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Starbucks Serves Up Success During 2007 Annual Meeting of Shareholders

Published 03-21-07

Submitted by Starbucks Corporation

SEATTLE--(BUSINESS WIRE)--March 21, 2007--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.


Copyright Business Wire 2007

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Starbucks Corporation

Starbucks Corporation

It's the way we do business Contributing positively to our communities and environment is so important to Starbucks that it's a guiding principle of our mission statement. We jointly fulfill this commitment with partners (employees), at all levels of the company, by getting involved together to help build stronger communities and conserve natural resources.

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