EX-99.1 2 v53028exv99w1.htm EX-99.1 EX-99.1
Exhibit 99.1
     
Starbucks Contact, Investor Relations:
  Starbucks Contact, Media:
JoAnn DeGrande
  Deb Trevino
206-318-7118
  206-318-7100
investorrelations@starbucks.com
  press@starbucks.com
Starbucks Posts Strong Third Quarter Fiscal 2009 Results
EPS of $0.20 vs. $(0.01) in Q3 FY08; Non-GAAP EPS of $0.24 vs. $0.16
Performance Reflects Higher Margins, Improving Store Traffic and Increased Operating Leverage
SEATTLE; July 21, 2009 — Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its third quarter ended June 28, 2009, provided its FY09 EPS target and introduced FY10 targets.
Fiscal Third Quarter 2009 Highlights include:
•   EPS of $0.20 compared to $(0.01) in Q308
 
•   Non-GAAP EPS of $0.24 compared to $0.16 in Q308, a 50% year-over-year increase
 
•   Operating margin of 8.5% vs. negative 0.8% in Q308; Non-GAAP operating margin of 10.6% vs. 6.9% in Q308
 
•   U.S. operating margin of 11.2% vs. negative 1.4% in Q308; Non-GAAP U.S. operating margin of 13.4% vs. 8.8% in Q308
 
•   Net revenues of $2.4 billion, compared to $2.6 billion in Q308
 
•   Cost savings of approximately $175 million, exceeding Q3 target of $150 million
 
•   Comparable store sales decline of 5%, a sequential improvement from a decline of 8% in Q209
“The transformation of Starbucks business — including the success of our consumer-facing initiatives and the permanent changes to our cost structure — are delivering improvements in comparable store sales trends and beginning to be reflected in our financial performance,” said Howard Schultz, chairman, president and ceo. “The entire Starbucks organization is committed to continually improving our customer experience as the roadmap to renewed growth and increasing profitability. At the same time, we will continue to innovate and differentiate, two perennial hallmarks of the Starbucks brand,” added Schultz.
“Excellent execution throughout our organization contributed significantly to our performance this quarter,” commented Troy Alstead, executive vice president and cfo. “Our store partners have embraced the cost disciplines and efficiency initiatives that are enabling us to expand our operating margin. In doing this, they have also delivered increased service speed, measurably-improved customer service, customer satisfaction, and an overall enhanced Starbucks Experience.”
Consolidated company revenues for Q309 were $2.4 billion, compared to $2.6 billion in Q308. The sales decline resulted primarily from a five percent decline in comparable store sales.
Restructuring charges, nearly all due to previously-announced store closures, impacted operating income and operating margin in Q309 by $51.6 million and 210 basis points, respectively. As a result, Q309 operating income totaled $204.0 million, representing an operating margin of 8.5 percent, compared to an operating loss of $21.6 million, and an operating margin of negative 0.8 percent in Q308. On a non-GAAP basis (excluding restructuring charges), Q309 operating income totaled $255.6 million, representing an operating margin of 10.6 percent, compared to non-GAAP operating income of $177.6 million and a non-GAAP
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operating margin of 6.9 percent in Q308. Non-GAAP results in Q308 exclude $199.2 million of restructuring charges specifically related to asset impairments for 600 underperforming company-operated stores in the U.S., and transformation-related costs.
Net earnings in Q309 totaled $151.5 million, compared to a net loss of $6.7 million in Q308, and diluted EPS for Q309 was $0.20, compared to $(0.01) in Q308. Non-GAAP net earnings totaled $179.9 million, and non-GAAP EPS was $0.24 for Q309, compared to non-GAAP net earnings of $115.8 million and non-GAAP EPS of $0.16 in Q308. Non-GAAP results for Q308 exclude approximately $0.17 per share in restructuring charges and transformation-related costs.
Cost Reduction Initiatives
Starbucks continues to make good progress on its fiscal 2009 target to reduce its cost structure by $500 million. In Q309, the company delivered approximately $175 million in cost savings, exceeding the company’s Q3 target of $150 million, resulting in year-to-date cost savings of approximately $370 million. Starbucks now expects to deliver cost savings of approximately $180 million in Q409, for a full year total of approximately $550 million in cost savings in fiscal 2009, exceeding its initial target.
Restructuring Charges
Restructuring charges of $51.6 million for the quarter were nearly all due to lease exit and other costs associated with the closure of U.S. and International company-operated stores. Starbucks actions to rationalize its global store portfolio have included the announcements (in July 2008 and January 2009) of plans to close approximately 800 company-operated stores in the U.S., restructure the company’s business in Australia, and close approximately 100 additional International company-operated stores. Since those announcements, 676 U.S. stores, 61 stores in Australia and 28 other International stores have been closed. The remaining U.S. store closures are expected to occur by September 27, 2009, Starbucks fiscal year end, while the remaining International store closures are expected to be completed by mid-year fiscal 2010. Related lease exit costs are expected to be recognized concurrently with the actual closures.
Q3 U.S. Segment Results
For Q309, U.S. total net revenues were $1.8 billion compared to $1.9 billion in Q308, with the decline due to decreased revenues from company-operated retail stores. U.S. comparable store sales declined six percent, due to a four percent decline in the number of transactions and a two percent decrease in the average value per transaction. Specialty revenues declined 4.7 percent to $207.0 million, driven by lower foodservice revenues primarily related to softness in the hospitality industry.
U.S. operating income for Q309 was $204.6 million, compared to an operating loss of $27.8 million for the same period a year ago. Operating margin was 11.2 percent of related revenues in Q309 compared to negative 1.4 percent in the corresponding period of fiscal 2008. This increase was driven by significantly lower restructuring charges recorded in the period, as well as a significant reduction in store operating expenses and cost of sales including occupancy costs.
Excluding restructuring charges, U.S. non-GAAP operating margin in Q309 was 13.4 percent compared to non-GAAP operating margin of 8.8 percent for the same period a year ago, which excludes restructuring charges and transformation-related costs. As a percent of total revenues, store operating expenses decreased 240 basis points to 37.0 percent, primarily due to the effect of labor efficiency initiatives. Additionally, cost of sales including occupancy costs improved by 210 basis points to 41.0 percent during
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Q309 due to lower dairy commodity costs and the implementation of operational improvements designed to minimize waste.
Q3 International Segment Results
International total net revenues were $477.4 million in Q309 compared to $535.6 million in Q308, with the decline primarily due to the impact of a stronger U.S. dollar relative to the British pound and Canadian dollar. Also contributing to the decrease in International revenues was a two percent decline in comparable store sales, due to a one percent decline in the number of transactions and a two percent decrease in the average value per transaction.
International operating income was $34.4 million in Q309 compared to $35.5 million for the same period a year ago, with the related operating margin expanding 60 basis points to 7.2 percent of total revenues, from 6.6 percent in Q308. Excluding restructuring charges, non-GAAP operating margin for Q309 improved to 8.1 percent compared to non-GAAP operating margin of 6.7 percent for the same period a year ago, which excludes transformation-related costs. This increase was driven by reductions in G&A expenses and lower occupancy costs.
Q3 Global Consumer Products Group Segment Results
Global Consumer Products Group (CPG) total net revenues increased by 17.2 percent to $106.3 million in Q309, due primarily to higher coffee sales to a grocery distribution partner.
Operating income for the CPG segment improved to $49.2 million in Q309, a one percent increase over the $48.7 million reported in Q308. Operating margin decreased 740 basis points to 46.3 percent of related revenues from 53.7 percent for the prior year period. This decrease was due primarily to lower income from equity investees largely related to expenses associated with the dissolution of the previous ice cream partnership, increased marketing expenses for ready-to-drink products in Japan, and higher green coffee costs.
YTD Financial Results
For the 39 weeks ended June 28, 2009, consolidated net revenues totaled $7.4 billion, compared to $7.9 billion for the corresponding period of fiscal 2008. Restructuring charges associated with the store closures and previously-announced workforce reductions impacted operating income and operating margin for the first nine months of fiscal 2009 by $279.2 million and 380 basis points, respectively. As a result, for the fiscal year-to-date period ended June 28, 2009, operating income was $362.6 million and operating margin was 4.9 percent, compared to $489.7 million of operating income and an operating margin of 6.2% in Q308. Non-GAAP operating income and non-GAAP operating margin, which exclude restructuring charges, were $641.8 million and 8.7 percent for the first nine months of fiscal 2009, respectively. This compared to non-GAAP operating income of $724.0 million and non-GAAP operating margin of 9.2 percent for the first nine months of fiscal 2008, each of which excluded restructuring charges and transformation-related costs totaling $234.3 million.
Net earnings totaled $240.8 million and EPS was $0.32 for the 39 weeks ended June 28, 2009, compared to $310.1 million and $0.42, respectively, for the same period a year ago. Excluding restructuring charges, non-GAAP net earnings were $414.1 million and non-GAAP EPS was $0.56 for the first nine months of fiscal 2009. This compares to non-GAAP net earnings of $454.8 million and non-GAAP EPS of $0.61 for the same period a year ago, which excludes $234.3 million, or $0.19 per share, in restructuring charges and transformation-related costs.
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Liquidity
Starbucks used its strong ongoing operating cash flow to reduce its short-term borrowings to a zero balance at the end of Q309, and expects the balance to remain below $50 million for the remainder of the fiscal year. The total amount of excess capital available under the company’s revolving credit facility was approximately $985 million at the end of Q309.
Fiscal 2009 Targets
Starbucks is on track with its plan to rationalize its current store base in order to strengthen its overall global store portfolio. In the current fiscal year, this includes a net reduction of approximately 465 company-operated stores in the U.S. and the net addition of approximately 70 company-operated stores internationally. The company now expects to open approximately 55 net new licensed stores in the U.S. and approximately 310 net new licensed stores internationally. (See Fiscal 2009 Revised Net New Store Target table following the segment results).
Capital expenditure projections for fiscal 2009 are now approximately $550 million. The company continues to expect fiscal year 2009 cash from operations to exceed $1 billion, with resulting free cash flow in excess of $500 million. Starbucks defines free cash flow as cash flow from operations less capital expenditures.
Based on year-to-date performance, along with its current outlook for the fourth quarter, Starbucks expects to achieve full year EPS within a range of $0.44 to $0.45 per share on a GAAP basis, and $0.74 to $0.75 per share on a non-GAAP basis. This range reflects strong Q3 performance and also recognizes both continued macro-economic uncertainty and normal seasonality in transaction volumes in the fiscal fourth quarter.
Fiscal 2010 Targets
Looking ahead, Starbucks introduced fiscal 2010 targets:
The company expects non-GAAP EPS growth in the range of 13 percent to 18 percent, excluding $0.02 to $0.03 of expected restructuring charges in the first half of fiscal 2010, and including approximately $0.02 of additional EPS from the extra week in the fiscal fourth quarter, as fiscal 2010 is a 53-week year for Starbucks.
The company expects full year U.S. segment operating margin improvement (excluding restructuring charges) of 150 to 200 basis points, and International segment operating margin improvement (excluding restructuring charges) of 200 to 250 basis points.
Conference Call
Starbucks will be holding a conference call today at 2:00 p.m. Pacific Time, which will be hosted by Howard Schultz, chairman, president and ceo, and Troy Alstead, 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://investor.starbucks.com. A replay of the call will be available via telephone through 9:00 p.m. Pacific Time on Friday, July 24, 2009, by calling 1-800-642-1687, reservation number 61844136. 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 Friday, August 21, 2009, at the following URL: http://investor.starbucks.com.
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The company’s consolidated statements of earnings, 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 for the fiscal year ended September 28, 2008 for additional information.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting the highest quality arabica coffee in the world. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup. To share in the experience, please visit us in our stores or online at www.starbucks.com.
Forward-Looking Statements
This release contains forward-looking statements relating to certain company initiatives and plans, as well as trends in or expectations regarding, the expected effects of restructuring and other initiatives, earnings per share, store openings and closings, cost savings, operating margins, restructuring charges, cash from operations, capital expenditures and free cash flow. These forward-looking statements are based on currently available operating, financial and competitive information and are subject to a number of significant risks and uncertainties. Actual future results 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 the company’s restructuring and other initiatives, fluctuations in U.S. and international economies and currencies, the impact of competition, the effect of legal proceedings, and other risks detailed in the company filing with the Securities and Exchange Commission, including the “Risk Factors” section of Starbucks Annual Report on Form 10-K for the fiscal year ended September 28, 2008. The company assumes no obligation to update any of these forward-looking statements.
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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
                                         
    13 Weeks Ended   13 Weeks Ended
    Jun 28,   Jun 29,   %   Jun 28,   Jun 29,
    2009   2008   Change   2009   2008
    (in millions, except per share data)   As a % of total net revenues
Net revenues:
                                        
Company-operated retail
   $ 2,013.8     $ 2,180.2       (7.6) %     83.8 %     84.7 %
Specialty:
                                        
Licensing
     301.0       281.3       7.0       12.5       10.9  
Foodservice and other
     89.1       112.5       (20.8 )     3.7       4.4  
                 
Total specialty
     390.1       393.8       (0.9 )     16.2       15.3  
                 
Total net revenues
     2,403.9       2,574.0       (6.6 )     100.0       100.0  
 
                                        
Cost of sales including occupancy costs
     1,043.4       1,163.1       (10.3 )     43.4       45.2  
Store operating expenses
     821.4       958.3       (14.3 )     34.2       37.2  
Other operating expenses
     69.2       79.6       (13.1 )     2.9       3.1  
Depreciation and amortization expenses
     133.7       139.8       (4.4 )     5.6       5.4  
General and administrative expenses
     110.3       116.1       (5.0 )     4.6       4.5  
Restructuring charges
     51.6       167.7       (69.2 )     2.1       6.5  
                 
Total operating expenses
     2,229.6       2,624.6       (15.0 )     92.7       102.0  
 
                                        
Income from equity investees
     29.7       29.0       2.4       1.2       1.1  
                 
Operating income (loss)
     204.0       (21.6 )   nm       8.5       (0.8 )
 
                                        
Interest income and other, net
     21.9       0.9     nm       0.9       —  
Interest expense
     (8.6 )     (12.5 )     (31.2 )     (0.4 )     (0.5 )
                 
Earnings (loss) before income taxes
     217.3       (33.2 )   nm       9.0       (1.3 )
 
                                        
Income taxes
     65.8       (26.5 )   nm       2.7       (1.0 )
                 
Net earnings (loss)
   $ 151.5     $ (6.7 )   nm       6.3 %     (0.3 )%
                 
 
                                        
Net earnings per common share — diluted
   $ 0.20     $ (0.01 )   nm %              
                             
Weighted avg. shares outstanding — diluted
     746.7       731.7                          
 
                                        
Supplemental Ratios:                        
Store operating expenses as a percentage of Company-operated retail revenues             40.8 %     44.0 %
Other operating expenses as a percentage of specialty revenues             17.7 %     20.2 %
Effective tax rate
                             30.3 %     79.8 %
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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
                                         
    39 Weeks Ended   39 Weeks Ended
    Jun 28,   Jun 29,   %   Jun 28,   Jun 29,
    2009   2008   Change   2009   2008
    (in millions, except per share data)   As a % of total net revenues
Net revenues:
                                        
Company-operated retail
   $ 6,151.8     $ 6,674.6       (7.8 )%     83.7 %     84.8 %
Specialty:
                                        
Licensing
     918.1       860.5       6.7       12.5       10.9  
Foodservice and other
     282.5       332.5       (15.0 )     3.8       4.2  
                 
Total specialty
     1,200.6       1,193.0       0.6       16.3       15.2  
                 
Total net revenues
     7,352.4       7,867.6       (6.5 )     100.0       100.0  
 
                                        
Cost of sales including occupancy costs
     3,283.7       3,455.8       (5.0 )     44.7       43.9  
Store operating expenses
     2,577.6       2,812.7       (8.4 )     35.1       35.8  
Other operating expenses
     205.8       248.1       (17.0 )     2.8       3.2  
Depreciation and amortization expenses
     402.1       411.1       (2.2 )     5.5       5.2  
General and administrative expenses
     319.8       359.6       (11.1 )     4.3       4.6  
Restructuring charges
     279.2       167.7       66.5       3.8       2.1  
                 
Total operating expenses
     7,068.2       7,455.0       (5.2 )     96.1       94.8  
 
                                        
Income from equity investees
     78.4       77.1       1.7       1.1       1.0  
                 
Operating income
     362.6       489.7       (26.0 )     4.9       6.2  
 
                                        
Interest income and other, net
     18.4       11.8       55.9       0.3       0.1  
Interest expense
     (30.5 )     (40.8 )     (25.2 )     (0.4 )     (0.5 )
                 
Earnings before income taxes
     350.5       460.7       (23.9 )     4.8       5.9  
 
                                        
Income taxes
     109.7       150.6       (27.2 )     1.5       1.9  
                 
Net earnings
   $ 240.8     $ 310.1       (22.3 )     3.3 %     3.9 %
                 
 
                                        
Net earnings per common share — diluted
   $ 0.32     $ 0.42       (23.8 )%                
                             
Weighted avg. shares outstanding — diluted
     741.9       741.7                          
                 
Supplemental Ratios:
                
Store operating expenses as a percentage of Company-operated retail revenues
     41.9 %     42.1 %
Other operating expenses as a percentage of specialty revenues
     17.1 %     20.8 %
Effective tax rate
     31.3 %     32.7 %
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Segment Results
The tables below present reportable segment results net of intersegment eliminations (in millions):
                                         
    Jun 28,   Jun 29,   %   Jun 28,   Jun 29,
    2009   2008   Change   2009   2008
                            As a % of US total net
United States                           revenues
13 Weeks Ended
                                        
Net revenues:
                                        
Company-operated retail
   $ 1,613.2     $ 1,730.4       (6.8 )%     88.6 %     88.8 %
Specialty:
                                        
Licensing
     129.4       119.2       8.6       7.1       6.1  
Foodservice and other
     77.6       98.1       (20.9 )     4.3       5.0  
                 
Total specialty
     207.0       217.3       (4.7 )     11.4       11.2  
                 
Total net revenues
     1,820.2       1,947.7       (6.5 )     100.0       100.0  
 
                                        
Cost of sales including occupancy costs
     746.2       845.8       (11.8 )     41.0       43.4  
Store operating expenses
     674.2       791.9       (14.9 )     37.0       40.7  
Other operating expenses
     40.1       51.6       (22.3 )     2.2       2.6  
Depreciation and amortization expenses
     95.6       101.9       (6.2 )     5.3       5.2  
General and administrative expenses
     20.3       16.0       26.9       1.1       0.8  
Restructuring charges
     39.2       167.7     nm       2.2       8.6  
                 
Total operating expenses
     1,615.6       1,974.9       (18.2 )     88.8       101.4  
 
                                        
Income from equity investees
     —       (0.6 )   nm       —       —  
                 
Operating income (loss)
   $ 204.6     $ (27.8 )   nm %     11.2 %     (1.4 )%
                 
 
                                        
Supplemental Ratios:
                                        
Store operating expenses as a percentage of Company-operated retail revenues     41.8 %     45.8 %
Other operating expenses as a percentage of specialty revenues     19.4 %     23.7 %
 
                                        
39 Weeks Ended
                                        
Net revenues:
                                        
Company-operated retail
   $ 4,977.2     $ 5,346.2       (6.9 )%     88.4 %     89.0 %
Specialty:
                                        
Licensing
     404.2       372.2       8.6       7.2       6.2  
Foodservice and other
     248.8       291.8       (14.7 )     4.4       4.9  
                 
Total specialty
     653.0       664.0       (1.7 )     11.6       11.0  
                 
Total net revenues
     5,630.2       6,010.2       (6.3 )     100.0       100.0  
 
                                        
Cost of sales including occupancy costs
     2,391.4       2,520.7       (5.1 )     42.5       41.9  
Store operating expenses
     2,124.6       2,318.9       (8.4 )     37.7       38.6  
Other operating expenses
     128.8       166.1       (22.5 )     2.3       2.8  
Depreciation and amortization expenses
     290.2       302.5       (4.1 )     5.2       5.0  
General and administrative expenses
     66.1       56.4       17.2       1.2       0.9  
Restructuring charges
     200.4       167.7       19.5       3.6       2.8  
                 
Total operating expenses
     5,201.5       5,532.3       (6.0 )     92.4       92.0  
 
                                        
Income from equity investees
     0.5       (0.9 )   nm       —       —  
                 
Operating income
   $ 429.2     $ 477.0       (10.0 )%     7.6 %     7.9 %
                 
 
Supplemental Ratios:
                                        
Store operating expenses as a percentage of Company-operated retail revenues     42.7 %     43.4 %
Other operating expenses as a percentage of specialty revenues     19.7 %     25.0 %

 

 

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    Jun 28,   Jun 29,   %   Jun 28,   Jun 29,
    2009   2008   Change   2009   2008
                            As a % of International
International                           total net revenues
13 Weeks Ended
                                        
Net revenues:
                                        
Company-operated retail
   $ 400.6     $ 449.8       (10.9 )%     83.9 %     84.0 %
Specialty:
                                        
Licensing
     65.3       71.4       (8.5 )     13.7       13.3  
Foodservice and other
     11.5       14.4       (20.1 )     2.4       2.7  
                 
Total specialty
     76.8       85.8       (10.5 )     16.1       16.0  
                 
Total net revenues
     477.4       535.6       (10.9 )     100.0       100.0  
 
                                        
Cost of sales including occupancy costs
     236.7       267.5       (11.5 )     49.6       49.9  
Store operating expenses
     147.2       166.4       (11.5 )     30.8       31.1  
Other operating expenses
     20.3       22.8       (11.0 )     4.3       4.3  
Depreciation and amortization expenses
     26.3       27.9       (5.7 )     5.5       5.2  
General and administrative expenses
     23.5       30.3       (22.4 )     4.9       5.7  
Restructuring charges
     4.5       —     nm       0.9       —  
                 
Total operating expenses
     458.5       514.9       (11.0 )     96.0       96.1  
 
                                        
Income from equity investees
     15.5       14.8       4.7       3.2       2.8  
                 
Operating income
   $ 34.4     $ 35.5       (3.1 )%     7.2 %     6.6 %
                 
 
                                        
Supplemental Ratios:
                                        
Store operating expenses as a percentage of Company-operated retail revenues     36.7 %     37.0 %
Other operating expenses as a percentage of specialty revenues     26.4 %     26.6 %
 
                                        
39 Weeks Ended
                                        
Net revenues:
                                        
Company-operated retail
   $ 1,174.6     $ 1,328.4       (11.6 )%     83.5 %     84.6 %
Specialty:
                                        
Licensing
     198.5       200.7       (1.1 )     14.1       12.8  
Foodservice and other
     33.7       40.7       (17.2 )     2.4       2.6  
                 
Total specialty
     232.2       241.4       (3.8 )     16.5       15.4  
                 
Total net revenues
     1,406.8       1,569.8       (10.4 )     100.0       100.0  
 
                                        
Cost of sales including occupancy costs
     708.8       775.3       (8.6 )     50.4       49.4  
Store operating expenses
     453.0       493.8       (8.3 )     32.2       31.5  
Other operating expenses
     56.8       66.1       (14.1 )     4.0       4.2  
Depreciation and amortization expenses
     75.6       80.1       (5.6 )     5.4       5.1  
General and administrative expenses
     76.4       89.2       (14.3 )     5.4       5.7  
Restructuring charges
     21.4       —     nm       1.5       —  
                 
Total operating expenses
     1,392.0       1,504.5       (7.5 )     98.9       95.8  
 
                                        
Income from equity investees
     38.5       42.1       (8.6 )     2.7       2.7  
                 
Operating income
   $ 53.3     $ 107.4       (50.4 )%     3.8 %     6.8 %
                 
 
Supplemental Ratios:
                                        
Store operating expenses as a percentage of Company-operated retail revenues     38.6 %     37.2 %
Other operating expenses as a percentage of specialty revenues     24.5 %     27.4 %

 

 

- Page 10 -
                                         
    Jun 28,   Jun 29,   %   Jun 28,   Jun 29,
    2009   2008   Change   2009   2008
Global CPG                           As a % of CPG
13 Weeks Ended
                                        
Licensing revenues
   $ 106.3     $ 90.7       17.2 %     100.0 %     100.0 %
                 
Total specialty revenues
     106.3       90.7       17.2       100.0       100.0  
 
                                        
Cost of sales
     60.5       49.8       21.5       56.9       54.9  
Other operating expenses
     8.8       5.2       69.2       8.3       5.7  
General and administrative expenses
     2.0       1.8       11.1       1.9       2.0  
                 
Total operating expenses
     71.3       56.8       25.5       67.1       62.6  
 
                                        
Income from equity investees
     14.2       14.8       (4.1 )     13.4       16.3  
                 
Operating income
   $ 49.2     $ 48.7       1.0 %     46.3 %     53.7 %
                 
 
                                        
39 Weeks Ended
                                        
Licensing revenues
   $ 315.4     $ 287.6       9.7 %     100.0 %     100.0 %
                 
Total specialty revenues
     315.4       287.6       9.7       100.0       100.0  
 
                                        
Cost of sales
     183.5       159.8       14.8       58.2       55.6  
Other operating expenses
     20.2       15.9       27.0       6.4       5.5  
General and administrative expenses
     4.9       5.8       (15.5 )     1.6       2.0  
Restructuring charges
     0.2       —     nm       0.1       —  
                 
Total operating expenses
     208.8       181.5       15.0       66.2       63.1  
 
                                        
Income from equity investees
     39.4       35.9       9.7       12.5       12.5  
                 
Operating income
   $ 146.0     $ 142.0       2.8 %     46.3 %     49.4 %
                 
                                         
    Jun 28,   Jun 29,   %   Jun 28,   Jun 29,
    2009   2008   Change   2009   2008
Unallocated Corporate                           As a % of total net revenues
         
13 Weeks Ended
                                        
Depreciation and amortization expenses
   $ 11.8     $ 10.0       18.0 %     0.5 %     0.4 %
General and administrative expenses
     64.5       68.0       (5.1 )     2.7       2.6  
Restructuring charges
     7.9       —     nm       0.3       —  
                 
Operating loss
   $ (84.2 )   $ (78.0 )     7.9 %     (3.5 )%     (3.0 )%
                 
 
                                        
39 Weeks Ended
                                        
Depreciation and amortization expenses
   $ 36.3     $ 28.5       27.4 %     0.5 %     0.4 %
General and administrative expenses
     172.4       208.2       (17.2 )     2.3       2.6  
Restructuring charges
     57.2       —     nm       0.8       —  
                 
Operating loss
   $ (265.9 )   $ (236.7 )     12.3 %     (3.6 )%     (3.0 )%
                 
- more -

 

- Page 11 -
Fiscal Third Quarter 2009 Store Data
The company’s store data for the periods presented are as follows:
                                                 
    Net stores opened/(closed) during the period    
    13 Weeks Ended   39 Weeks Ended   Stores open as of
    Jun 28,   Jun 29,   Jun 28,   Jun 29,   Jun 28,   Jun 29,
    2009   2008   2009   2008   2009   2008
             
United States:
                                                
Company-operated Stores
     (164 )     118       (367 )     582       6,871       7,375  
Licensed Stores
     (16 )     18       66       304       4,395       4,195  
             
 
     (180 )     136       (301 )     886       11,266       11,570  
             
International:
                                                
Company-operated Stores (1)
     (8 )     68       82       231       2,061       1,974  
Licensed Stores (1)
     55       118       268       420       3,402       3,004  
             
 
     47       186       350       651       5,463       4,978  
             
 
                                                
Total
     (133 )     322       49       1,537       16,729       16,548  
             
 
(1)   International store data has been adjusted for the acquisition of retail store locations in Quebec and Atlantic Canada from former licensees Coffee Vision, Inc. and Coffee Vision Atlantic, Inc., by reclassifying historical information from Licensed Stores to Company-operated stores.
FISCAL 2009 REVISED NET NEW STORES TARGETS
         
Company-operated new stores
        
United States
        
New
     95  
Closed
     (560 )
 
        
Total company-operated net United States
     (465 )
 
        
International
        
New
     130  
Closed
     (60 )
 
        
Total company-operated net International
     70  
 
        
 
        
Total company-operated net new stores
     (395 )
 
        
 
        
Licensed net new stores
        
United States
     55  
International
     310  
 
        
Total licensed net new stores
     365  
 
        
 
        
 
        
Total consolidated net new stores
     (30 )
 
        
- more -

 

 

- Page 12 -
Non-GAAP Disclosure
In addition to the GAAP results provided in this release, the company provides non-GAAP operating income, non-GAAP operating margin, non-GAAP net earnings, non-GAAP earnings per share (non-GAAP EPS), non-GAAP cost of sales including occupancy ratio, non-GAAP store operating expense ratio (store operating expenses as a percentage of total net revenues), and non-GAAP store operating expenses as a percentage of company-operated retail revenues, as well as free cash flow. These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP operating income, non-GAAP operating margin, non-GAAP net earnings, non-GAAP earnings per share (non-GAAP EPS), non-GAAP cost of sales including occupancy ratio, non-GAAP store operating expense ratio and non-GAAP store operating expenses as a percentage of company-operated retail revenues are operating income, operating margin, net earnings, diluted net earnings per share, cost of sales including occupancy costs as a percentage of total net revenues, store operating expenses as a percentage of total net revenues, and store operating expenses as a percentage of company-operated retail revenues, respectively. The GAAP measure most directly comparable to free cash flow is cash flow from operations (or net cash provided by operating activities).
The non-GAAP financial measures provided in this release for fiscal 2009, other than free cash flow, exclude restructuring charges, primarily related to company-operated store closures and the impacts of the recent global workforce reductions. The non-GAAP financial measures provided in this release for fiscal 2008 exclude costs related to the company’s transformation efforts during such periods consisting primarily of charges related to slowing the pace of U.S. store openings and the associated termination of future site commitments, related inventory and store assets. Free cash flow is defined as cash flow from operations less capital expenditures (or net additions to property, plant and equipment). The company’s management believes that providing these non-GAAP financial measures better enables investors to understand and evaluate the company’s historical and prospective operating performance. More specifically, for historical non-GAAP financial measures other than free cash flow, management excludes each of those items mentioned above because it believes that these costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of the company’s future operating performance or comparisons to the company’s past operating performance.
These non-GAAP financial measures may have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of the company’s results as reported under GAAP. Other companies may calculate these non-GAAP financial measures differently than the company does, limiting the usefulness of those measures for comparative purposes.
- more -

 

 

- Page 13 -
STARBUCKS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(unaudited)
(in millions, except per share data)
                                 
    13 Weeks Ended     39 Weeks Ended  
    Jun 28,     Jun 29,     Jun 28,     Jun 29,  
    2009     2008     2009     2008  
         
Consolidated
                                
Operating income (loss), as reported (GAAP)
   $ 204.0     $ (21.6 )   $ 362.6     $ 489.7  
Restructuring charges
     51.6       167.7       279.2       167.7  
Other transformation charges
     —       31.5       —       66.6  
 
                        
Non-GAAP operating income
   $ 255.6     $ 177.6     $ 641.8     $ 724.0  
 
                        
 
                                
Operating margin, as reported (GAAP)
     8.5 %     (0.8 )%     4.9 %     6.2 %
Restructuring charges
     2.1       6.5       3.8       2.1  
Other transformation charges
     —       1.2       —       0.9  
 
                        
Non-GAAP operating margin
     10.6 %     6.9 %     8.7 %     9.2 %
 
                        
 
                                
Net earnings (loss), as reported (GAAP)
   $ 151.5     $ (6.7 )   $ 240.8     $ 310.1  
Restructuring charges, net of tax
     28.4       103.5       173.3       103.5  
Other transformation charges, net of tax
     —       19.0       —       41.2  
 
                        
Non-GAAP net income
   $ 179.9     $ 115.8     $ 414.1     $ 454.8  
 
                        
 
                                
EPS, as reported (GAAP)
   $ 0.20     $ (0.01 )   $ 0.32     $ 0.42  
Restructuring charges, net of tax
     0.04       0.14       0.24       0.14  
Other transformation charges, net of tax
     —       0.03       —       0.05  
 
                        
Non-GAAP EPS
   $ 0.24     $ 0.16     $ 0.56     $ 0.61  
 
                        
 
                                
Projected FY 2009 Earnings Per Share:
                                
EPS (GAAP)
   $ 0.44 - 0.45                          
Restructuring charges
     0.30                          
 
                              
Non-GAAP EPS
   $ 0.74 - 0.75                          
 
                              
- more -

 

 

- Page 14 -
STARBUCKS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(unaudited)
(in millions, except per share data)
                                 
    13 Weeks Ended     39 Weeks Ended  
    Jun 28,     Jun 29,     Jun 28,     Jun 29,  
    2009     2008     2009     2008  
         
United States
                                
Operating income (loss), as reported (GAAP)
   $ 204.6     $ (27.8 )   $ 429.2     $ 477.0  
Restructuring charges
     39.2       167.7       200.4       167.7  
Other transformation charges
     —       30.9       —       58.9  
 
                        
Non-GAAP operating income
   $ 243.8     $ 170.8     $ 629.6     $ 703.6  
 
                        
 
                                
Cost of sales including occupancy ratio, as reported (GAAP)
     41.0 %     43.4 %     42.5 %     41.9 %
Restructuring charges
     —       —       —       —  
Other transformation charges
     —       (0.3 )     —     nm  
 
                        
Non-GAAP cost of sales including occupancy ratio
     41.0 %     43.1 %     42.5 %     41.9 %
 
                        
 
                                
Store operating expense ratio, as reported (GAAP)
     37.0 %     40.7 %     37.7 %     38.6 %
Restructuring charges
     —       —       —       —  
Other transformation charges
     —       (1.3 )     —       (0.9 )
 
                        
Non-GAAP store operating expense ratio
     37.0 %     39.4 %     37.7 %     37.7 %
 
                        
 
                                
Store operating expense, as a % of company-operated retail revenues, as reported (GAAP)
     41.8 %     45.8 %     42.7 %     43.4 %
Restructuring charges
     —       —       —       —  
Other transformation charges
     —       (1.5 )     —       (1.0 )
 
                        
Non-GAAP store operating expense, as a % of company-operated retail revenues
     41.8 %     44.3 %     42.7 %     42.4 %
 
                        
 
                                
Operating margin, as reported (GAAP)
     11.2 %     (1.4 )%     7.6 %     7.9 %
Restructuring charges
     2.2       8.6       3.6       2.8  
Other transformation charges
     —       1.6       —       1.0  
 
                        
Non-GAAP operating margin
     13.4 %     8.8 %     11.2 %     11.7 %
 
                        
 
                                
International
                                
Operating income, as reported (GAAP)
   $ 34.4     $ 35.5     $ 53.3     $ 107.4  
Restructuring charges
     4.5       —       21.4       —  
Other transformation charges
     —       0.3       —       7.9  
 
                        
Non-GAAP operating income
   $ 38.9     $ 35.8     $ 74.7     $ 115.3  
 
                        
 
                                
Operating margin, as reported (GAAP)
     7.2 %     6.6 %     3.8 %     6.8 %
Restructuring charges
     0.9       —       1.5       —  
Other transformation charges
     —       0.1       —       0.5  
 
                        
Non-GAAP operating margin
     8.1 %     6.7 %     5.3 %     7.3 %
 
                        
###
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