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): November 17, 2005

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)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EXHIBIT 99.1

Item 2.02. Results of Operation and Financial Condition.

     On November 17, 2005, Starbucks Corporation issued an earnings release announcing its financial results for the 13 weeks and 52 weeks ended October 2, 2005. A copy of the earnings release is attached as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits.

(c)      Exhibits.

Exhibit No.		Description
	99.1	Earnings release of Starbucks Corporation dated November 17, 2005.

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: November 17, 2005
	By:	/s/ Michael Casey
		Michael Casey
		executive vice president, chief financial
		officer and chief administrative 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 November 17, 2005

EX-99.1

Exhibit 99.1

Starbucks Contact, Investor Relations:	Starbucks Contact, Media:
JoAnn DeGrande	T. May Kulthol
206-318-7893	206-318-7100

Starbucks Announces Record Fourth Quarter and Fiscal Year End 2005 Results
Consolidated Net Revenues Increase 20 Percent to $6.4 Billion
Net Earnings Increase 27 Percent to $494 Million
1,672 New Stores – Highest Annual Store Openings in Company History

SEATTLE; November 17, 2005 – Starbucks Corporation (NASDAQ: SBUX) today announced revenues and earnings for its fiscal fourth quarter and fiscal year ended October 2, 2005, which included 13 weeks and 52 weeks, respectively. The fiscal fourth quarter and fiscal year ended October 3, 2004, included 14 weeks and 53 weeks, respectively. All applicable references to earnings per share have been adjusted to reflect the recent two-for-one stock split completed on October 21, 2005.

For the 13 weeks ended October 2, 2005, consolidated net revenues increased to a record $1.7 billion from $1.5 billion for the 14-week period in fiscal 2004. Net revenues increased 23 percent when calculated on a comparative 13-week basis for both fiscal 2005 and 2004. Net earnings for the 13 weeks ended October 2, 2005, increased 21 percent to $124 million from $103 million for the 14-week period in fiscal 2004. Fully diluted earnings per share were $0.16 for the 13 weeks ended October 2, 2005, compared to $0.12 per share for the 14-week period in fiscal 2004.

For the 52-week fiscal year ended October 2, 2005, consolidated net revenues rose to a record $6.4 billion from $5.3 billion for fiscal 2004. Net revenues increased 23 percent when calculated on a comparative 52-week basis for both fiscal 2005 and 2004. Net earnings for fiscal 2005 increased 27 percent to $494 million from $389 million for fiscal 2004. Earnings per share were $0.61 for fiscal 2005, compared to $0.47 per share for fiscal 2004.

“Starbucks record results in fiscal 2005 reflect the exciting momentum that we continue to see throughout our business, and demonstrate the underlying power of the Starbucks brand,” commented Howard Schultz, Starbucks chairman. “We are particularly encouraged by the early success and the continuously expanding development potential of our International business. From opening a record number of new stores, to the ongoing popularity of our core beverage and food items, to enhancing the customer experience through unique offerings in music and consumer products, Starbucks is appealing to a broad and diverse global consumer base.”

Schultz continued, “During the year, Jim Donald successfully transitioned into his new role as president and ceo. His contributions and leadership are evident in our record results this year.”

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“This year, we again leveraged cross-market learnings into innovative and successful new products that, combined with our popular core offerings, stirred enthusiastic response from our customers,” Jim Donald added. “Starbucks terrific financial performance, while pursuing aggressive growth, shows our ability to translate our efforts into long-term shareholder value.”

Consolidated Financial and Operating Summary

Company-operated retail revenues increased 14 percent to $1.4 billion for the 13 weeks ended October 2, 2005, from $1.2 billion for the 14-week period in fiscal 2004. Excluding the impact of the extra week in 2004, Company-operated retail revenues increased 23 percent. The increase was primarily attributable to the opening of 735 new Company-operated retail stores in the last 12 months and comparable store sales growth of eight percent for the quarter. The increase in comparable store sales was due to a four percent increase in the average value per transaction and a four percent increase in the number of customer transactions. Comparable store sales were calculated excluding the 14th week of fiscal fourth quarter 2004.

Specialty revenues increased 13 percent to $267 million for the 13 weeks ended October 2, 2005, compared to $235 million for the 14-week period in fiscal 2004. Excluding the impact of the extra week in 2004, specialty revenues increased 22 percent. Licensing revenues increased 12 percent to $184 million in fiscal 2005 and increased 20 percent on a comparable 13-week basis over fiscal 2004, primarily due to higher product sales and royalty revenues from the opening of 937 new licensed retail stores in the last 12 months. Foodservice and other revenues increased 17 percent to $82 million in fiscal 2005 and increased 27 percent on a comparable 13-week basis over fiscal 2004, primarily due to growth in new and existing U.S. and International foodservice accounts and, to a lesser extent, growth in the emerging entertainment business.

Cost of sales including occupancy costs decreased to 40.9 percent of total net revenues for the 13 weeks ended October 2, 2005, compared to 42.3 percent for the 14-week period of fiscal 2004. The decrease was primarily due to higher average revenue per retail transaction.

Store operating expenses as a percentage of Company-operated retail revenues decreased to 40.6 percent for the 13 weeks ended October 2, 2005, compared to 41.9 percent for the 14-week period of fiscal 2004, primarily due to higher average revenue per retail transaction.

Other operating expenses (expenses associated with the Company’s specialty operations) increased to 21.7 percent of total specialty revenues for the 13 weeks ended October 2, 2005, compared to 18.3 percent for the 14-week period of fiscal 2004. The increase was primarily due to higher payroll-related expenditures to support the Company’s emerging entertainment business and to support the growth of Seattle’s Best Coffee licensed café operations. In addition, marketing expenditures were higher in support of the launch of ready-to-drink coffee beverages in Japan and Taiwan.

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Depreciation and amortization expenses increased to $88 million for the 13 weeks ended October 2, 2005, compared to $74 million for the 14-week period of fiscal 2004. The increase was primarily due to the opening of 735 new Company-operated retail stores in the last 12 months. As a percentage of total net revenues, depreciation and amortization expenses increased to 5.3 percent for the 13 weeks ended October 2, 2005, from 5.1 percent for the 14-week period of fiscal 2004, primarily due to the extra sales week in fiscal 2004.

General and administrative expenses increased to $101 million for the 13 weeks ended October 2, 2005, compared to $81 million for the 14-week period of fiscal 2004. The increase was primarily due to increased charitable commitments and higher provisions for incentive compensation. As a percentage of total net revenues, general and administrative expenses increased to 6.1 percent for the 13 weeks ended October 2, 2005, from 5.5 percent for the 14-week period of fiscal 2004.

Income from equity investees increased to $29 million for the 13 weeks ended October 2, 2005, compared to $24 million for the 14-week period of fiscal 2004. The increase was primarily due to volume-driven operating results for the North American Coffee Partnership, which produces bottled Frappuccino^® coffee drinks and Starbucks DoubleShot^® espresso drink, and improved operating results from international investees.

Operating income increased 27 percent to $197 million for the 13 weeks ended October 2, 2005, compared to $155 million for the 14-week period of fiscal 2004. The operating margin increased to 11.8 percent of total net revenues for the 13 weeks ended October 2, 2005, compared to 10.7 percent for the 14-week period of fiscal 2004. This improvement was due to lower cost of sales including occupancy costs and store operating expenses as a percentage of total net revenues, offset in part by higher general and administrative and other operating expenses.

Income taxes for the 13 weeks ended October 2, 2005, resulted in an effective tax rate of 38.1 percent, compared to 35.1 percent in the 14-week period of fiscal 2004. For the full year of fiscal 2005, the effective tax rate was 37.9 percent, compared to 37.3 percent for the full year 2004, due to a variety of factors, none of which were individually significant.

Net earnings for the 13 weeks ended October 2, 2005, increased 21 percent to $124 million from $103 million for the 14-week period in fiscal 2004. Earnings were $0.16 per share for the 13 weeks ended October 2, 2005, compared to $0.12 per share for the 14-week period in fiscal 2004.

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Fiscal 2006 Targets

Looking ahead, Starbucks provided current fiscal 2006 targets:

• Starbucks plans to open approximately 1,800 new stores on a global basis in fiscal 2006. In the United States, Starbucks plans to open approximately 700 Company-operated locations and 600 licensed locations. In International markets, Starbucks plans to open approximately 150 Company-operated stores and 350 licensed stores;

• The Company is targeting total net revenue growth of approximately 20 percent and continues to expect comparable store sales growth in the range of three percent to seven percent in fiscal 2006, with monthly anomalies;

• The Company is targeting earnings per share of $0.63 to $0.65 for fiscal 2006, including stock compensation expense estimated at approximately $0.09 per share. On a comparable basis including stock compensation expense, Starbucks expects full year and quarterly earnings per share growth for fiscal 2006 to be consistent with the Company’s longer-term 20 percent to 25 percent targeted range;

• The effective tax rate is expected to be approximately 38 percent in fiscal 2006, with quarterly variations; and,

• Capital expenditures are expected to be in the range of $700 million to $725 million in fiscal 2006.

Starbucks will be holding a conference call today at 1:30 p.m. Pacific Time, which will be hosted by Howard Schultz, chairman, Jim Donald, president and ceo, and Michael Casey, 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://www.starbucks.com/aboutus/investor.asp. A replay of the call will be available via telephone through 5:30 p.m. Pacific Time on Thursday, November 24, 2005, by calling 1-800-642-1687, reservation number 4093403. 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. Pacific Time on Thursday, December 15, 2005, at the following URL: http://www.starbucks.com/aboutus/investor.asp.

The Company’s consolidated financial statements, 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/A filed with the Securities and Exchange Commission on February 18, 2005, for additional information.

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

	Fiscal quarter ended							Fiscal quarter ended
	October 2,		October 3,					October 2,			October 3,
	2005		2004					2005			2004
	(13 weeks)		(14 weeks)		% Change			(13 weeks)			(14 weeks)
	(in thousands, except per share data)
								As a % of total net revenues
								(unless otherwise indicated)
Net revenues:
Company-operated retail	$	1,392,714	$	1,218,347		14.3	%		83.9	%		83.8	%
Specialty:
Licensing		184,180		164,761		11.8	%		11.1	%		11.4	%
Foodservice and other		82,347		70,189		17.3	%		5.0	%		4.8	%
Total specialty		266,527		234,950		13.4	%		16.1	%		16.2	%
Total net revenues		1,659,241		1,453,297		14.2	%		100.0	%		100.0	%
Cost of sales including occupancy costs		678,886		614,288					40.9	%		42.3	%
Store operating expenses		565,953		510,342					(a) 40.6	%		(a) 41.9	%
Other operating expenses		57,932		42,889					(b) 21.7	%		(b) 18.3	%
Depreciation and amortization expenses		88,475		74,142					5.3	%		5.1	%
General and administrative expenses		100,949		80,537					6.1	%		5.5	%
Subtotal operating expenses		1,492,195		1,322,198		12.9	%
Income from equity investees		29,494		24,150					1.8	%		1.7	%
Operating income		196,540		155,249		26.6	%		11.8	%		10.7	%
Interest and other income, net		3,458		2,823					0.2	%		0.2	%
Earnings before income taxes		199,998		158,072		26.5	%		12.1	%		10.9	%
Income taxes(c)		76,251		55,469					4.6	%		3.8	%
Net earnings	$	123,747	$	102,603		20.6	%		7.5	%		7.1	%
Net earnings per common share — diluted	$	0.16	$	0.12
Weighted average shares outstanding — diluted		794,942		826,754

(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 October 2, 2005, and the 14 weeks ended October 3, 2004, were 38.1 percent and 35.1 percent for the respective periods.

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

	Fiscal year ended							Fiscal year ended
	October 2,		October 3,					October 2,			October 3,
	2005		2004					2005			2004
	(52 weeks)		(53 weeks)		% Change			(52 weeks)			(53 weeks)
	(in thousands, except per share data)
								As a % of total net revenues
								(unless otherwise indicated)
Net revenues:
Company — operated retail	$	5,391,927	$	4,457,378		21.0	%		84.7	%		84.2	%
Specialty:
Licensing		673,015		565,798		18.9	%		10.5	%		10.7	%
Foodservice and other		304,358		271,071		12.3	%		4.8	%		5.1	%
Total specialty		977,373		836,869		16.8	%		15.3	%		15.8	%
Total net revenues		6,369,300		5,294,247		20.3	%		100.0	%		100.0	%
Cost of sales including occupancy costs		2,605,212		2,191,440					40.9	%		41.4	%
Store operating expenses		2,165,911		1,790,168					(a) 40.2	%		(a) 40.2	%
Other operating expenses		197,024		171,648					(b) 20.2	%		(b) 20.5	%
Depreciation and amortization expenses		340,169		289,182					5.3	%		5.5	%
General and administrative expenses		357,114		304,293					5.6	%		5.7	%
Subtotal operating expenses		5,665,430		4,746,731		19.4	%
Income from equity investees		76,745		59,071					1.2	%		1.1	%
Operating income		780,615		606,587		28.7	%		12.3	%		11.5	%
Interest and other income, net		15,829		14,140					0.2	%		0.3	%
Earnings before income taxes		796,444		620,727		28.3	%		12.5	%		11.7	%
Income taxes(c)		301,977		231,754					4.7	%		4.4	%
Net earnings	$	494,467	$	388,973		27.1	%		7.8	%		7.3	%
Net earnings per common share — diluted	$	0.61	$	0.47
Weighted average shares outstanding — diluted		815,417		822,930

(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 52 weeks ended October 2, 2005, and the 53 weeks ended October 3, 2004, were 37.9 percent and 37.3 percent for the respective periods.

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

	October 2,		October 3,
	2005		2004
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	173,809	$	145,053
Short-term investments — available-for-sale securities		95,379		483,157
Short-term investments — trading securities		37,848		24,799
Accounts receivable, net of allowances of $3,079 and $2,231, respectively		177,930		140,226
Inventories		546,299		422,663
Prepaid expenses and other current assets		95,734		71,347
Deferred income taxes, net		70,808		63,650
Total current assets		1,197,807		1,350,895
Long-term investments — available-for-sale securities		60,475		135,179
Equity and other investments		201,461		167,740
Property, plant and equipment, net		1,842,019		1,551,416
Other assets		73,476		85,561
Other intangible assets		35,409		26,800
Goodwill		92,473		68,950
TOTAL ASSETS	$	3,503,120	$	3,386,541
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	221,558	$	199,346
Accrued compensation and related costs		232,354		208,927
Accrued occupancy costs		44,496		29,231
Accrued taxes		66,765		62,959
Short-term borrowings		277,000		—
Other accrued expenses		193,318		123,684
Deferred revenue		175,049		121,377
Current portion of long-term debt		748		735
Total current liabilities		1,211,288		746,259
Deferred income taxes, net		—		21,770
Long-term debt		2,870		3,618
Other long-term liabilities		198,328		144,683
Shareholders’ equity:
Common stock and additional paid-in capital — Authorized, 1,200,000,000 shares; issued and outstanding, 767,442,110 and 794,811,688 shares, respectively, (includes 3,394,200 common stock units in both periods)		90,968		956,685
Other additional paid-in capital		39,393		39,393
Retained earnings		1,939,359		1,444,892
Accumulated other comprehensive income		20,914		29,241
Total shareholders’ equity		2,090,634		2,470,211
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,503,120	$	3,386,541

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

	Fiscal year ended
	October 2,			October 3,
	2005			2004
	(52 weeks)			(53 weeks)
OPERATING ACTIVITIES:
Net earnings	$	494,467		$	388,973
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		367,207			314,047
Provision for impairments and asset disposals		18,558			13,568
Deferred income taxes, net		(31,253	)		(3,770	)
Equity in income of investees		(49,633	)		(31,801	)
Distributions from equity investees		30,919			38,328
Tax benefit from exercise of non-qualified stock options		109,978			63,405
Net amortization of premium on marketable securities		10,097			11,603
Cash provided/(used) by changes in operating assets and liabilities:
Accounts receivable		(37,051	)		(24,977	)
Inventories		(121,618	)		(77,662	)
Accounts payable		1,223			27,948
Accrued compensation and related costs		22,711			54,929
Deferred revenue		53,276			47,590
Other operating assets and liabilities		13,118			36,356
Net cash provided by operating activities		881,999			858,537
INVESTING ACTIVITIES:
Purchase of available-for-sale securities		(643,488	)		(887,969	)
Maturity of available-for-sale securities		469,554			170,789
Sale of available-for-sale securities		626,113			452,467
Acquisitions, net of cash acquired		(31,110	)		(7,515	)
Net additions to equity, other investments and other assets		(8,498	)		(64,747	)
Net additions to property, plant and equipment		(592,270	)		(412,537	)
Net cash used by investing activities		(179,699	)		(749,512	)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock		163,555			137,590
Borrowings under revolving credit facility		277,000			—
Principal payments on long-term debt		(735	)		(722	)
Repurchase of common stock		(1,113,647	)		(203,413	)
Net cash used by financing activities		(673,827	)		(66,545	)
Effect of exchange rate changes on cash and cash equivalents		283			3,111
Net increase in cash and cash equivalents		28,756			45,591
CASH AND CASH EQUIVALENTS:
Beginning of period		145,053			99,462
End of the period	$	173,809		$	145,053
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	1,060		$	370
Income taxes	$	227,086		$	172,759

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Stock Compensation Expense

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123R, “Share-Based Payment” (“SFAS 123R”), a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” SFAS 123R requires Starbucks to measure all employee stock-based compensation awards using a fair value method and record compensation expense in the Company’s consolidated financial statements. Starbucks will adopt SFAS 123R using the modified prospective transition method in its first fiscal quarter of 2006, which ends January 1, 2006.

The Company discloses the pro forma impact of stock compensation on the Company’s net earnings and earnings per share through fiscal year end 2005 within its periodic filings with the SEC in accordance with current accounting rules. The pro forma impacts for the 13 and 52 weeks ended October 2, 2005, and the 14 and 53 weeks ended October 3, 2004, were as follows for the information presented (in thousands, except earnings per share):

	Fiscal quarter ended						Fiscal year ended
	October 2,			October 3,			October 2,			October 3,
	2005			2004			2005			2004
	(13 weeks)			(14 weeks)			(52 weeks)			(53 weeks)
Net earnings	$	123,747		$	102,603		$	494,467		$	388,973
Deduct: stock-based compensation expense determined under fair value method, net of tax		(15,409	)		(13,018	)		(58,742	)		(45,056	)
Pro forma net income	$	108,338		$	89,585		$	435,725		$	343,917
Earnings per share:
Diluted – as reported	$	0.16		$	0.12		$	0.61		$	0.47
Deduct: stock-based compensation expense determined under fair value method, net of tax		(0.02	)		(0.01	)		(0.08	)		(0.05	)
Diluted – pro forma	$	0.14		$	0.11		$	0.53		$	0.42

Business Acquisitions

In July 2005, Starbucks increased its equity ownership in its licensed operations in Southern China and Chile, to 51 percent and 100 percent, respectively, for a combined purchase price of $15 million. Previously, Starbucks owned less than 20 percent in each of these operations, which were accounted for under the cost method. These increases in equity ownership resulted in a change of accounting method, from the cost method to the consolidation method, on the respective dates of acquisition. This accounting change also included adjusting previously reported information for the Company’s proportionate share of net losses in Southern China and Chile. The cumulative effect of the accounting change for previously reported information resulted in a reduction of net earnings of $0.1 million for the 39 weeks ended July 3, 2005, and a reduction of retained earnings of $0.4 million prior to fiscal 2005.

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Segment Results

Segment information is prepared on the basis that the Company’s management reviews financial information for operational decision-making purposes. 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 periods ended (in thousands):

			% of					% of						% of
			United					Inter-						Total
	United		States			Inter-		national			Unallocated			Net
13 Weeks Ended October 2, 2005	States		Revenue			national		Revenue			Corporate			Revenues			Consolidated
Net revenues:
Company-operated retail	$	1,163,533		84.3	%	$	229,181		82.0	%	$	—			—	%	$	1,392,714
Specialty:
Licensing		140,306		10.2			43,874		15.7			—			—			184,180
Foodservice and other		75,990		5.5			6,357		2.3			—			—			82,347
Total specialty		216,296		15.7			50,231		18.0			—			—			266,527
Total net revenues		1,379,829		100.0			279,412		100.0			—			—			1,659,241
Cost of sales including occupancy costs		544,550		39.5			134,336		48.1			—			—			678,886
Store operating expenses		482,916		41.5	(1)		83,037		36.2	(1)		—			—			565,953
Other operating expenses		46,056		21.3	(2)		11,876		23.6	(2)		—			—			57,932
Depreciation and amortization expenses		65,234		4.7			15,473		5.5			7,768			0.5			88,475
General and administrative expenses		20,123		1.5			15,622		5.6			65,204			3.9			100,949
Income from equity investees		18,202		1.3			11,292		4.0			—			—			29,494
Operating income/(loss)	$	239,152		17.3	%	$	30,360		10.9	%	$	(72,972	)		(4.4)	%	$	196,540

			% of					% of						% of
			United					Inter-						Total
	United		States			Inter-		national			Unallocated			Net
14 Weeks Ended October 3, 2004	States		Revenue			national		Revenue			Corporate			Revenues			Consolidated
Net revenues:
Company-operated retail	$	1,030,195		84.1	%	$	188,152		82.2	%	$	—			—	%	$	1,218,347
Specialty:
Licensing		129,351		10.6			35,410		15.5			—			—			164,761
Foodservice and other		64,945		5.3			5,244		2.3			—			—			70,189
Total specialty		194,296		15.9			40,654		17.8			—			—			234,950
Total net revenues		1,224,491		100.0			228,806		100.0			—			—			1,453,297
Cost of sales including occupancy costs		498,422		40.7			115,866		50.6			—			—			614,288
Store operating expenses		440,041		42.7	(1)		70,301		37.4	(1)		—			—			510,342
Other operating expenses		35,442		18.2	(2)		7,447		18.3	(2)		—			—			42,889
Depreciation and amortization expenses		54,096		4.4			12,155		5.3			7,891			0.6			74,142
General and administrative expenses		24,960		2.0			11,692		5.1			43,885			3.0			80,537
Income from equity investees		15,806		1.3			8,344		3.6			—			—			24,150
Operating income/(loss)	$	187,336		15.3	%	$	19,689		8.6	%	$	(51,776	)		(3.6)	%	$	155,249

(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 periods ended (in thousands):

			% of					% of
			United					Inter-						% of
	United		States			Inter-		national			Unallocated			Total
52 Weeks Ended October 2, 2005	States		Revenue			national		Revenue			Corporate			Net Revenues			Consolidated
Net revenues:
Company-operated retail	$	4,539,455		85.1	%	$	852,472		82.4	%	$	—			—	%	$	5,391,927
Specialty:
Licensing		514,932		9.7			158,083		15.3			—			—			673,015
Foodservice and other		280,073		5.2			24,285		2.3			—			—			304,358
Total specialty		795,005		14.9			182,368		17.6			—			—			977,373
Total net revenues		5,334,460		100.0			1,034,840		100.0			—			—			6,369,300
Cost of sales including occupancy costs		2,086,707		39.1			518,505		50.1			—			—			2,605,212
Store operating expenses		1,848,836		40.7	(1)		317,075		37.2	(1)		—			—			2,165,911
Other operating expenses		162,793		20.5	(2)		34,231		18.8	(2)		—			—			197,024
Depreciation and amortization expenses		250,415		4.7			56,705		5.5			33,049			0.5			340,169
General and administrative expenses		85,362		1.6			53,069		5.1			218,683			3.4			357,114
Income from equity investees		45,579		0.9			31,166		3.0			—			—			76,745
Operating income/(loss)	$	945,926		17.7	%	$	86,421		8.4	%	$	(251,732	)		(3.9	)%	$	780,615

			% of					% of
			United					Inter-						% of
	United		States			Inter-		national			Unallocated			Total
53 Weeks Ended October 3, 2004	States		Revenue			national		Revenue			Corporate			Net Revenues			Consolidated
Net revenues:
Company-operated retail	$	3,800,367		84.6	%	$	657,011		81.8	%	$	—			—	%	$	4,457,378
Specialty:
Licensing		436,981		9.7			128,817		16.0			—			—			565,798
Foodservice and other		253,502		5.7			17,569		2.2			—			—			271,071
Total specialty		690,483		15.4			146,386		18.2			—			—			836,869
Total net revenues		4,490,850		100.0			803,397		100.0			—			—			5,294,247
Cost of sales including occupancy costs		1,782,584		39.7			408,856		50.9			—			—			2,191,440
Store operating expenses		1,546,871		40.7	(1)		243,297		37.0	(1)		—			—			1,790,168
Other operating expenses		144,853		21.0	(2)		26,795		18.3	(2)		—			—			171,648
Depreciation and amortization expenses		210,448		4.7			46,196		5.8			32,538			0.6			289,182
General and administrative expenses		80,221		1.8			48,206		6.0			175,866			3.3			304,293
Income from equity investees		37,453		0.8			21,618		2.7			—			—			59,071
Operating income/(loss)	$	763,326		17.0	%	$	51,665		6.4	%	$	(208,404	)		(3.9	)%	$	606,587

(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 $155 million to $1.4 billion for the 13 weeks ended October 2, 2005, compared to $1.2 billion for the 14-week period of fiscal 2004. Excluding the impact of the extra week in 2004, United States total net revenues increased 21 percent. United States Company-operated retail revenues increased by $133 million to $1.2 billion for the 13 weeks ended October 2, 2005, compared to $1.0 billion for the 14-week period of fiscal 2004. Excluding the impact of the extra week in 2004, United States Company-operated revenues increased 22 percent, primarily due to the opening of 574 new Company-operated retail stores in the last 12 months and comparable store sales growth of nine percent for the quarter. The increase in comparable store sales was due to a five percent increase in the average value per transaction, including three percent attributable to a beverage price increase in October 2004, and a four percent increase in the number of customer transactions.

Total United States specialty revenues increased by $22 million to $216 million for the 13 weeks ended October 2, 2005, compared to $194 million in the 14-week period of fiscal 2004. Excluding the impact of the extra week in 2004, United States specialty revenues increased 20 percent. United States licensing revenues increased to $140 million in fiscal 2005, an increase of 17 percent on a comparable 13-week basis, primarily due to higher product sales and royalty revenues as a result of opening 596 new licensed retail stores in the last 12 months. United States foodservice and other revenues increased to $76 million in fiscal 2005, an increase of 27 percent on a comparable 13-week basis, primarily due to growth in new and existing foodservice accounts, as well as growth in the emerging entertainment business.

United States operating income increased by 28 percent to $239 million for the 13 weeks ended October 2, 2005, from $187 million for the 14-week period in fiscal 2004. This improvement was primarily due to the increase in revenues discussed above. Operating margin increased to 17.3 percent of related revenues from 15.3 percent in the 14-week period of fiscal 2004, primarily due to higher average revenue per retail transaction, which favorably impacted cost of sales including occupancy costs and store operating expenses. This improvement was partially offset by higher payroll-related expenditures to support the emerging entertainment business and to support the growth of Seattle’s Best Coffee licensed café operations.

International

International total net revenues increased by $51 million to $279 million for the 13 weeks ended October 2, 2005, compared to $229 million for the 14-week period of fiscal 2004. Excluding the impact of the extra week in 2004, international total net revenues increased 31 percent. International Company-operated retail revenues increased by $41 million to $229 million for the 13 weeks ended October 2, 2005, compared to $188 million for the 14-week period for fiscal 2004. Excluding the impact of the extra week in 2004, international Company-operated retail revenues increased 31 percent, primarily due to the opening of 161 new Company-operated retail stores in the last 12 months, comparable store sales growth of six percent for the quarter and a favorable foreign currency exchange rate for the Canadian dollar. The increase in comparable store sales resulted from a four percent increase in the number of customer transactions coupled with a two percent increase in the average value per transaction.

Total international specialty revenues increased to $50 million for the 13 weeks ended October 2, 2005, compared to $41 million in the 14-week period of fiscal 2004. Excluding the impact of the extra week in 2004, international specialty revenues increased 33 percent. International licensing revenues increased to $44 million in fiscal 2005, an increase of 33 percent on a comparable 13-week basis, primarily due to higher product sales and royalty revenues from opening 341 new licensed retail stores in the last 12 months, volume driven growth in the Canadian grocery and warehouse club businesses and, to a lesser extent, the launch of new ready-to-drink coffee

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beverages in Japan and Taiwan. International foodservice and other revenues increased 31 percent from fiscal 2004, on a comparable 13-week basis, due to growth in new and existing foodservice accounts.

International operating income increased by 54 percent to $30 million for the 13 weeks ended October 2, 2005, compared to $20 million in the 14-week period of fiscal 2004. This increase was due to both revenue growth and margin improvement. Operating margin increased to 10.9 percent of related revenues from 8.6 percent in the 14-week period of fiscal 2004, due to lower cost of sales including occupancy costs and store operating expenses as a percentage of related revenues, partially offset by increased other operating expenses related to launching the new ready-to-drink coffee beverages in Japan and Taiwan.

Store Data

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

	Net stores opened during
	the fiscal year ended				Stores open as of
	October 2,		October 3,
	2005		2004		October 2,		October 3,
	(52 weeks)		(53 weeks)		2005		2004
United States:
Company-operated Stores		574		514		4,867		4,293
Licensed Stores		596		417		2,435		1,839
		1,170		931		7,302		6,132
International:
Company-operated Stores (1)		161		141		1,133		972
Licensed Stores (1)		341		272		1,806		1,465
		502		413		2,939		2,437
Total		1,672		1,344		10,241		8,569

⁽¹⁾ International store data has been adjusted for the acquisitions of the Germany, Southern China and Chile operations by reclassifying historical information from Licensed Stores to Company-operated Stores.

Starbucks Corporation is the leading retailer, roaster and brand of specialty coffee in the world, with more than 10,000 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® espresso 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 – innovative superpremium Tazo® teas and exceptional compact discs from Starbucks Hear Music™ 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.

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This release includes the following forward-looking statements: anticipated store openings, comparable store sales expectations, trends in or expectations regarding the Company’s net revenue, estimated stock based compensation expense, capital expenditures, effective tax rate, net earnings and earnings per share results. These forward-looking statements 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 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 “Certain Additional Risks and Uncertainties” section of Starbucks Annual Report on Form 10-K/A for the fiscal year ended October 3, 2004. The Company assumes no obligation to update any of these forward-looking statements.

© 2005 Starbucks Coffee Company. All rights reserved.

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