Today, Starbucks Coffee Company (Nasdaq:SBUX) welcomed more than
5,000 shareholders as well as special guest, His Excellency Paul
Kagame, president of the Republic of Rwanda, to Seattle for its 2007
Annual Meeting. Thousands more participated through a live audio
simulcast on the web. Starbucks chairman, Howard Schultz, was joined
on stage by president and ceo, Jim Donald, and Martin Coles, president
of Starbucks International, to recap the Company's fiscal 2006
performance, highlight successes already seen in fiscal 2007 and
reaffirm Starbucks strategy, growth and vision for the future. Schultz
opened the meeting by discussing what it is that sets Starbucks apart,
resulting in recognition such as the No. 2 spot on Fortune magazine's
Most Admired Companies list.
"At the core of what we want to share with you today, is a sense
of optimism and the Company's commitment to its values and guiding
principles as we have grown," said Howard Schultz, chairman. "We have
built an emotional connection with both customers and partners
resulting in a Starbucks Experience that is as relevant in Europe and
Asia as it is in Seattle."
Solid Results in '06, Reaffirming Commitment to Growth in '07 and
Beyond
Jim Donald, president and ceo, recapped Starbucks financial
results for the 2006 fiscal year and the first quarter of fiscal 2007.
He emphasized the Company's track record of execution in fiscal 2006
as evidenced by a 22 percent increase in total net revenues to $7.8
billion; a net earnings increase of 14 percent to $564 million; and an
increased return on equity to 25 percent for the year. First quarter
of fiscal 2007 saw a 22 percent increase in net revenues to a record
$2.4 billion and net earnings of $205 million, an increase of 18
percent when compared to the first quarter of fiscal 2006.
The Company is also successfully executing against its plans to
increase to 40,000 locations worldwide, with 10,000 new stores planned
in the next four years. Both fiscal 2006 and the first quarter of
fiscal 2007 saw record store openings, with 2,199 and 728 store
openings respectively.
Starbucks fiscal 2007 targets capitalize on the previous year's
demonstrated success and drive home the focus on growth:
-- The net store growth target is a record 2,400 stores,
including 700 internationally. This is an increase of nearly
20 percent when compared to the store count from the end of
fiscal 2006.
-- The comparable stores sales growth target continues to be in
the range of three to seven percent.
-- Total net revenue growth is expected to be approximately 20
percent.
-- Earnings per share is expected to be in the range of $0.87-
$0.89 based on first quarter results and the current outlook
for the balance of the year.
Performance Remains Strong in U.S. and Abroad
The Company's fiscal 2006 financial results were strong. Donald
highlighted U.S. successes in net revenues and operating income:
-- Total net revenues in the U.S. grew to $6.2 billion, up 21
percent over fiscal 2005.
-- U.S. operating income increased to $955 million in fiscal
2006, an increase of 17 percent when compared to fiscal 2005.
-- Company-operated retail revenues grew 21 percent to $5.5
billion.
-- U.S. specialty revenues grew by 22 percent to $683 million.
Martin Coles, president of Starbucks Coffee International,
overviewed Starbucks International's financial achievements:
-- $1.3 billion in total net revenues for fiscal 2006, an
increase of 27 percent over fiscal 2005.
-- Eight percent comparable store sales growth and $108 million
in operating income for the year.
-- Fourteen consecutive quarters of profitability.
-- Acquisitions completed in fiscal 2006 of the remaining 95
percent stake of Starbucks operations in Hawaii and Puerto
Rico.
-- Acquisition of a 90 percent interest in the licensed
operations in Beijing in the first quarter of 2007. The
Beijing transaction gives the Company managing control of
operations in this crucial mainland China market ahead of the
2008 Olympics.
"Starbucks International continues to execute against our
five-year strategic plan and is clearly demonstrating that the
Starbucks brand works whether it's in Shanghai, Madrid, Mexico City,
London or Los Angeles," said Coles. "Great coffee, our third place,
the human connection and our commitment to community have universal
relevance."
Strong Results in Global Consumer Products Group
In 2006, Starbucks customers responded positively to the Company's
Global Consumer Products Group (CPG) offerings. CPG is a collection of
products in both domestic and international markets, primarily
packaged coffee and tea and ready-to-drink products, which provides
the Company the opportunity to extend the Starbucks Experience to
customers at any time and any place they choose.
Donald provided an overview of CPG's fiscal 2006 accomplishments:
-- Total net revenues were $305 million.
-- Operating income increased to $167 million compared to $131
million in fiscal 2005.
-- Introduced Starbucks-branded coffees to two new countries,
Korea and United Kingdom.
-- Introduced Starbucks DoubleShot(R), as well as Starbucks
bottled Frappuccino(R) into Korea.
Success Due to Doing Business Differently
"Starbucks is successful because we are able to achieve fiscal
performance while maintaining a different approach to business. We
operate in a way that drives financial strength, and reflects our
understanding of the impact we have on our world," said Donald.
"Starbucks opportunity continues to expand. We have set and delivered
against aggressive growth targets, we keep to our commitments and we
stay on task. These ingredients add up to a great future for the
Company."
During the meeting, Schultz, Donald and Coles each emphasized
Starbucks strong commitment to global initiatives that make a
difference for people around the world.
"Conducting business in a socially and environmentally responsible
manner is an integral part of our guiding principles and our continued
success," said Donald. "Starbucks commitment and passion to improve
the world can be seen through our programs around the globe."
Fiscal 2006 was a milestone year for Starbucks and the role it
plays in communities around the world. Among the achievements Donald
noted were:
-- $36.1 million in contributions to charities and nonprofit
organizations worldwide in 2006.
-- Two new multi-year clean water initiatives in Sumatra,
Indonesia and Menge Woreda, Ethiopia, with commitments of $1
million from the Ethos Water Fund.
-- The China Education Project, which is training more than 3,000
teachers during a three-year period.
Emphasizing Starbucks continuing dedication, Donald also
highlighted two new water initiatives announced less than one week
ago. Projects in both India and Kenya received commitments of $1
million from the Ethos Water Fund to help improve access to water and
sanitization in communities in both nations.
Starbucks strongly believes in the importance of building
mutually-beneficial relationships with coffee farmers and coffee
communities. The success of the farmers who supply Starbucks coffee is
a critical component of the Company's own success as it helps ensure
the continued availability of the highest quality coffee. Starbucks
focus is on taking an integrated approach to building relationships
with coffee communities.
The significant progress made in socially and environmentally
responsible coffee purchasing was a key feature of Donald's
presentation. Among the milestones in fiscal 2006:
-- 155 million pounds purchased from Coffee and Farmer Equity
(C.A.F.E.)-verified suppliers. This represents 53 percent of
Starbucks green coffee purchases.
-- 18 million pounds of Fair Trade Certified(TM) coffee purchased
- or six percent of the Company's total coffee purchases -
making Starbucks the largest purchaser of Fair Trade
Certified(TM) coffee in North America.
-- Continued offering of Starbucks Black Apron Exclusives(TM),
which celebrate exceptional and rarified coffees and provide
the producing farmers with cash awards. Farmers use these
funds to make infrastructure investments that enable them to
improve coffee quality and increase their potential for higher
earnings.
Donald also laid out Starbucks future goal for purchasing C.A.F.E.
Practices coffee. "We recognize our responsibility to the communities
in which we operate and to the farms and communities where we source
our coffee," stated Donald. "By 2013, we intend to purchase 80 percent
of our coffee from verified C.A.F.E. Practices suppliers."
Still in the "Early Days" of Growth
Schultz summed up the message of the Annual Meeting by returning
to a theme he has shared many times before. "I've stood here before
you in the past and said that we are in the early chapters of
Starbucks growth. I continue to believe that today. These are still
the early days."
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.
Starbucks Corporate Social Responsibility Annual Report Available
Today
Today, Starbucks also launched its sixth Corporate Social
Responsibility (CSR) Annual Report, a review of the Company's social,
environmental and economic sustainability performance and initiatives
for fiscal 2006. Online now at www.starbucks.com/csrannualreport, the
Report offers the most comprehensive information available about
Starbucks coffee-buying practices, growth and community impacts,
environment and climate change strategy, health and wellness
initiatives, and workplace practices. Using videos, photos, and flash
technology this year's Report is more interactive and engaging than
ever before. In April, the abridged version of the Report, focused on
the Company's most material CSR issues, will also be available online
in Spanish, Japanese, simplified Chinese, traditional Chinese and
Arabic.
Forward-Looking Statements
This release includes forward-looking statements about trends in
or expectations regarding: store openings, comparable store sales, net
revenue, and earnings per share results. These forward-looking
statements are based on currently available operating, financial and
competitive information and are subject to various risks and
uncertainties. Actual future results and trends may differ materially
depending on a variety of factors including, but not limited to,
coffee, dairy and other raw material prices and availability,
successful execution of internal performance and expansion plans,
fluctuations in U.S. and international economies and currencies, the
impact of initiatives by competitors, the effect of legal proceedings,
and other risks detailed in the Company's filings with the Securities
and Exchange Commission, including the "Risk Factors" section of
Starbucks Annual Report on Form 10-K for the fiscal year ended Oct. 1,
2006. The Company assumes no obligation to update any of these
forward-looking statements.
