Starbucks: reports strong Q4 and record full year 2007

Seattle / WA. (sc) Starbucks Corporation announced the results for its fiscal fourth quarter and fiscal year ended September 30, 2007. In notes: 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 USD for the Quarter and 0,87 USD for the year. Overview:

• Fiscal Fourth Quarter 2007 Highlights:
  • Consolidated net revenues of 2,4 billion USD, 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 USD, compared to 0,15 USD 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 USD, 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 USD, compared to 0,71 USD 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 USD for the 13 weeks ended September 30, 2007, compared to 2,0 billion USD for the fiscal fourth quarter of 2006. Net earnings totaled 159 million USD in the fourth quarter 2007 versus 117 million USD for the same period a year ago. Earnings per share for the fourth quarter rose to 0,21 USD from 0,15 USD 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 USD 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 consolidated net revenues increased 21 percent to 9,4 billion USD, compared to 7,8 billion USD for the 52 weeks ended October 01, 2006. Company-operated retail revenues in fiscal 2007 rose 21 percent to 8,0 billion USD from 6,6 billion USD 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 USD from 1,2 billion USD in fiscal 2006.

For fiscal 2007, operating income increased to 1,1 billion USD, compared to 894 million USD 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 USD in fiscal 2007 from 564 million USD for the previous year. Earnings per share for the period increased to 0,87 USD compared to 0,71 USD 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 USD for the 13 weeks ended September 30, 2007, from 1,7 billion USD for the same period in fiscal 2006, resulting primarily from opening 1’342 new company-operated retail stores in the last twelve 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 USD for the 13 weeks ended September 30, 2007, compared to 309 million USD for the corresponding period of fiscal 2006. Licensing revenues increased 27 percent to 283 million USD 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 twelve 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 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 USD for the 13 weeks ended September 30, 2007, compared to 198 million USD 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 USD for the 13 weeks ended September 30, 2007, compared to income of 3,9 million USD for the corresponding period of fiscal 2006, primarily due to a higher level of borrowings outstanding, which include the 550 million USD senior notes issued in August 2007.

_{Info: Facts about «Fourth Quarter Results – United States», «Fourth Quarter Results – International», «Fourth Quarter Results – Global Consumer Products Group», «Fourth Quarter Results – Unallocated Corporate Expenses», «Cash Flow and Balance Sheet», «Fiscal 2008 Targets» and «Forward-Looking Statements» Starbucks Corporation published in the investor relations section of its homepage.}