%
----------------- --------------
STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
(unaudited)
March 30, September 30,
2008 2007
----------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 303.4 $ 281.3
Short-term investments - available-for-sale
securities - 83.8
Short-term investments - trading securities 68.1 73.6
Accounts receivable, net 300.3 287.9
Inventories 607.3 691.7
Prepaid expenses and other current assets 145.8 148.8
Deferred income taxes, net 154.3 129.4
----------- -------------
Total current assets 1,579.2 1,696.5
Long-term investments - available-for-sale
securities 70.5 21.0
Equity and other investments 305.6 258.9
Property, plant and equipment, net 3,052.3 2,890.4
Other assets 245.0 219.4
Other intangible assets 58.1 42.1
Goodwill 223.4 215.6
----------- -------------
TOTAL ASSETS $ 5,534.1 $ 5,343.9
=========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Commercial paper and short-term borrowings $ 701.8 $ 710.3
Accounts payable 313.4 390.8
Accrued compensation and related costs 329.2 332.3
Accrued occupancy costs 82.4 74.6
Accrued taxes 8.9 92.5
Other accrued expenses 266.7 257.4
Deferred revenue 376.3 296.9
Current portion of long-term debt 0.7 0.8
----------- -------------
Total current liabilities 2,079.4 2,155.6
Long-term debt 549.9 550.1
Other long-term liabilities 464.0 354.1
----------- -------------
Total liabilities 3,093.3 3,059.8
Shareholders' equity:
Common stock ($0.001 par value) -
authorized, 1,200 million shares; issued
and outstanding, 730.7 and 738.3 million
shares, respectively, (includes 3.4
common stock units in both periods) 0.7 0.7
Other additional paid-in-capital 39.4 39.4
Retained earnings 2,315.6 2,189.4
Accumulated other comprehensive income 85.1 54.6
----------- -------------
Total shareholders' equity 2,440.8 2,284.1
----------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,534.1 $ 5,343.9
=========== =============
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
26 Weeks Ended
----------------------------
Mar 30, Apr 1,
2008 2007
------------- --------------
OPERATING ACTIVITIES:
Net earnings $ 316.8 $ 355.8
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization 286.3 235.5
Provision for impairments and asset
disposals 42.4 13.5
Deferred income taxes, net (15.3) (37.2)
Equity in income of investees (22.9) (24.9)
Distributions from equity investees 17.3 32.4
Stock-based compensation 39.3 52.2
Tax benefit from exercise of stock
options 2.8 5.0
Excess tax benefit from exercise of
stock options (7.7) (46.3)
Net amortization of (discount)/premium
on securities (0.2) 0.4
Cash provided/(used) by changes in
operating assets and liabilities:
Inventories 87.8 60.6
Accounts payable (70.0) (60.5)
Accrued taxes (50.4) 27.2
Deferred revenue 79.8 68.8
Other operating assets and liabilities 59.4 55.3
------------- --------------
Net cash provided by operating activities 765.4 737.8
INVESTING ACTIVITIES:
Purchase of available-for-sale
securities (56.5) (177.3)
Maturity of available-for-sale
securities 15.3 134.7
Sale of available-for-sale securities 75.9 36.9
Acquisitions, net of cash acquired - (47.3)
Net purchases of equity, other
investments and other assets (27.3) (31.1)
Net additions to property, plant and
equipment (505.1) (507.2)
------------- --------------
Net cash used by investing activities (497.7) (591.3)
FINANCING ACTIVITIES:
Repayments of commercial paper (44,798.7) -
Proceeds from issuance of commercial
paper 44,789.1 -
Repayments of short-term borrowings - (429.0)
Proceeds from short-term borrowings 1.1 576.0
Proceeds from issuance of common stock 59.3 108.2
Excess tax benefit from exercise of
stock options 7.7 46.3
Principal payments on long-term debt (0.3) (0.4)
Repurchase of common stock (311.4) (563.1)
Other (0.7) -
------------- --------------
Net cash used by financing activities (253.9) (262.0)
Effect of exchange rate changes on cash
and cash equivalents 8.3 3.1
------------- --------------
Net increase/(decrease) in cash and cash
equivalents 22.1 (112.4)
CASH AND CASH EQUIVALENTS:
Beginning of period 281.3 312.6
------------- --------------
End of the period $ 303.4 $ 200.2
============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest, net of capitalized interest $ 27.8 $ 14.9
Income taxes $ 231.0 $ 223.6
Fiscal Second Quarter 2008 Store Data
----------------------------------------------------------------------
The company's store data for the periods presented are as follows:
Net stores opened during the period
-----------------------------------
13 weeks ended 26 weeks ended Stores open as of
------------------ ---------------- -----------------
Mar 30, Apr 1, Mar 30, Apr 1, Mar 30, Apr 1,
2008 2007 2008 2007 2008 2007
------------------ ---------------- -----------------
United States:
Company-
operated
Stores 170 271 464 553 7,257 6,281
Licensed Stores 96 142 286 365 4,177 3,533
------------------ ---------------- -----------------
266 413 750 918 11,434 9,814
------------------ ---------------- -----------------
International:
Company-
operated
Stores 71 42 155 118 1,867 1,553
Licensed Stores 133 105 310 252 2,925 2,361
------------------ ---------------- -----------------
204 147 465 370 4,792 3,914
------------------ ---------------- -----------------
Total 470 560 1,215 1,288 16,226 13,728
------------------ ---------------- -----------------
(C) 2008 Starbucks Coffee Company. All rights reserved.
CONTACT: Starbucks Corporation
Investor Relations:
JoAnn DeGrande, 206-318-7118
investorrelations@starbucks.com
or
Media:
Valerie O'Neil, 206-318-7100
press@starbucks.com
SOURCE: Starbucks Corporation
