8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934

Date of Report (Date of earliest event reported): July 21, 2004

STARBUCKS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Washington	0-20322	91-1325671
(State or Other Jurisdiction of	(Commission File Number)	(IRS Employer
Incorporation or Organization)		Identification No.)

2401 Utah Avenue South, Seattle, Washington 98134
(Address of principal executive offices)

(206) 447-1575
(Registrant’s Telephone Number, including Area Code)

TABLE OF CONTENTS

	Item 12. Results of Operations and Financial Condition.
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1

Item 12. Results of Operations and Financial Condition.

     On July 21, 2004, Starbucks Corporation issued an earnings release announcing its financial results for the 13 and 39 weeks ended June 27, 2004. A copy of the earnings release is attached as Exhibit 99.1.

     The information in this Current Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	STARBUCKS CORPORATION
Dated: July 21, 2004
	By:	/s/ MICHAEL CASEY
		Michael Casey
		executive vice president and chief financial officer
		Signing on behalf of the registrant and as principal financial officer

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Earnings Release of Starbucks Corporation dated July 21, 2004.

EX-99.1

Exhibit 99.1

Starbucks Contact, Investor Relations:	Starbucks Contact, Media:
Mary Ellen Fukuhara	Audrey Lincoff
206-318-4025	206-447-7950 ext. 52690

Starbucks Announces Record Third Quarter Results; Raises Full Year 2004 EPS Target to $0.94-$0.95
Revenues Up 27 Percent; Net Earnings Increase By 44 Percent
Company Sets Aggressive Fiscal 2005 Targets Including 1,500 New Retail Locations

SEATTLE; July 21, 2004 – Starbucks Corporation (Nasdaq: SBUX) today announced record revenues and earnings for its fiscal third quarter ended June 27, 2004.

For the 13 weeks ended June 27, 2004, consolidated net revenues increased 27 percent to $1.3 billion from $1.0 billion for the same period in fiscal 2003. Net earnings for the 13 weeks ended June 27, 2004, increased 44 percent to $98 million from $68 million for the same period in fiscal 2003. Diluted earnings per share were $0.24 for the 13 weeks ended June 27, 2004, compared to $0.17 per share for the comparable period in fiscal 2003.

For the 39 weeks ended June 27, 2004, consolidated net revenues increased 28 percent to $3.8 billion from $3.0 billion for the same period in fiscal 2003. Net earnings for the 39 weeks ended June 27, 2004, increased 45 percent to $288 million from $199 million for the same period in fiscal 2003. Diluted earnings per share were $0.70 for the 39 weeks ended June 27, 2004, compared to $0.50 per share for the comparable period in fiscal 2003.

“Our third quarter financial results demonstrate the on-going strength of our business,” commented Orin Smith, president and ceo. “Starbucks operations are functioning at a more sophisticated level than ever before. Our consistently strong performance positions us well to achieve our aggressive fiscal 2005 goals – including an acceleration of store growth as we pursue the Company’s expanding global opportunity.”

Consolidated Financial and Operating Summary
Company-operated retail revenues increased 26 percent to $1.1 billion for the 13 weeks ended June 27, 2004, from $878 million for the same period in fiscal 2003. The increase was primarily attributable to the opening of 651 new Company-operated retail stores in the last 12 months and comparable store sales growth of 11 percent for the quarter. The increase in comparable store sales was due to a 10 percent increase in the number of customer transactions and a one percent increase in the average dollar value per transaction.

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Specialty revenues increased 32 percent to $211 million for the 13 weeks ended June 27, 2004, compared to $159 million for the same period in fiscal 2003. Licensing revenues increased 33 percent to $139 million due to higher product sales and royalty revenues from opening 727 new licensed retail stores in the last 12 months, the acquisition of Seattle Coffee Company in the fiscal fourth quarter of 2003, and growth in the grocery and warehouse club business. Foodservice and other revenues increased 31 percent to $71 million primarily due to the acquisition of Seattle Coffee Company and growth in new and existing Starbucks foodservice accounts.

Cost of sales and related occupancy costs were unchanged at 41.1 percent of total net revenues for the 13 weeks ended June 27, 2004, compared to the corresponding period of fiscal 2003. Higher dairy and green coffee commodity costs were offset by efficiencies in supply chain distribution operations and leverage gained on fixed occupancy costs distributed over an expanded revenue base.

Store operating expenses as a percentage of Company-operated retail revenues decreased to 40.4 percent for the 13 weeks ended June 27, 2004, from 40.9 percent for the corresponding period of fiscal 2003 primarily due to higher costs in the prior year associated with regional leadership conferences and provisions for asset impairment for international Company-operated retail stores. In the fiscal second quarter of 2004, the Company held its first global leadership conference for retail management partners (employees), which replaced regional conferences held during the fiscal third quarter of 2003. The conferences are important investments in the development of the Company’s retail management partners (employees).

Other operating expenses (expenses associated with the Company’s specialty operations) decreased to 21.0 percent of total specialty revenues for the 13 weeks ended June 27, 2004, compared to 22.5 percent in the corresponding period of fiscal 2003. This decrease was primarily due to leverage gained on payroll-related expenditures distributed over an expanded revenue base, partially offset by provisions for asset impairment related to integrating Seattle Coffee Company grocery operations into Starbucks distribution channels.

Depreciation and amortization expenses increased to $70.6 million for the 13 weeks ended June 27, 2004, compared to $59.8 million for the corresponding period of fiscal 2003. The increase was primarily due to the opening of 651 Company-operated retail stores in the last 12 months and higher depreciation expenses associated with the Company’s foodservice operations. As a percentage of total net revenues, depreciation and amortization expenses decreased to 5.4 percent for the 13 weeks ended June 27, 2004, from 5.8 percent for the same period in fiscal 2003.

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General and administrative expenses increased to $73.4 million for the 13 weeks ended June 27, 2004, compared to $58.1 million for the corresponding period of fiscal 2003. The increase was primarily due to additional staff to support the accelerated retail store growth. As a percentage of total net revenues, general and administrative expenses were unchanged at 5.6 percent for the 13 weeks ended June 27, 2004, and June 29, 2003.

Income from equity investees increased $5.6 million to $13.5 million for the 13 weeks ended June 27, 2004, from $7.8 million for the same period in fiscal 2003. The increase was primarily due to volume driven operating results for the North American Coffee Partnership, which produces bottled Frappuccino® and Starbucks Double Shot® coffee drinks, and new licensed retail store openings, particularly in Japan. The July 2003 increase from five percent to 50 percent in the Company’s ownership interest in the Taiwan and Shanghai licensed operations also contributed to the growth.

Operating income increased 45.1 percent to $153.8 million for the 13 weeks ended June 27, 2004, compared to $106.0 million for the same period in fiscal 2003. Operating margin increased to 11.7 percent of total net revenues for the 13 weeks ended June 27, 2004, compared to 10.2 percent in the corresponding period of fiscal 2003, primarily due to reductions in store operating and depreciation and amortization expenses as a percentage of total net revenues.

Interest and other income decreased to $4.4 million for the 13 weeks ended June 27, 2004, from $5.1 million in the corresponding period of fiscal 2003, primarily due to lower gains realized on market revaluations of the Company’s trading securities.

Fiscal 2004 Targets

The Company also provided updated fiscal 2004 targets:

• Starbucks continues to plan to open approximately 1,300 new stores on a global basis for fiscal 2004;

• The Company continues to expect full year fiscal 2004 revenue growth in the range of 25 to 30 percent;

• For the remainder of the fiscal year, Starbucks comparable store sales growth is likely to continue to exceed its target range of three to seven percent;

• The Company continues to experience higher than normal dairy costs. Additionally, investments in store maintenance, infrastructure supporting accelerating store growth, and new business platforms, such as the music initiative that includes CD burning services and the Hear Music^TM Coffeehouse concept, are expected to continue during the fourth quarter, and;

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• As a result of Starbucks strong third quarter performance, along with its current revenue and operating outlook for the fourth quarter of 2004, the Company is raising its full-year earnings per share target to $0.94 to $0.95. This new target range is $0.04 per share higher than the Company’s previous goal of $0.90 to $0.91 and is approximately $0.10 above Starbucks original fiscal 2004 target range of $0.83 to $0.85 per share. Both the new and previous target ranges include an approximate $0.02 per share benefit from the 53rd week in fiscal 2004. The entire benefit from the 53rd week will occur in the fourth quarter of 2004.

Fiscal 2005 Targets

Looking ahead, Starbucks introduced the following fiscal 2005 targets:

• The Company is accelerating its store development plans and expects to open approximately 1,500 new stores on a global basis in fiscal 2005. In the United States, Starbucks plans to open approximately 550 Company-operated locations and 525 licensed locations. In International markets, Starbucks plans to open approximately 100 Company-operated stores and 325 licensed stores;

• Starbucks is targeting total net revenue growth of approximately 20 percent, excluding the impact of the 53rd week in fiscal 2004;

• The Company continues to believe comparable store sales growth in the range of three to seven percent is the right level to target. However, based on current business performance it is possible that comparable store sales growth may again exceed the Company’s target range during fiscal 2005;

• Starbucks is targeting earnings per share of $1.12 to $1.15 for fiscal 2005. The earnings per share target range equates to 20 to 25 percent growth over $0.92 to $0.93 per share in fiscal 2004, which is the Company’s current year target adjusted for the $0.02 impact of the 53rd week, and;

• Capital expenditures are expected to be in the range of $600 to $650 million in fiscal 2005, compared to the current target of $475 million in fiscal 2004.

The Company’s consolidated financial statements, operating segment results, and other additional information have been provided on the following pages in accordance with current period classifications, and 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 23, 2003, for additional information regarding reclassifications within operating expenses.

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

	13 Weeks Ended							13 Weeks Ended
	June 27,		June 29,		%			June 27,			June 29,
	2004		2003		Change			2004			2003
								As a % of total net revenues
	(in thousands, except per share data)							(unless otherwise indicated)
Net revenues:
Company-operated retail	$	1,108,055	$	877,754		26.2	%		84.0	%		84.7	%
Specialty:
Licensing		139,195		104,340		33.4	%		10.6	%		10.0	%
Foodservice and other		71,441		54,682		30.6	%		5.4	%		5.3	%
Total specialty		210,636		159,022		32.5	%		16.0	%		15.3	%
Total net revenues		1,318,691		1,036,776		27.2	%		100.0	%		100.0	%
Cost of sales and related occupancy costs		542,148		425,709					41.1	%		41.1	%
Store operating expenses		448,029		359,250					(a) 40.4	%		(a) 40.9	%
Other operating expenses		44,259		35,748					(b) 21.0	%		(b) 22.5	%
Depreciation and amortization expenses		70,550		59,764					5.4	%		5.8	%
General and administrative expenses		73,357		58,108					5.6	%		5.6	%
Subtotal operating expenses		1,178,343		938,579
Income from equity investees		13,459		7,821					1.0	%		0.8	%
Operating income		153,807		106,018		45.1	%		11.7	%		10.2	%
Interest and other income, net		4,424		5,115					0.3	%		0.5	%
Earnings before income taxes		158,231		111,133		42.4	%		12.0	%		10.7	%
Income taxes(c)		60,127		42,777					4.6	%		4.1	%
Net earnings	$	98,104	$	68,356		43.5	%		7.4	%		6.6	%
Net earnings per common share - diluted	$	0.24	$	0.17
Weighted average shares outstanding - diluted		412,289		402,664

(a)	Calculated as a percentage of Company-operated retail revenues.
(b)	Calculated as a percentage of total specialty revenues.
(c)	The effective tax rates for the 13 weeks ended June 27, 2004, and the 13 weeks ended June 29, 2003, were 38.0 percent and 38.5 percent for the respective periods.

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

	39 Weeks Ended							39 Weeks Ended
	June 27,		June 29,		%			June 27,			June 29,
	2004		2003		Change			2004			2003
								As a % of total net revenues
	(in thousands, except per share data)							(unless otherwise indicated)
Net revenues:
Company-operated retail	$	3,239,031	$	2,536,557		27.7	%		84.3	%		84.7	%
Specialty:
Licensing		395,211		295,581		33.7	%		10.3	%		9.9	%
Foodservice and other		206,708		162,370		27.3	%		5.4	%		5.4	%
Total specialty		601,919		457,951		31.4	%		15.7	%		15.3	%
Total net revenues		3,840,950		2,994,508		28.3	%		100.0	%		100.0	%
Cost of sales and related occupancy costs		1,582,534		1,236,968					41.2	%		41.3	%
Store operating expenses		1,279,826		1,008,690					(a) 39.5	%		(a) 39.8	%
Other operating expenses		128,759		103,785					(b) 21.4	%		(b) 22.7	%
Depreciation and amortization expenses		208,379		175,110					5.4	%		5.8	%
General and administrative expenses		223,756		178,603					5.8	%		6.0	%
Subtotal operating expenses		3,423,254		2,703,156
Income from equity investees		36,152		20,995					0.9	%		0.7	%
Operating income		453,848		312,347		45.3	%		11.8	%		10.4	%
Interest and other income, net		11,317		10,850					0.3	%		0.4	%
Earnings before income taxes		465,165		323,197		43.9	%		12.1	%		10.8	%
Income taxes(c)		176,762		124,447					4.6	%		4.2	%
Net earnings	$	288,403	$	198,750		45.1	%		7.5	%		6.6	%
Net earnings per common share - diluted	$	0.70	$	0.50
Weighted average shares outstanding - diluted		410,587		400,544

(a)	Calculated as a percentage of Company-operated retail revenues.
(b)	Calculated as a percentage of total specialty revenues.
(c)	The effective tax rates for the 39 weeks ended June 27, 2004, and the 39 weeks ended June 29, 2003, were 38.0 percent and 38.5 percent for the respective periods.

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STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

	June 27,		September 28,
	2004		2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	383,373	$	200,907
Short-term investments — Available-for-sale securities		311,847		128,905
Short-term investments — Trading securities		23,893		20,199
Accounts receivable, net of allowances of $4,970 and $4,809, respectively		122,760		114,448
Inventories		385,284		342,944
Prepaid expenses and other current assets		64,758		55,173
Deferred income taxes, net		79,776		61,453
Total current assets		1,371,691		924,029
Long-term investments – Available-for-sale securities		158,962		136,159
Equity and other investments		162,246		144,257
Property, plant and equipment, net		1,383,058		1,384,902
Other assets		59,076		52,113
Other intangible assets		25,948		24,942
Goodwill		63,311		63,344
TOTAL ASSETS	$	3,224,292	$	2,729,746
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	142,149	$	168,984
Accrued compensation and related costs		198,504		152,608
Accrued occupancy costs		65,558		56,179
Accrued taxes		49,990		54,934
Other accrued expenses		137,680		101,800
Deferred revenue		124,374		73,476
Current portion of long-term debt		732		722
Total current liabilities		718,987		608,703
Deferred income taxes, net		44,993		33,217
Long-term debt		3,803		4,354
Other long-term liabilities		7,024		1,045
Shareholders’ equity:
Common stock and additional paid-in capital — Authorized, 600,000,000 shares; issued		1,025,289		959,103
and outstanding, 398,256,520 and 393,692,536 shares, respectively, (includes 1,697,100 common stock units in both periods) Other additional paid-in-capital		39,393		39,393
Retained earnings		1,358,086		1,069,683
Accumulated other comprehensive income		26,717		14,248
Total shareholders’ equity		2,449,485		2,082,427
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,224,292	$	2,729,746

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)

	39 Weeks Ended
	June 27, 2004			June 29, 2003
OPERATING ACTIVITIES:
Net earnings	$	288,403		$	198,750
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		226,925			190,654
Provision for impairments and asset disposals		9,703			5,007
Deferred income taxes, net		(4,539	)		(4,037	)
Equity in income of investees		(18,031	)		(7,568	)
Tax benefit from exercise of non-qualified stock options		45,045			23,328
Net amortization of premium on securities		8,049			4,312
Cash provided/(used) by changes in operating assets and liabilities:
Inventories		(41,278	)		(15,081	)
Accounts payable		(28,617	)		40,248
Accrued compensation and related costs		45,185			28,638
Accrued taxes		(5,169	)		(6,326	)
Deferred revenue		50,864			32,017
Other accrued expenses		28,968			30,824
Other operating assets and liabilities		(4,845	)		(33,187	)
Net cash provided by operating activities		600,663			487,579
INVESTING ACTIVITIES:
Purchase of available-for-sale securities		(413,078	)		(271,556	)
Maturity of available-for-sale securities		107,943			132,558
Sale of available-for-sale securities		89,321			69,178
Net additions to equity, other investments and other assets		(4,366	)		(8,807	)
Net additions to property, plant and equipment		(221,111	)		(259,179	)
Net cash used by investing activities		(441,291	)		(337,806	)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock		103,345			72,298
Principal payments on long-term debt		(540	)		(525	)
Repurchase of common stock		(82,204	)		(61,242	)
Net cash provided by financing activities		20,601			10,531
Effect of exchange rate changes on cash and cash equivalents		2,493			3,657
Net increase in cash and cash equivalents		182,466			163,961
CASH AND CASH EQUIVALENTS:
Beginning of period		200,907			99,677
End of the period	$	383,373		$	263,638
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	409		$	226
Income taxes	$	144,999		$	112,381

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Store Data

The Company’s store data for the periods presented are as follows:

	Net stores opened during the period
	13-week period ended				39-week period ended				Stores open as of
	June 27, 2004		June 29, 2003		June 27, 2004		June 29, 2003		June 27, 2004		June 29, 2003
United States:
Company-operated Stores		99		122		302		335		4,081		3,544
Licensed Stores		84		77		281		225		1,703		1,258
		183		199		583		560		5,784		4,802
International:
Company-operated Stores		27		24		89		71		856		742
Licensed Stores		75		60		222		224		1,479		1,197
		102		84		311		295		2,335		1,939
Total		285		283		894		855		8,119		6,741

Segment Results

Segment information is prepared on the same basis that the Company’s management internally reviews financial information for operational decision making purposes.

United States

United States operations (“United States”) sell coffee and other beverages, whole bean coffees, complementary food, coffee brewing equipment and merchandise primarily through Company-operated retail stores. Specialty operations within the United States include retail store and other licensing operations, foodservice accounts and other initiatives related to the Company’s core businesses.

International

International operations (“International”) sell coffee and other beverages, whole bean coffees, complementary food, coffee brewing equipment and merchandise through Company-operated retail stores in Canada, the United Kingdom, Thailand and Australia, as well as through retail store licensing operations and foodservice accounts in these and 30 other countries. International operations are in various early stages of development and have country-specific regulatory requirements that require a more extensive support organization relative to the current levels of revenue and operating income than the United States.

Unallocated Corporate

Unallocated corporate expenses pertain to certain functions, such as executive management, accounting, administration, tax, treasury, and information technology infrastructure, which are not specifically attributable to the Company’s operating segments and include related depreciation and amortization expenses.

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The tables below present, by operating segment, total net revenues, operating income and operating income as a percentage of related revenues, net of intersegment eliminations for the period ended (in thousands):

			% of					% of
			United					Inter-						% of
	United		States			Inter-		national			Unallocated			Total
13 Weeks Ended June 27, 2004	States		Revenue			national		Revenue			Corporate			Net Revenues			Consolidated
Net revenues:
Company-operated retail	$	947,379		84.6	%	$	160,676		81.0	%	$	—			—	%	$	1,108,055
Specialty:
Licensing		106,031		9.4			33,164		16.7			—			—			139,195
Foodservice and other		66,859		6.0			4,582		2.3			—			—			71,441
Total specialty		172,890		15.4			37,746		19.0			—			—			210,636
Total net revenues		1,120,269		100.0			198,422		100.0			—			—			1,318,691
Cost of sales and related occupancy costs		442,402		39.5			99,746		50.3			—			—			542,148
Store operating expenses		388,337		41.0	(1)		59,692		37.2	(1)		—			—			448,029
Other operating expenses		37,711		21.8	(2)		6,548		17.3	(2)		—			—			44,259
Depreciation and amortization expenses		50,865		4.5			11,592		5.8			8,093			0.6			70,550
General and administrative expenses		20,260		1.8			12,032		6.1			41,065			3.1			73,357
Income from equity investees		8,530		0.8			4,929		2.5			—			—			13,459
Operating income/(loss)	$	189,224		16.9	%	$	13,741		6.9	%	$	(49,158	)		(3.7	)%	$	153,807

			% of						% of
			United						Inter-						% of
	United		States			Inter-			national			Unallocated			Total
13 Weeks Ended June 29, 2003	States		Revenue			national			Revenue			Corporate			Net Revenues			Consolidated
Net revenues:
Company-operated retail	$	752,376		85.7	%	$	125,378			79.1	%	$	—			—	%	$	877,754
Specialty:
Licensing		73,967		8.4			30,373			19.2			—			—			104,340
Foodservice and other		52,005		5.9			2,677			1.7			—			—			54,682
Total specialty		125,972		14.3			33,050			20.9			—			—			159,022
Total net revenues		878,348		100.0			158,428			100.0			—			—			1,036,776
Cost of sales and related occupancy costs		338,403		38.5			87,306			55.1			—			—			425,709
Store operating expenses		311,877		41.5	(1)		47,373			37.8	(1)		—			—			359,250
Other operating expenses		29,239		23.2	(2)		6,509			19.7	(2)		—			—			35,748
Depreciation and amortization expenses		41,769		4.8			9,807			6.2			8,188			0.8			59,764
General and administrative expenses		11,709		1.3			10,930			6.9			35,469			3.4			58,108
Income from equity investees		5,286		0.6			2,535			1.6			—			—			7,821
Operating income/(loss)	$	150,637		17.2	%	$	(962	)		(0.6	)%	$	(43,657	)		(4.2	)%	$	106,018

(1)	Shown as a percentage of related Company-operated retail revenues.
(2)	Shown as a percentage of related total specialty revenues.

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The tables below present, by operating segment, total net revenues, operating income and operating income as a percentage of related revenues, net of intersegment eliminations for the period ended (in thousands):

			% of					% of
			United					Inter-						% of
	United		States			Inter-		national			Unallocated			Total
39 Weeks Ended June 27, 2004	States		Revenue			national		Revenue			Corporate			Net Revenues			Consolidated
Net revenues:
Company-operated retail	$	2,770,172		84.8	%	$	468,859		81.6	%	$	—			—	%	$	3,239,031
Specialty:
Licensing		301,804		9.2			93,407		16.3			—			—			395,211
Foodservice and other		194,383		6.0			12,325		2.1			—			—			206,708
Total specialty		496,187		15.2			105,732		18.4			—			—			601,919
Total net revenues		3,266,359		100.0			574,591		100.0			—			—			3,840,950
Cost of sales and related occupancy costs		1,289,341		39.5			293,193		51.0			—			—			1,582,534
Store operating expenses		1,106,830		40.0	(1)		172,996		36.9	(1)		—			—			1,279,826
Other operating expenses		109,411		22.1	(2)		19,348		18.3	(2)		—			—			128,759
Depreciation and amortization expenses		149,992		4.6			33,740		5.9			24,647			0.6			208,379
General and administrative expenses		55,261		1.7			36,514		6.4			131,981			3.5			223,756
Income from equity investees		21,647		0.7			14,505		2.5			—			—			36,152
Operating income/(loss)	$	577,171		17.7	%	$	33,305		5.8	%	$	(156,628	)		(4.1	)%	$	453,848

			% of						% of
			United						Inter-						% of
	United		States			Inter-			national			Unallocated			Total
39 Weeks Ended June 29, 2003	States		Revenue			national			Revenue			Corporate			Net Revenues			Consolidated
Net revenues:
Company-operated retail	$	2,186,214		85.6	%	$	350,343			79.6	%	$	—			—	%	$	2,536,557
Specialty:
Licensing		213,906		8.4			81,675			18.6			—			—			295,581
Foodservice and other		154,242		6.0			8,128			1.8			—			—			162,370
Total specialty		368,148		14.4			89,803			20.4			—			—			457,951
Total net revenues		2,554,362		100.0			440,146			100.0			—			—			2,994,508
Cost of sales and related occupancy costs		997,222		39.0			239,746			54.5			—			—			1,236,968
Store operating expenses		877,707		40.1	(1)		130,983			37.4	(1)		—			—			1,008,690
Other operating expenses		84,580		23.0	(2)		19,205			21.4	(2)		—			—			103,785
Depreciation and amortization expenses		123,302		4.8			28,165			6.4			23,643			0.8			175,110
General and administrative expenses		33,354		1.3			33,326			7.6			111,923			3.7			178,603
Income from equity investees		15,893		0.6			5,102			1.2			—			—			20,995
Operating income/(loss)	$	454,090		17.8	%	$	(6,177	)		(1.4	)%	$	(135,566	)		(4.5	)%	$	312,347

(1)	Shown as a percentage of related Company-operated retail revenues.
(2)	Shown as a percentage of related total specialty revenues.

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United States

United States total net revenues increased by $242 million, or 28 percent, to $1.1 billion for the 13 weeks ended June 27, 2004, compared to $878 million for the corresponding period of fiscal 2003. United States Company-operated retail revenues increased $195 million, or 26 percent, to $947 million for the 13 weeks ended June 27, 2004, compared to $752 million for the corresponding period of fiscal 2003, primarily due to the opening of 537 new Company-operated retail stores in the last 12 months and comparable store sales growth of 12 percent for the 13 weeks ended June 27, 2004. The increase in comparable store sales was due to an 11 percent increase in the number of customer transactions and a one percent increase in the average dollar value per transaction.

Total United States specialty revenues increased $47 million, or 37 percent, to $173 million for the 13 weeks ended June 27, 2004, compared to $126 million in the corresponding period of fiscal 2003. Licensing revenues increased $32 million, or 43 percent, to $106 million from $74 million in fiscal 2003. This increase was primarily due to higher product sales and royalty revenues as a result of opening 445 new licensed retail stores in the last 12 months, the acquisition of Seattle Coffee Company in the fiscal fourth quarter of 2003, and volume driven growth in the grocery and warehouse club business as a result of an expanded agreement with Kraft to include the addition of six new Starbucks coffees. Foodservice and other revenues increased $15 million, or 29 percent, to $67 million from $52 million in fiscal 2003, due to both the addition of Seattle Coffee Company foodservice accounts as well as the growth in new and existing Starbucks foodservice accounts.

United States operating income increased 25.6 percent to $189.2 million for the 13 weeks ended June 27, 2004, from $150.6 million for the same period in fiscal 2003. Operating margin decreased to 16.9 percent of related revenues from 17.2 percent in the corresponding period of fiscal 2003, primarily due to higher dairy costs, partially offset by reductions in occupancy and most other operating expenses as a percentage of related revenues.

International

International total net revenues increased by $40 million, or 25 percent, to $198 million for the 13 weeks ended June 27, 2004, compared to $158 million for the corresponding period of fiscal 2003. International Company-operated retail revenues increased by $35 million, or 28 percent, to $161 million for the 13 weeks ended June 27, 2004, compared to $125 million for the corresponding period for fiscal 2003, primarily due to the opening of 114 new Company-operated retail stores in the last 12 months, the weakening of the United States dollar against both the British pound sterling and Canadian dollar, and comparable store sales growth of seven percent for the 13 weeks ended June 27, 2004. The increase in comparable store sales resulted from a six percent increase in the number of customer transactions and a one percent increase in the average dollar value per transaction.

Total international specialty revenues increased $5 million, or 14 percent, to $38 million for the 13 weeks ended June 27, 2004, compared to $33 million in the corresponding period of fiscal 2003. The increase was primarily due to higher product sales and royalty revenues from opening 282 new licensed retail stores in the last 12 months.

International operating income increased to $13.7 million for the 13 weeks ended June 27, 2004, from an operating loss of $1.0 million in the corresponding period of fiscal 2003. Operating margin increased to a positive 6.9 percent of related revenues from a negative 0.6 percent in the corresponding period of fiscal 2003, primarily due to greater efficiency throughout the organization. Excluding Canadian operations, operating income increased to $5.4 million for the 13 weeks ended June 27, 2004, compared to an operating loss of $7.5 million in the corresponding period of fiscal 2003.

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Starbucks will be holding a conference call today at 1:30 p.m. Pacific time, which will be hosted by Howard Schultz, chairman and chief global strategist, Orin Smith, president and chief executive officer, Michael Casey, executive vice president and chief financial officer and Jim Donald, president, North America. The call will be broadcast live over the Internet and can be accessed at the Company’s web site address of http://www.starbucks.com/aboutus/investor.asp. A replay of the call will be available via telephone from approximately 5:30 p.m. Pacific time today through 5:30 p.m. Pacific time on July 28, 2004, by calling 1-800-642-1687, reservation number 8669044, or via the Investor Relations page on Starbucks.com through approximately 5:00 p.m. Pacific time on Thursday, August 19, 2004 at the following URL: http://www.starbucks.com/aboutus/investor.asp.

Starbucks Coffee Company is the leading retailer, roaster and brand of specialty coffee in the world, with more than 8,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim. The Company is committed to offering the highest quality coffee and the Starbucks Experience while conducting its business in ways that produce social, environmental and economic benefits for communities in which it does business. In addition to its retail operations, the Company produces and sells bottled Frappuccino® coffee drinks, Starbucks DoubleShot™ coffee drink, and a line of superpremium ice creams through its joint venture partnerships. The Company’s brand portfolio provides a wide variety of consumer products. Tazo Tea’s line of innovative premium teas and Hear Music’s exceptional compact discs enhance the Starbucks Experience through best-of-class products. The Seattle’s Best Coffee® and Torrefazione Italia® Coffee brands enable Starbucks to appeal to a broader consumer base by offering an alternative variety of coffee flavor profiles.

This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, including anticipated store openings, comparable store sales expectations, trends in or expectations regarding the Company’s revenue and expense growth, capital expenditures, net earnings and earnings per share results, are all 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, ramifications from the war on terrorism, or other international events or developments, 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 “Certain Additional Risks and Uncertainties” section of Starbucks Annual Report on Form 10-K for the fiscal year ended September 28, 2003.

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