10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended April 2, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number: 0-20322

STARBUCKS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Washington	91-1325671
(State or Other Jurisdiction of	(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)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x       No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x       Accelerated filer o       Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o       No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title	Shares Outstanding as of May 10, 2006
Common Stock, par value $0.001 per share	767,492,289

STARBUCKS CORPORATION

FORM 10-Q

For the Quarterly Period Ended April 2, 2006

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1	Financial Statements:
	Consolidated Statements of Earnings		1
	Consolidated Balance Sheets		2
	Consolidated Statements of Cash Flows		3
	Notes to Consolidated Financial Statements		4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3	Quantitative and Qualitative Disclosures About Market Risk		26
Item 4	Controls and Procedures		26
PART II. OTHER INFORMATION
Item 1	Legal Proceedings		27
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		27
Item 4	Submission of Matters to a Vote of Security Holders		27
Item 6	Exhibits		28
Signatures			29
Index to Exhibits			30
EXHIBIT 3.1
EXHIBIT 3.2
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except earnings per share)
(unaudited)

	13 Weeks Ended				26 Weeks Ended
	April 2,		April 3,		April 2,		April 3,
	2006		2005		2006		2005
Net revenues:
Company-operated retail	$	1,599,844	$	1,283,947	$	3,227,827	$	2,642,608
Specialty:
Licensing		202,354		161,292		421,504		318,505
Foodservice and other		83,624		73,477		170,583		147,147
Total specialty		285,978		234,769		592,087		465,652
Total net revenues		1,885,822		1,518,716		3,819,914		3,108,260
Cost of sales including occupancy costs		760,873		628,740		1,538,911		1,276,495
Store operating expenses		665,273		532,944		1,287,439		1,053,950
Other operating expenses		63,648		46,347		122,796		90,628
Depreciation and amortization expenses		94,508		87,772		185,796		166,331
General and administrative expenses		119,611		81,929		242,936		165,528
Subtotal operating expenses		1,703,913		1,377,732		3,377,878		2,752,932
Income from equity investees		19,985		16,294		39,705		29,105
Operating income		201,894		157,278		481,741		384,433
Interest and other income, net		3,063		4,014		3,411		9,136
Earnings before income taxes		204,957		161,292		485,152		393,569
Income taxes		77,641		60,831		183,680		148,434
Net earnings	$	127,316	$	100,461	$	301,472	$	245,135
Net earnings per common share - basic	$	0.17	$	0.13	$	0.39	$	0.31
Net earnings per common share - diluted	$	0.16	$	0.12	$	0.38	$	0.30
Weighted average shares outstanding:
Basic		767,445		801,926		767,250		801,480
Diluted		794,613		828,062		793,936		829,352

See Notes to Consolidated Financial Statements.

1

STARBUCKS CORPORATION

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

	April 2,		October 2,
	2006		2005
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	202,671	$	173,809
Short-term investments - available-for-sale securities		193,231		95,379
Short-term investments - trading securities		49,546		37,848
Accounts receivable, net of allowances of $4,627 and $3,079, respectively		190,631		190,762
Inventories		456,695		546,299
Prepaid expenses and other current assets		87,163		94,429
Deferred income taxes, net		87,477		70,808
Total current assets		1,267,414		1,209,334
Long-term investments - available-for-sale securities		37,639		60,475
Equity and other investments		214,780		201,089
Property, plant and equipment, net		1,963,701		1,842,019
Other assets		125,171		72,893
Other intangible assets		36,657		35,409
Goodwill		172,337		92,474
TOTAL ASSETS	$	3,817,699	$	3,513,693
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	230,719	$	220,975
Accrued compensation and related costs		283,342		232,354
Accrued occupancy costs		49,350		44,496
Accrued taxes		100,108		78,293
Short-term borrowings		95,000		277,000
Other accrued expenses		194,580		198,082
Deferred revenue		233,269		175,048
Current portion of long-term debt		755		748
Total current liabilities		1,187,123		1,226,996
Long-term debt		2,491		2,870
Other long-term liabilities		210,176		193,565
Shareholders’ equity:
Common stock ($0.001 par value) - authorized, 1,200,000,000; issued and outstanding, 769,274,760 and 767,442,110 shares, respectively (includes 3,394,200 common stock units in both periods)		769		767
Additional paid-in-capital		111,109		90,201
Other additional paid-in-capital		39,393		39,393
Retained earnings		2,240,459		1,938,987
Accumulated other comprehensive income		26,179		20,914
Total shareholders’ equity		2,417,909		2,090,262
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,817,699	$	3,513,693

See Notes to Consolidated Financial Statements.

2

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

	26 Weeks Ended
	April 2,			April 3,
	2006			2005
OPERATING ACTIVITIES:
Net earnings	$	301,472		$	245,135
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		198,633			179,857
Provision for impairments and asset retirements		9,153			6,554
Deferred income taxes, net		(57,131	)		(20,946	)
Equity in income of investees		(24,807	)		(15,947	)
Distributions from equity investees		16,393			11,287
Stock-based compensation		51,297			-
Tax benefit from exercise of stock options		520			88,781
Excess tax benefit from exercise of stock options		(54,872	)		-
Net amortization of premium on securities		1,209			7,112
Cash provided/(used) by changes in operating assets and liabilities:
Inventories		91,975			18,894
Accounts payable		8,270			(20,350	)
Accrued compensation and related costs		50,099			(5,488	)
Accrued taxes		76,716			12,322
Deferred revenue		58,250			47,061
Other operating assets and liabilities		34,815			23,272
Net cash provided by operating activities		761,992			577,544
INVESTING ACTIVITIES:
Purchase of available-for-sale securities		(356,681	)		(582,992	)
Maturity of available-for-sale securities		127,604			362,666
Sale of available-for-sale securities		154,250			196,395
Acquisitions, net of cash acquired		(90,219	)		(11,282	)
Net (purchases)/sales of equity, other investments and other assets		(19,103	)		12,676
Net additions to property, plant and equipment		(310,331	)		(311,454	)
Net cash used by investing activities		(494,480	)		(333,991	)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock		91,618			121,534
Excess tax benefit from exercise of stock options		54,872			-
Net repayments of revolving credit facility		(182,000	)		-
Repurchase of common stock		(204,186	)		(334,749	)
Principal payments on long-term debt		(372	)		(366	)
Net cash used by financing activities		(240,068	)		(213,581	)
Effect of exchange rate changes on cash and cash equivalents		1,418			2,117
Net increase in cash and cash equivalents		28,862			32,089
CASH AND CASH EQUIVALENTS:
Beginning of period		173,809			145,053
End of the period	$	202,671		$	177,142
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the 26 weeks ended:
Interest	$	4,444		$	108
Income taxes	$	167,286		$	68,523

See Notes to Consolidated Financial Statements.

3

STARBUCKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the 13 Weeks and 26 Weeks Ended April 2, 2006, and April 3, 2005

Note 1: Financial Statement Preparation

The unaudited consolidated financial statements as of April 2, 2006, and for the 13-week and 26-week periods ended April 2, 2006, and April 3, 2005, have been prepared by Starbucks Corporation (“Starbucks” or the “Company”) under the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the financial information for the 13-week and 26-week periods ended April 2, 2006, and April 3, 2005, reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods.

The financial information as of October 2, 2005, is derived from the Company’s audited consolidated financial statements and notes for the fiscal year ended October 2, 2005 (“Fiscal 2005”), included in Item 8 in the Fiscal 2005 Annual Report on Form 10-K (“10-K”). The information included in this Form 10-Q should be read in conjunction with management’s discussion and analysis and notes to the financial statements in the 10-K.

Certain reclassifications of prior year’s balances have been made to conform to the current format.

The results of operations for the 13-week and 26-week periods ended April 2, 2006, are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending October 1, 2006.

Note 2: Business Acquisitions

In January 2006, Starbucks increased its equity ownership to 100% in its operations in Hawaii and Puerto Rico. Previously the Company owned 5% of both Coffee Partners Hawaii and Cafe´ del Caribe in Puerto Rico. Because Coffee Partners Hawaii was a general partnership, the equity method of accounting was previously applied. Retroactive application of the equity method of accounting for the Puerto Rico investment, which was previously accounted for under the cost method, resulted in a reduction of retained earnings of $0.5 million as of April 2, 2006 for the cumulative effect of the accounting change. Previously reported earnings per share amounts were not impacted as a result of this acquisition.

As shown in the tables below, the cumulative effect of the accounting change for financial results previously reported under the cost method and as restated in this Report under the equity method resulted in reductions of net earnings of $34 thousand for the 13 weeks ended January 1, 2006, and $97 thousand for the fiscal year ended October 2, 2005 (in thousands):

	Jan 1, 2006
Fiscal quarter ended	(13 Weeks)
Net earnings, as previously reported	$	174,190
Effect of change to equity method		(34	)
Net earnings, as restated for Puerto Rico acquisition	$	174,156

The following table summarizes the effects of the investment accounting change on net earnings for the periods indicated (in thousands):

	Jan 2, 2005			Apr 3, 2005			Jul 3, 2005			Oct 2, 2005			Oct 2, 2005
Fiscal period ended	(13 Weeks)			(13 Weeks)			(13 Weeks)			(13 Weeks)			(52 Weeks)
Net earnings, as previously reported	$	144,710		$	100,482		$	125,528		$	123,747		$	494,467
Effect of change to equity method		(36	)		(21	)		(15	)		(25	)		(97	)
Net earnings, as restated for Puerto Rico acquisition	$	144,674		$	100,461		$	125,513		$	123,722		$	494,370

Note 3: Summary of Significant Accounting Policies

Accounting for Stock-Based Compensation

The Company maintains several equity incentive plans under which it may grant non-qualified stock options, incentive stock options, restricted stock units or stock appreciation rights to employees, non-employee directors and consultants. The Company also has employee stock purchase plans (“ESPP”).

Prior to the October 3, 2005 adoption of the Financial Accounting Standards Board (“FASB”) Statement No. 123(R), “Share-Based Payment” (“SFAS 123R”), Starbucks accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations.

4

Accordingly, because the stock option grant price equaled the market price on the date of grant, and any purchase discounts under the Company’s stock purchase plans were within statutory limits, no compensation expense was recognized by the Company for stock-based compensation. As permitted by SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), stock-based compensation was included as a pro forma disclosure in the notes to the consolidated financial statements.

Effective October 3, 2005, the beginning of Starbucks first fiscal quarter of 2006, the Company adopted the fair value recognition provisions of SFAS 123R, using the modified-prospective transition method. Under this transition method, stock-based compensation expense was recognized in the consolidated financial statements for granted, modified, or settled stock options and for expense related to the ESPP, since the related purchase discounts exceeded the amount allowed under SFAS 123R for non-compensatory treatment. Compensation expense recognized included the estimated expense for stock options granted on and subsequent to October 3, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R, and the estimated expense for the portion vesting in the period for options granted prior to, but not vested as of October 3, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123. Results for prior periods have not been restated, as provided for under the modified-prospective method.

Total stock-based compensation expense recognized in the consolidated statement of earnings for the 13 weeks ended April 2, 2006, was $27.8 million before income taxes and consisted of stock option and ESPP expense of $25.4 million and $2.4 million, respectively. Total stock-based compensation expense recognized in the consolidated statement of earnings for the 26 weeks ended April 2, 2006, was $50.6 million before income taxes and consisted of stock option and ESPP expense of $45.9 million and $4.7 million, respectively. The related total tax benefit was $9.6 million and $17.3 million for the 13 weeks and 26 weeks ended April 2, 2006, respectively. Capitalized stock-based compensation at April 2, 2006 was $0.8 million, and was included in property, plant and equipment, and inventory on the consolidated balance sheet.

Prior to the adoption of SFAS 123R, Starbucks presented all tax benefits resulting from the exercise of stock options as operating cash inflows in the consolidated statements of cash flows, in accordance with the provisions of the Emerging Issues Task Force (“EITF”) Issue No 00-15, “Classification in the Statement of Cash Flows of the Income Tax Benefit Received by a Company upon Exercise of a Nonqualified Employee Stock Option.” SFAS 123R requires the benefits of tax deductions in excess of the compensation cost recognized for those options to be classified as financing cash inflows rather than operating cash inflows, on a prospective basis. This amount is shown as “Excess tax benefit from exercise of stock options” on the consolidated statement of cash flows.

For option grants made in November 2003 and thereafter, the Company may provide for immediate vesting upon retirement for optionees who have attained at least 10 years of service and are age 55 or older. Prior to adoption of SFAS 123R, the Company amortized the expense over the related vesting period with acceleration of expense upon retirement. With the adoption of SFAS 123R, the accounting treatment for retirement features changed. Expense for awards made prior to adoption of SFAS 123R is still amortized over the vesting period until retirement, at which point any remaining unrecognized expense is immediately recognized. For awards made on or after October 3, 2005, the related expense is recognized either from grant date through the date the employee reaches the years of service and age requirements, or from grant date through the stated vesting period, whichever is shorter.

The following table shows the effect on net earnings and earnings per share had compensation cost been recognized based upon the estimated fair value on the grant date of stock options, and ESPP, in accordance with SFAS 123, as amended by SFAS No. 148 “Accounting for Stock-Based Compensation – Transition and Disclosure” (in thousands, except earnings per share) :

	13 Weeks Ended			26 Weeks Ended
	April 3,			April 3,
	2005			2005
Net earnings	$	100,461		$	245,135
Deduct: stock-based compensation expense determined under fair value method, net of tax		(15,983	)		(28,057	)
Pro forma net income	$	84,478		$	217,078
Earnings per share:
Basic — as reported	$	0.13		$	0.31
Deduct: stock-based compensation expense determined under fair value method, net of tax		(0.02	)		(0.04	)
Basic — pro forma	$	0.11		$	0.27
Diluted — as reported	$	0.12		$	0.30
Deduct: stock-based compensation expense determined under fair value method, net of tax		(0.02	)		(0.04	)
Diluted — pro forma	$	0.10		$	0.26

Disclosures for the period ended April 2, 2006 are not presented because the amounts are recognized in the consolidated financial statements.

5

The fair value of stock awards was estimated at the date of grant using the Black-Scholes-Merton (“BSM”) option valuation model with the following weighted average assumptions for the 13 weeks ended April 2, 2006 and April 3, 2005:

	Employee Stock Options		ESPP
		April 3,		April 3,
	April 2,	2005	April 2,	2005
13 Weeks Ended	2006	(Pro forma)	2006	(Pro forma)
Expected term (in years)	4.4	4.1	0.25 – 3.0	0.25 – 3.0
Expected stock price volatility	28%	29%	25% – 50%	30% – 58%
Risk-free interest rate	4.6%	3.3%	2.3% – 4.6%	2.7% – 2.9%
Expected dividend yield	0.0%	0.0%	0.0%	0.0%
Estimated fair value per option granted	$10.86	$7.29	$6.18	$5.46

The fair value of stock awards was estimated at the date of grant using the BSM option valuation model with the following weighted average assumptions for the 26 weeks ended April 2, 2006 and April 3, 2005:

	Employee Stock Options		ESPP
		April 3,		April 3,
	April 2,	2005	April 2,	2005
26 Weeks Ended	2006	(Pro forma)	2006	(Pro forma)
Expected term (in years)	4.4	3.7	0.25 – 3.0	0.25 – 3.0
Expected stock price volatility	29%	34%	22% – 50%	20% – 58%
Risk-free interest rate	4.4%	3.6%	2.3% – 4.6%	1.9% – 2.9%
Expected dividend yield	0.0%	0.0%	0.0%	0.0%
Estimated fair value per option granted	$9.54	$8.25	$5.68	$4.99

The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. For 2006, expected stock price volatility is based on a combination of historical volatility of the Company’s stock and the one-year implied volatility of its traded options, for the related vesting periods. Prior to the adoption of SFAS 123R, expected stock price volatility was estimated using only historical volatility. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The Company has not paid dividends in the past and does not plan to pay any dividends in the near future.

The BSM option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, particularly for the expected term and expected stock price volatility. The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate. Because Company stock options do not trade on a secondary exchange, employees do not derive a benefit from holding stock options unless there is an increase, above the grant price, in the market price of the Company’s stock. Such an increase in stock price would benefit all shareholders commensurately. See Note 9 for additional details.

Stored Value Cards

Revenues from the Company’s stored value cards, such as the Starbucks Card, are recognized when tendered for payment, or upon redemption. Outstanding customer balances are included in “Deferred revenue” on the consolidated balance sheets. There are no expiration dates on the Company’s stored value cards, and Starbucks does not charge any service fees that cause a decrement to customer balances.

While the Company will continue to honor all stored value cards presented for payment, management may determine the likelihood of redemption to be remote for certain card balances due to, among other things, long periods of inactivity. In these circumstances, to the extent management determines there is no requirement for remitting card balances to government agencies under unclaimed property laws, card balances may be recognized in the consolidated statements of earnings in “Income and other income, net.” For the 13 weeks and 26 weeks ended April 2, 2006, income recognized on unredeemed stored value card balances was $1.1 million and $2.3 million, respectively. There was no income recognized on unredeemed stored value card balances during the 13 weeks or 26 weeks ended April 3, 2005.

Recently Issued Accounting Pronouncements

In November 2005, the FASB issued Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards” (“FSP 123R-3”). The Company has elected to adopt the alternative transition method provided in FSP 123R-3 for calculating the tax effects of stock-based compensation under SFAS 123R. The alternative transition method includes

6

simplified methods to establish the beginning balance of the additional paid-in-capital pool (“APIC pool”) related to the tax effects of stock-based compensation, and for determining the subsequent impact on the APIC pool and consolidated statements of cash flows of the tax effects of stock-based compensation awards that are outstanding upon adoption of SFAS 123R.

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 requires the recognition of a liability for the fair value of a legally-required conditional asset retirement obligation when incurred, if the liability’s fair value can be reasonably estimated. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for fiscal years ending after December 15, 2005, or no later than Starbucks fiscal fourth quarter of 2006. The Company has not yet determined the impact of adoption on its consolidated financial statements.

In December 2004, the FASB issued Staff Position No. FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP 109-2”). The American Jobs Creation Act allows a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer (“repatriation provision”), provided certain criteria are met. The law allows the Company to make an election to repatriate earnings through fiscal 2006. FSP 109-2 provides accounting and disclosure guidance for the repatriation provision. Although FSP 109-2 was effective upon its issuance, it allows companies additional time beyond the enactment date to evaluate the effects of the provision on its plan for investment or repatriation of unremitted foreign earnings. The Company continues to evaluate the impact of the new Act to determine whether it will repatriate foreign earnings and the impact, if any, this pronouncement will have on its consolidated financial statements. As of April 2, 2006, the Company has not made an election to repatriate earnings under this provision. The Company may or may not elect to repatriate earnings in fiscal 2006. Earnings under consideration for repatriation range from $0 to $75 million and the related income tax effects range from $0 to $5 million. As provided in FSP 109-2, Starbucks has not adjusted its tax expense or deferred tax liability to reflect the repatriation provision.

Note 4: Derivative Financial Instruments

The Company manages its exposure to various risks within the consolidated financial statements according to an umbrella risk management policy. Under this policy, Starbucks may engage in transactions involving various derivative instruments with maturities generally not longer than five years, to hedge assets, liabilities, revenues and purchases.

Cash Flow Hedges

Starbucks, which include subsidiaries that use their local currency as their functional currency, enters into cash flow derivative instruments to hedge portions of anticipated revenue streams and inventory purchases. Current forward contracts hedge monthly forecasted revenue transactions denominated in Japanese yen and Canadian dollars, as well as forecasted inventory purchases denominated in U.S. dollars, euros and Swiss francs, for foreign operations. Additionally, the Company has swap contracts to hedge a portion of its forecasted U.S. fluid milk purchases. The effect of these swaps will fix the price paid by Starbucks for the monthly volume of milk purchases covered under the contracts.

The Company had accumulated net derivative losses of $3.2 million, net of taxes, in other comprehensive income as of April 2, 2006, related to cash flow hedges. Of this amount, $2.4 million of net derivative losses pertain to hedging instruments that will be dedesignated within 12 months and will also continue to experience fair value changes before affecting earnings. No cash flow hedges were discontinued during the 13-week or 26-week periods ended April 2, 2006, and April 3, 2005. Current contracts will expire within 30 months.

Net Investment Hedges

Net investment derivative instruments hedge the Company’s equity method investment in Starbucks Coffee Japan, Ltd. to minimize foreign currency exposure to fluctuations in the Japanese yen. The Company applies the spot-to-spot method for these forward foreign exchange contracts, and under this method the change in fair value of the forward contracts attributable to the changes in spot exchange rates (the effective portion) is reported in other comprehensive income. The remaining change in fair value of the forward contract (the ineffective portion) is reclassified into earnings in “Interest and other income, net.” The Company had accumulated net derivative losses of $2.0 million, net of taxes, in other comprehensive income as of April 2, 2006, related to net investment derivative hedges. Current contracts expire within 25 months.

7

The following table presents the net gains and losses reclassified from other comprehensive income into the consolidated statements of earnings during the periods indicated for cash flow and net investment hedges (in thousands):

	13 Weeks Ended						26 Weeks Ended
	April 2,			April 3,			April 2,			April 3,
	2006			2005			2006			2005
Cash flow hedges:
Reclassified gains/(losses) into total net revenues	$	451		$	(351	)	$	872		$	(763	)
Reclassified losses into cost of sales		(1,932	)		(1,135	)		(3,568	)		(2,184	)
Net reclassified losses — cash flow hedges		(1,481	)		(1,486	)		(2,696	)		(2,947	)
Net reclassified gains — net investment hedges		576			46			999			210
Total	$	(905	)	$	(1,440	)	$	(1,697	)	$	(2,737	)

Note 5: Inventories

Inventories consist of the following (in thousands):

	April 2,		October 2,		April 3,
	2006		2005		2005
Coffee:
Unroasted	$	245,117	$	319,745	$	222,896
Roasted		63,486		56,231		41,099
Other merchandise held for sale		79,250		109,094		78,733
Packaging and other supplies		68,842		61,229		63,345
Total	$	456,695	$	546,299	$	406,073

The Company had committed to fixed-price purchase contracts for green coffee totaling $424 million and $333 million as of April 2, 2006 and April 3, 2005, respectively. The Company believes, based on relationships established with its suppliers in the past, the risk of nondelivery on such purchase commitments is remote.

Note 6: Property, Plant, and Equipment

Property, plant and equipment are recorded at cost and consist of the following (in thousands):

	April 2,			October 2,
	2006			2005
Land	$	17,247		$	13,833
Buildings		72,612			68,180
Leasehold improvements		2,154,957			1,947,963
Store equipment		715,680			646,792
Roasting equipment		178,206			168,934
Furniture, fixtures and other		503,415			476,372
		3,642,117			3,322,074
Less: accumulated depreciation and amortization		(1,791,828	)		(1,625,564	)
		1,850,289			1,696,510
Work in progress		113,412			145,509
Property, plant and equipment, net	$	1,963,701		$	1,842,019

Note 7: Short-term Borrowings

As of April 2, 2006 the Company had $95 million outstanding under its revolving credit facility, which was entered into in August 2005, as well as an outstanding letter of credit of $11.9 million. As of October 2, 2005, the Company had $277 million outstanding, with no outstanding letters of credit. During the 26-weeks ended April 2, 2006, the Company had additional borrowings of $178 million under the credit facility and made principal repayments of $360 million. Interest expense on the Company’s short-term borrowings for the 13 weeks and 26 weeks ended April 2, 2006 was $1.4 million and $4.0 million, respectively. The weighted average contractual interest rates at April 2, 2006 and October 2, 2005 were 5.0% and 4.0%, respectively. The credit facility contains provisions that require the Company to maintain compliance with certain covenants, including the maintenance of certain financial ratios. As of April 2, 2006 and October 2, 2005, the Company was in compliance with each of these covenants.

Note 8: Shareholders’ Equity

Under the Company’s authorized share repurchase program, Starbucks acquired 6.1 million shares at an average price of $29.00 for a total amount of $178 million during the 26-week period ended April 2, 2006. Starbucks acquired 13.1 million shares at an average price of $25.56 for a total amount of $335 million during the 26-week period ended April 3, 2005. As of April 2, 2006, the Company

8

had 16.0 million additional shares authorized for repurchase. Share repurchases were funded through cash, cash equivalents, available-for-sale securities and borrowings under the revolving credit facility and were part of the Company’s active capital management program.

Comprehensive Income

Comprehensive income includes all changes in equity during the period, except those resulting from transactions with shareholders and subsidiaries of the Company. It has two components: net earnings and other comprehensive income. Accumulated other comprehensive income reported on the Company’s consolidated balance sheets consists of foreign currency translation adjustments and the unrealized gains and losses, net of applicable taxes, on available-for-sale securities and on derivative instruments designated and qualifying as cash flow and net investment hedges.

Comprehensive income, net of related tax effects, is as follows (in thousands):

	13 Weeks Ended						26 Weeks Ended
	April 2,			April 3,			April 2,			April 3,
	2006			2005			2006			2005
Net earnings	$	127,316		$	100,461		$	301,472		$	245,135
Unrealized holding gains/(losses) on cash flow hedging instruments		570			1,045			(698	)		(3,020	)
Unrealized holding gains/(losses) on net investment hedging instruments		(93	)		1,185			1,244			(926	)
Unrealized holding gains/(losses) on available-for-sale securities		911			(1,055	)		867			(1,342	)
Reclassification adjustment for losses realized in net earnings		922			1,257			2,022			1,803
Net unrealized gains/(losses)		2,310			2,432			3,435			(3,485	)
Translation adjustment		5,450			(12,910	)		1,830			16,266
Total comprehensive income	$	135,076		$	89,983		$	306,737		$	257,916

The favorable translation adjustment change for the 13-week period ended April 2, 2006, of $5.4 million was primarily due to the weakening of the U.S. dollar against several currencies, such as the euro, British pound sterling and Korean won. The unfavorable translation adjustment change for the 13-week period ended April 3, 2005, of $12.9 million was primarily due to the strengthening of the U.S. dollar against several currencies, such as the euro, Japanese yen and British pound sterling.

The favorable translation adjustment change for the 26-week period ended April 2, 2006, of $1.8 million was primarily due to the weakening of the U.S. dollar against several currencies, such as the Korean won, Taiwan dollar and Chinese renminbi, partially offset by the strengthening of the U.S. dollar against the Japanese yen. The favorable translation adjustment change for the 26-week period ended April 3, 2005, of $16.3 million was primarily due to the weakening of the U.S. dollar against several currencies, such as the British pound sterling, Japanese yen, euro and Canadian dollar.

The components of accumulated other comprehensive income, net of tax, were as follows (in thousands):

	April 2,			October 2,
	2006			2005
Net unrealized holding gains/(losses) on available-for-sale securities	$	222		$	(651	)
Net unrealized holding losses on hedging instruments		(5,224	)		(7,786	)
Translation adjustment		31,181			29,351
Accumulated other comprehensive income	$	26,179		$	20,914

Note 9: Stock-Based Compensation

Stock Option Plans

Stock options to purchase the Company’s common stock are granted at prices at or above the fair market value on the date of grant. Options generally become exercisable in three or four equal installments beginning a year from the date of grant and generally expire 10 years from the date of grant. Options granted to non-employee directors generally vest over one year. Nearly all outstanding stock options are non-qualified stock options.

The fair value of each stock option granted is estimated on the date of grant using the BSM option valuation model. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience. Options granted are valued using the multiple option valuation approach, and the resulting expense is recognized using the graded, or accelerated, attribution method, consistent with the multiple option valuation approach. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. Prior to the adoption of SFAS 123R, the effect of forfeitures on the pro forma expense

9

amounts was recognized as the forfeitures occurred.

A summary of the Company’s stock option activity during the 26 weeks ended April 2, 2006 is presented in the following table:

	Shares		Weighted Average		Weighted Average		Aggregate Intrinsic
	Subject to		Exercise Price per		Remaining		Value
	Options		Share		Contractual Life		(in thousands)
Outstanding, October 2, 2005		72,458,906	$	13.22		6.3	$	857,319
Granted		12,924,332		30.37
Exercised		(7,147,282)		10.16
Cancelled		(1,818,944)		23.68
Outstanding, April 2, 2006		76,417,012		16.16		6.4		1,640,797
Exercisable, April 2, 2006		45,351,971		10.27		4.9		1,240,751

The aggregate intrinsic value in the table above is before applicable income taxes, based on the Company’s closing stock price of $37.63 as of the last business day of the period ended April 2, 2006, which would have been received by the optionees had all options been exercised on that date. As of April 2, 2006, total unrecognized stock-based compensation expense related to nonvested stock options was approximately $118 million, which is expected to be recognized over a weighted average period of approximately 24 months. During the 26 weeks ended April 2, 2006, the total intrinsic value of stock options exercised was $155.3 million. During the 26 weeks ended April 2, 2006, the total fair value of options vested was $9.3 million.

The Company issues new shares of common stock upon exercise of stock options.

As of April 2, 2006, there were 61.4 million shares of common stock available for issuance pursuant to future stock option grants. Additional information regarding options outstanding as of April 2, 2006, is as follows:

	Options Outstanding				Options Exercisable
			Weighted
			Average	Weighted			Weighted
			Remaining	Average			Average
Range of			Contractual	Exercise			Exercise
Exercise Prices	Shares		Life (Years)	Price	Shares		Price
$3.96 —     $6.56		15,960,151	2.0	$  5.00		15,960,151		$   5.00
6.64 —     10.32		17,356,628	5.7	9.42		15,560,927		9.32
10.38 —     15.23		16,030,161	7.2	14.16		9,909,122		13.78
15.76 —     27.32		14,328,780	8.6	26.35		3,764,838		26.55
27.58 —     36.51		12,741,292	9.6	30.37		156,933		28.83
		76,417,012	6.4	16.16		45,351,971		10.27

Employee Stock Purchase Plans

The Company has an employee stock purchase plan allowing eligible employees to contribute up to 10% of their base earnings toward the quarterly purchase of the Company’s common stock. The employee’s purchase price is 85% of the lesser of the fair market value of the stock on the first business day or the last business day of the quarterly offering period. Employees may purchase shares having a fair market value of up to $25,000 (measured as of the first day of each quarterly offering period for each calendar year). The total number of shares issuable under the plan is 32.0 million. There were 795,468 shares issued under the plan during the 26 weeks ended April 2, 2006 at an average price of $23.62. Since inception of the plan, 15.6 million shares have been purchased, leaving 16.4 million shares available for future issuance.

Starbucks has an additional employee stock purchase plan in the United Kingdom that allows eligible U.K. employees to save toward the purchase of the Company’s common stock. Under the Save-As-You-Earn (“SAYE”) plan the employee’s purchase price is 85% of the fair value of the stock on the first business day of a three-year offering period. The total number of shares issuable under the plan is 1.2 million. There were 29,382 shares issued under the plan during the 26 weeks ended April 2, 2006 at $8.84, and 1.1 million shares remain available for future issuance. During fiscal 2004, the Company suspended future offerings under this plan. The last offering was made in December 2002 and matured in February 2006.

A new employee stock purchase plan, the U.K. Share Incentive Plan, was introduced during fiscal 2004 to replace the SAYE plan. It allows eligible U.K. employees to purchase shares of common stock through payroll deductions during six-month offering periods at the lesser of the fair market value of the stock at the beginning or at the end of the offering period. The Company will award one matching share for each six shares purchased under the plan. The total number of shares issuable under the plan is 1.4 million. There were 5,948 shares issued under the plan during the 26 weeks ended April 2, 2006 at $24.91. As of April 2, 2006, 1.38 million shares were available for future issuance.

10

Note 10: Earnings Per Share

The following table represents the calculation of net earnings per common share – basic and diluted (in thousands, except earnings per share):

	13 Weeks Ended				26 Weeks Ended
	April 2,		April 3,		April 2,		April 3,
	2006		2005		2006		2005
Net earnings	$	127,316	$	100,461	$	301,472	$	245,135
Weighted average common shares and common stock units outstanding (for basic calculation)		767,445		801,926		767,250		801,480
Dilutive effect of outstanding common stock options		27,168		26,136		26,686		27,872
Weighted average common and common equivalent shares outstanding (for diluted calculation)		794,613		828,062		793,936		829,352
Net earnings per common share — basic	$	0.17	$	0.13	$	0.39	$	0.31
Net earnings per common and common equivalent share — diluted	$	0.16	$	0.12	$	0.38	$	0.30

Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options using the treasury stock method. Potential dilutive shares are excluded from the computation of earnings per share if their effect is antidilutive. For the 13-week period ended April 2, 2006, antidilutive options totaled 12.0 million, and for the 13-week period ended April 3, 2005, totaled 13.6 million. For the 26-week period ended April 2, 2006, antidilutive options totaled 10.1 million, and for the 26-week period ended April 3, 2005, totaled 10.3 million.

Note 11: Commitments and Contingencies

Guarantees

The Company has unconditionally guaranteed the repayment of certain Japanese yen-denominated bank loans and related interest and fees of an unconsolidated equity investee, Starbucks Coffee Japan, Ltd. The guarantees continue until the loans, including accrued interest and fees, have been paid in full, with the final loan amount due in 2014. The maximum amount is limited to the sum of unpaid principal and interest amounts, as well as other related expenses. These amounts will vary based on fluctuations in the yen foreign exchange rate. As of April 2, 2006, the maximum amount of the guarantees was approximately $6.7 million. Because there has been no modification of these loan guarantees subsequent to the Company’s adoption of FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indebtedness of Others,” Starbucks has applied the disclosure provisions only and has not recorded the guarantee on its consolidated balance sheet.

Starbucks has commitments under which it has unconditionally guaranteed its proportionate share, or 50%, of certain borrowings of unconsolidated equity investees. The Company’s maximum exposure is approximately $6.9 million, excluding interest and other related costs and the majority of these commitments expire in 2007 and 2011. As of April 2, 2006, the Company recorded $2.8 million to “Equity and other investments” and “Other long-term liabilities” on the consolidated balance sheet for the fair value of the guarantee arrangements.

Product Warranties

Coffee brewing and espresso equipment sold to the Company’s licensees for use in retail licensing operations are under warranty for defects in materials and workmanship for a period ranging from 12 months to 24 months. The Company establishes an accrual for estimated warranty costs at the time of sale, based on historical experience. Product warranty costs and changes to the related accrual were not significant for the 26-week period ended April 2, 2006.

Legal Proceedings

On June 3, 2004, two then-current employees of the Company filed a lawsuit, entitled Sean Pendlebury and Laurel Overton v. Starbucks Coffee Company, in the U.S. District Court for the Southern District of Florida claiming the Company violated requirements of the Fair Labor Standards Act (“FLSA”). The suit alleges that the Company misclassified its retail store managers as exempt from the overtime provisions of the FLSA, and that each manager therefore is entitled to overtime compensation for any week in which he or she worked more than 40 hours during the three years before joining the suit as a plaintiff, and for as long as they remain a manager thereafter. Plaintiffs seek to represent themselves and all similarly situated U.S. current and former store managers of the Company. Plaintiffs seek reimbursement for an unspecified amount of unpaid overtime compensation, liquidated damages, attorney’s fees and costs. Plaintiffs also filed on June 3, 2004 a motion for conditional collective action treatment and court-supervised notice to additional putative class members under the opt-in procedures in section 16(b) of the FLSA. On January 3, 2005, the district court entered an order authorizing nationwide notice of the lawsuit to all current and former store managers employed by the Company during the three years before the suit was filed. The Company filed a motion for summary judgment as to the claims of the named

11

plaintiffs on September 24, 2004. The court denied that motion because this case is in the early stages of discovery, but the court noted that the Company may resubmit this motion at a later date. Starbucks believes that the plaintiffs are properly classified as exempt under the federal wage laws and that a loss in this case is unlikely. Due to the early status of this case, the Company cannot estimate the possible loss to the Company, if any. Trial is currently set for early 2007. The Company intends to vigorously defend the lawsuit.

On March 11, 2005, a former employee of the Company filed a lawsuit, entitled James Falcon v. Starbucks Corporation and Does 1 through 100, in the U.S. District Court for the Southern District of Texas claiming that the Company violated requirements of the FLSA. Specifically, the plaintiff claims that the Company misclassified its retail assistant store managers as exempt from the overtime provisions of the FLSA and that each assistant manager therefore is entitled to overtime compensation for any week in which he or she worked more than 40 hours during the three years before joining the suit as a plaintiff, and for as long as they remain an assistant manager thereafter. On August 18, 2005, the plaintiff amended his complaint to include allegations that he and other retail assistant store managers were not paid overtime compensation for all hours worked in excess of 40 hours in a work week after they were re-classified as non-exempt employees in September 2002. In both claims, Plaintiff seeks to represent himself and a putative class of all current and former assistant store managers employed by the Company in the United States from March 11, 2002 until the present. He also seeks, on behalf of himself and the class, reimbursement for an unspecified amount of unpaid overtime compensation, liquidated damages, injunctive relief, and attorney’s fees and costs. On September 13, 2005, the plaintiff filed a motion for conditional collective action treatment and court-supervised notice to all putative class members under the opt-in procedures in section 16(b) of the FLSA. On November 29, 2005, the court entered an order authorizing notice to the class of the existence of the lawsuit and their opportunity to join as plaintiffs. The Company has a policy requiring that all non-exempt partners, including assistant store managers, be paid for all hours worked, including any hours worked in excess of 40 per week. The Company also believes that this policy is, and at all relevant times has been, communicated and followed consistently. Further, the Company believes that the plaintiff and other assistant store managers were properly classified as exempt under the FLSA prior to September 2002. At this early stage of the case, the Company cannot estimate the possible loss to the Company, if any, and believes that a loss in this case is unlikely. No trial date has been set. The Company intends to vigorously defend the lawsuit.

On October 8, 2004, a former hourly employee of the Company filed a lawsuit in San Diego County Superior Court entitled Jou Chau v. Starbucks Coffee Company. The lawsuit alleges that the Company violated the California Labor Code by allowing shift supervisors to receive tips. More specifically, the lawsuit alleges that since shift supervisors direct the work of baristas, they qualify as “agents” of the Company and are therefore excluded from receiving tips under California Labor Code Section 351, which prohibits employers and their agents from collecting or receiving tips left by patrons for other employees. The lawsuit further alleges that because the tipping practices violate the Labor Code, they also are unfair practices under the California Unfair Competition Law. In addition to recovery of an unspecified amount of tips distributed to shift supervisors, the lawsuit seeks penalties under California Labor Code Section 203 for willful failure to pay wages due. Plaintiff also seeks attorneys’ fees and costs. On March 30, 2006, the Court issued an order certifying the case as a class action, with the plaintiff representing a class of all persons employed as baristas in the state of California since October 8, 2000. The size of the class has yet to be determined. Due to the early status of this case, the Company cannot estimate the possible loss to the Company, if any. The Company believes its practices comply with California law, and the Company intends to vigorously defend the lawsuit. There has been no trial date set in the case.

The Company is party to various other legal proceedings arising in the ordinary course of its business, but it is not currently a party to any legal proceeding that management believes would have a material adverse effect on the consolidated financial position or results of operations of the Company.

12

Note 12: Segment Reporting

Segment information is prepared on the basis that the Company’s management reviews financial information for operational decision making purposes. The tables below present information by operating segment (in thousands):

	United				Unallocated
13 Weeks Ended	States(1)		International(1)		Corporate(2)			Total
April 2, 2006
Total net revenues	$	1,570,496	$	315,326	$	-		$	1,885,822
Earnings/(loss) before income taxes		266,314		22,728		(84,085	)		204,957
Depreciation and amortization expenses		69,102		16,745		8,661			94,508
Income from equity investees		10,761		9,224		-			19,985
Provision for impairments and asset retirements		1,870		3,684		(150	)		5,404
April 3, 2005
Total net revenues	$	1,276,418	$	242,298	$	-		$	1,518,716
Earnings/(loss) before income taxes		195,941		17,408		(52,057	)		161,292
Depreciation and amortization expenses		64,819		14,128		8,825			87,772
Income from equity investees		8,564		7,730		-			16,294
Provision for impairments and asset retirements		1,271		1,501		1,389			4,161

	United				Unallocated
26 Weeks Ended	States(1)		International(1)		Corporate(2)			Total
April 2, 2006
Total net revenues	$	3,191,077	$	628,837	$	-		$	3,819,914
Earnings/(loss) before income taxes		605,625		58,299		(178,772	)		485,152
Depreciation and amortization expenses		136,820		31,754		17,222			185,796
Income from equity investees		22,460		17,245		-			39,705
Provision for impairments and asset retirements		3,912		5,256		(15	)		9,153
April 3, 2005
Total net revenues	$	2,615,191	$	493,069	$	-		$	3,108,260
Earnings/(loss) before income taxes		461,473		37,129		(105,033	)		393,569
Depreciation and amortization expenses		122,154		27,217		16,960			166,331
Income from equity investees		17,272		11,833		-			29,105
Provision for impairments and asset retirements		3,350		1,815		1,389			6,554

(1)	For purposes of internal management and segment reporting, Company-operated operations in Hawaii and Puerto Rico are included in the International segment to conform to the organizational alignment of the Company.
(2)	Unallocated corporate includes certain general and administrative expenses, related depreciation and amortization expenses and certain amounts included in “Interest and other income, net” on the consolidated statements of earnings.

The table below represents information by geographic area (in thousands):

	13 Weeks Ended				26 Weeks Ended
	April 2,		April 3,		April 2,		April 3,
	2006		2005		2006		2005
Net revenues from external customers:
United States	$	1,587,249	$	1,279,019	$	3,212,116	$	2,620,721
Foreign countries		298,573		239,697		607,798		487,539
Total	$	1,885,822	$	1,518,716	$	3,819,914	$	3,108,260

No customer accounts for 10% or more of the Company’s revenues. Revenues from foreign countries are based on the geographic location of the customers and consist primarily of revenues from the United Kingdom and Canada, which together account for approximately 76% of foreign net revenues.

13

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements herein, including anticipated store openings, trends in or expectations regarding Starbucks Corporation’s revenue, comparable store sales and net earnings growth, effective tax rate, cash flow requirements and capital expenditures, all constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, coffee, dairy and other raw materials prices and availability, successful execution of internal performance and expansion plans, fluctuations in United States and international economies and currencies, ramifications from the war on terrorism, or other international events or developments, the impact of competitors’ initiatives, the effect of legal proceedings, and other risks detailed herein and in Starbucks Corporation’s other filings with the Securities and Exchange Commission (“SEC”), including the Item 1A. “Risks Factors” section of the Starbucks Annual Report on Form 10-K for the fiscal year ended October 2, 2005.

A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Users should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. The Company is under no obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

This information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2005.

General

Starbucks Corporation’s fiscal year ends on the Sunday closest to September 30. Fiscal year 2005 had 52 weeks and the fiscal year ending on October 1, 2006 will also include 52 weeks.

Management Overview

During both the 13 weeks and 26 weeks ended April 2, 2006, the Company’s focus on execution in all areas of its business, from U.S. and International Company-operated retail operations to the Company’s specialty businesses, delivered strong financial performance. Management believes that its ability to achieve the balance between growing the core business and building the foundation for future growth is the key to increasing long-term shareholder value. Starbucks quarterly and year to date fiscal 2006 performance reflects the Company’s continuing commitment to achieving this balance.

The primary driver of the Company’s revenue growth continues to be the opening of new retail stores, both Company-operated and licensed, in support of the Company’s objective to establish Starbucks as one of the most recognized and respected brands in the world. Starbucks opened 984 new stores in the first half of fiscal 2006 and expects to open at least 1,800 new stores during fiscal 2006. With a presence today in 37 countries, serving more than 40 million customers per week, management continues to believe that the Company’s long-term goal of 15,000 Starbucks retail locations throughout the United States and at least 15,000 stores in International markets is achievable.

In addition to opening new retail stores, Starbucks is targeting to increase revenues generated at new and existing Company-operated stores by attracting new customers and increasing the frequency of visits by current customers. The strategy is to increase first year average store sales and comparable store sales by continuously improving the level of customer service, introducing innovative products and improving service with speed through training, technology and process improvement.

In licensed retail operations, Starbucks shares operating and store development experience to help licensees improve the profitability of existing stores and build new stores. Internationally, the Company’s strategy is to selectively increase its equity stake in licensed international operations as these markets develop. In January 2006, the Company increased its equity ownership from 5% to 100% in its operations in Hawaii and Puerto Rico.

The combination of more retail stores, comparable store sales growth of 10% and growth in other business channels in both the U.S. and International operating segments resulted in a 24% increase in total net revenues for the 13 weeks ended April 2, 2006, compared to the same period of fiscal 2005. The Company’s three to five year revenue growth target is approximately 20%. Comparable store sales growth for the remainder of fiscal 2006 is expected to be in the range of 3% to 7%, with monthly anomalies.

Because additional U.S. and International retail stores continue to leverage existing support organizations and facilities, the

14

Company’s infrastructure can be expanded more slowly than the rate of revenue growth and generate margin improvement. For the 13 weeks ended April 2, 2006, operating income as a percentage of total net revenues increased to 10.7% from 10.4% in the same period of fiscal 2005, primarily due to lower cost of sales including occupancy costs, offset in part by higher general and administrative expenses. For the 26 weeks ended April 2, 2006, operating income as a percentage of total net revenues increased to 12.6% from 12.4% in the same period of fiscal 2005, primarily due to lower cost of sales including occupancy costs, and depreciation and amortization expense, partially offset by higher general and administrative expenses. Net earnings increased by 27% and 23% during the 13 weeks and 26 weeks ended April 2, 2006, respectively. Reported margin and net earnings increases include the expense for stock-based compensation in the 13 weeks and 26 weeks ended April 2, 2006, while stock-based compensation expense was not included in the Company’s consolidated financial results in fiscal 2005.

Results of Operations for the 13 Weeks Ended April 2, 2006 and April 3, 2005

CONSOLIDATED RESULTS

The following table presents the consolidated statements of earnings as well as the percentage relationship to total net revenues of items included in the Company’s consolidated statements of earnings (amounts in thousands):

	13 Weeks Ended							13 Weeks Ended
	April 2,		April 3,		%			April 2,		April 3,
	2006		2005		Change			2006		2005
STATEMENTS OF EARNINGS DATA
								As a % of total net revenues
Net revenues:
Company-operated retail	$	1,599,844	$	1,283,947		24.6	%		84.8%		84.5%
Specialty:
Licensing		202,354		161,292		25.5	%		10.7		10.6
Foodservice and other		83,624		73,477		13.8	%		4.5		4.9
Total specialty		285,978		234,769		21.8	%		15.2		15.5
Total net revenues		1,885,822		1,518,716		24.2	%		100.0		100.0
Cost of sales including occupancy costs		760,873		628,740					40.3		41.4
Store operating expenses (1)		665,273		532,944					35.4		35.1
Other operating expenses (2)		63,648		46,347					3.4		3.0
Depreciation and amortization expenses		94,508		87,772					5.0		5.8
General and administrative expenses		119,611		81,929					6.3		5.4
Subtotal operating expenses		1,703,913		1,377,732		23.7	%		90.4		90.7
Income from equity investees		19,985		16,294					1.1		1.1
Operating income		201,894		157,278		28.4	%		10.7		10.4
Interest and other income, net		3,063		4,014					0.2		0.2
Earnings before income taxes		204,957		161,292		27.1	%		10.9		10.6
Income taxes		77,641		60,831					4.1		4.0
Net earnings	$	127,316	$	100,461		26.7	%		6.8%		6.6%

(1)	As a percentage of related Company-operated retail revenues, store operating expenses were 41.6% for the 13 weeks ended April 2, 2006, and 41.5% for the 13 weeks ended April 3, 2005.
(2)	As a percentage of related total specialty revenues, other operating expenses were 22.3% for the 13 weeks ended April 2, 2006, and 19.7% for the 13 weeks ended April 3, 2005.

Net revenues for the 13 weeks ended April 2, 2006, increased 24% to $1.9 billion from $1.5 billion for the corresponding period of fiscal 2005, driven by increases in both Company-operated retail revenues and specialty operations. Net revenues are expected to grow approximately 20% in fiscal 2006 compared to fiscal 2005.

During the 13-week period ended April 2, 2006, Starbucks derived 85% of total net revenues from its Company-operated retail stores. Company-operated retail revenues increased 25% to $1.6 billion for the 13 weeks ended April 2, 2006, from $1.3 billion for the same period in fiscal 2005. The increase was primarily attributable to the opening of 874 new Company-operated retail stores in the last 12 months and comparable store sales growth of 10% for the 13 weeks ended April 2, 2006. The increase in comparable store sales was due to an 8% increase in the number of customer transactions and a 2% increase in the average value per transaction. Management believes increased traffic in Company-operated retail stores continues to be driven by sustained popularity of core products, new product innovation, a high level of customer satisfaction and improved service with speed through enhanced technology, training and execution at retail stores.

The Company derived the remaining 15% of total net revenues from channels outside the Company-operated retail stores, collectively known as “Specialty Operations.” Specialty revenues, which include licensing revenues and foodservice and other revenues, increased 22% to $286 million for the 13 weeks ended April 2, 2006, compared to $235 million for the corresponding period of fiscal 2005.

15

Licensing revenues, which are derived from retail store licensing arrangements, as well as grocery, warehouse club, and certain other branded-product licensed operations, increased 25% to $202 million primarily due to higher product sales and royalty revenues from the opening of 1,090 new licensed retail stores in the last 12 months and growth in the licensed grocery and warehouse club business.

Foodservice and other revenues increased 14% to $84 million for the 13 weeks ended April 2, 2006, from $73 million for the corresponding period of fiscal 2005. The increase was primarily due to growth in the U.S. foodservice business.

Cost of sales including occupancy costs decreased to 40.3% of total net revenues for the 13 weeks ended April 2, 2006, compared to 41.4% in the corresponding 13-week period of fiscal 2005. This improvement was primarily due to fixed rent costs in the current year being distributed over an expanded revenue base, as well as higher occupancy costs in the prior year resulting from intensified store maintenance activities. These favorable items, together with other lesser improvements, offset higher green coffee costs in the second quarter.

Store operating expenses as a percentage of Company-operated retail revenues increased slightly to 41.6% for the 13 weeks ended April 2, 2006, from 41.5% for the corresponding period of fiscal 2005, primarily due to higher payroll-related expenditures for incentive compensation based on the Company’s strong operating results in fiscal 2006 and the recognition of stock-based compensation expense. This increase was partially offset by higher costs in the prior year associated with the North American leadership conference held for retail management employees, as well as leverage gained from higher retail revenues. Regional leadership conferences in fiscal 2006 will be held during the Company’s third fiscal quarter.

Other operating expenses (expenses associated with the Company’s specialty operations) increased to 22.3% of total specialty revenues for the 13 weeks ended April 2, 2006, compared to 19.7% in the corresponding period of fiscal 2005. The increase was primarily due to the recognition of stock-based compensation expense, as well as higher payroll-related expenditures to support the expansion of U.S. and International licensed retail store businesses.

Depreciation and amortization expenses increased to $95 million for the 13 weeks ended April 2, 2006, compared to $88 million for the corresponding period of fiscal 2005. The increase was primarily due to the opening of 874 new Company-operated retail stores in the last 12 months. As a percentage of total net revenues, depreciation and amortization expenses decreased to 5.0% for the 13 weeks ended April 2, 2006, from 5.8% for the corresponding 13-week period of fiscal 2005.

General and administrative expenses increased to $120 million for the 13 weeks ended April 2, 2006, compared to $82 million for the corresponding period of fiscal 2005. The increase was primarily due to higher payroll-related expenditures from stock-based compensation, additional employees to support continued global growth and higher provisions for incentive compensation based on the Company’s strong operating results in fiscal 2006. As a percentage of total net revenues, general and administrative expenses increased to 6.3% for the 13 weeks ended April 2, 2006, from 5.4% for the corresponding period of fiscal 2005.

Income from equity investees increased 23% to $20 million for the 13 weeks ended April 2, 2006, compared to $16 million for the corresponding period of fiscal 2005. The increase was primarily due to volume-driven results for The North American Coffee Partnership, which produces bottled Frappuccino^® and Starbucks DoubleShot^® coffee drinks, and improved results from international investees primarily as a result of additional licensed retail stores.

Operating income increased 28% to $202 million for the 13 weeks ended April 2, 2006, compared to $157 million for the corresponding 13-week period of fiscal 2005. Operating margin increased to 10.7% of total net revenues for the 13 weeks ended April 2, 2006, compared to 10.4% for the corresponding period of fiscal 2005, primarily due to lower cost of sales including occupancy costs, offset in part by higher general and administrative expenses.

Interest and other income decreased to $3.1 million for the 13 weeks ended April 2, 2006, compared to $4.0 million in the corresponding 13-week period of fiscal 2005, primarily due to lower interest income as well as interest expense recognized on borrowings under the Company’s revolving credit facility, which was entered into in August of 2005. These were offset in part by higher realized gains from investment activity.

Income taxes for the 13 weeks ended April 2, 2006 resulted in an effective tax rate of 37.9%, compared to 37.7% in the corresponding period of fiscal 2005. The Company currently estimates that its effective tax rate for fiscal year 2006 will approximate 38%, with quarterly variations.

16

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 operating segment results net of intersegment eliminations for the 13 weeks ended April 2, 2006 and April 3, 2005 (in thousands):

	13 Weeks Ended							13 Weeks Ended
	April 2,		April 3,		%			April 2,			April 3,
	2006		2005		Change			2006			2005
								As a % of U.S. total net
United States								revenues
Net revenues:
Company-operated retail	$	1,338,118	$	1,084,737		23.4	%		85.2	%		85.0	%
Specialty:
Licensing		155,794		124,136		25.5	%		9.9	%		9.7	%
Foodservice and other		76,584		67,545		13.4	%		4.9	%		5.3	%
Total specialty		232,378		191,681		21.2	%		14.8	%		15.0	%
Total net revenues		1,570,496		1,276,418		23.0	%		100.0	%		100.0	%
Cost of sales including occupancy costs		609,168		504,076					38.8	%		39.5	%
Store operating expenses		562,429		456,838					42.0	%(1)		42.1	%(1)
Other operating expenses		51,439		38,841					22.1	%(2)		20.3	%(2)
Depreciation and amortization expenses		69,102		64,819					4.4	%		5.1	%
General and administrative expenses		23,201		24,350					1.5	%		1.9	%
Income from equity investees		10,761		8,564					0.7	%		0.7	%
Operating income	$	265,918	$	196,058		35.6	%		16.9	%		15.4	%

							As a % of International
International							total net revenues
Net revenues:
Company-operated retail	$	261,726	$	199,210	31.4	%		83.0	%	82.2	%
Specialty:
Licensing		46,560		37,156	25.3	%		14.8	%	15.3	%
Foodservice and other		7,040		5,932	18.7	%		2.2	%	2.5	%
Total specialty		53,600		43,088	24.4	%		17.0	%	17.8	%
Total net revenues		315,326		242,298	30.1	%		100.0	%	100.0	%
Cost of sales including occupancy costs		151,705		124,664				48.1	%	51.5	%
Store operating expenses		102,844		76,106				39.3	% (1)	38.2	% (1)
Other operating expenses		12,209		7,506				22.8	% (2)	17.4	% (2)
Depreciation and amortization expenses		16,745		14,128				5.3	%	5.8	%
General and administrative expenses		18,570		10,216				5.9	%	4.2	%
Income from equity investees		9,224		7,730				2.9	%	3.2	%
Operating income	$	22,477	$	17,408	29.1	%		7.1	%	7.2	%

							As a % of total net
Unallocated Corporate							revenues
Depreciation and amortization expenses	$	8,661		$	8,825			0.5	%	0.6	%
General and administrative expenses		77,840			47,363			4.1	%	3.1	%
Operating loss	$	(86,501	)	$	(56,188	)		(4.6	)%	(3.7	)%

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

17

United States

United States operations (“United States”) sells 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.

United States total net revenues increased by 23% to $1.6 billion for the 13 weeks ended April 2, 2006, compared to $1.3 billion for the corresponding period of fiscal 2005. United States Company-operated retail revenues increased 23% to $1.3 billion, primarily due to the opening of 660 new Company-operated retail stores in the last 12 months and comparable store sales growth of 10% for the quarter. The increase in comparable store sales was due to an 8% increase in the number of customer transactions and a 2% increase in the average value per transaction.

Total United States specialty revenues increased by 21% to $232 million for the 13 weeks ended April 2, 2006, compared to $192 million in the corresponding period of fiscal 2005. United States licensing revenues increased 26% to $156 million from $124 million in fiscal 2005, primarily due to higher product sales and royalty revenues as a result of opening 685 new licensed retail stores in the last 12 months and growth in the licensed grocery and warehouse club business. United States foodservice and other revenues increased to $77 million, or 13%, from $68 million in fiscal 2005, primarily due to growth in new and existing foodservice accounts.

United States operating income increased by 36% to $266 million for the 13 weeks ended April 2, 2006, from $196 million for the same period in fiscal 2005. Operating margin increased to 16.9% of related revenues from 15.4% in the corresponding period of fiscal 2005, primarily due to leverage gained from fixed costs, including occupancy, depreciation and general and administrative expenses, distributed over an expanded revenue base in the current year period, and to higher costs in the prior year period for intensified store maintenance activities in Company-operated retail stores.

International

International operations (“International”) sells coffee and other beverages, whole bean coffees, complementary food, coffee brewing equipment and merchandise through Company-operated retail stores in the United Kingdom, Canada, Thailand, Australia, Hawaii, Germany, Singapore, China, Puerto Rico, Chile and Ireland. Specialty Operations in International primarily include retail store licensing operations in 25 other countries and foodservice accounts in Canada and the United Kingdom. The Company’s International store base continues to increase rapidly and Starbucks is achieving a growing contribution from established areas of the business while at the same time investing in emerging markets and channels, such as China. Certain of these markets are in various early stages of development that require a more extensive support organization, relative to the current levels of revenue and operating income, than in the United States. This continuing investment is part of the Company’s long-term, balanced plan for profitable growth.

International total net revenues increased by 30% to $315 million for the 13 weeks ended April 2, 2006, compared to $242 million for the corresponding period of fiscal 2005.

International Company-operated retail revenues increased by 31% to $262 million, primarily due to the opening of 214 new Company-operated retail stores in the last 12 months and comparable store sales growth of 9% for the quarter. The increase in comparable store sales resulted from a 7% increase in the number of customer transactions coupled with a 2% increase in the average value per transaction.

Total international specialty revenues increased by 24% to $54 million for the 13 weeks ended April 2, 2006, compared to $43 million in the corresponding period of fiscal 2005. The increase was primarily due to higher product sales and royalty revenues from opening 405 licensed retail stores in the last 12 months and expansion of the Canadian grocery and warehouse club business.

International operating income increased by 29% to $22 million for the 13 weeks ended April 2, 2006, compared to $17 million in the corresponding period of fiscal 2005. Operating margin decreased slightly to 7.1% of related revenues from 7.2% in the corresponding period of fiscal 2005. This decrease was primarily due to higher general and administrative expenses and an increase in other operating expenses for expanding infrastructure to support global growth, as well as increased retail store operating expenses related to higher provisions for incentive compensation. These were partially offset by lower costs of sales including occupancy costs due to leverage gained from fixed costs distributed over an expanded revenue base, as well as improvements in the food program. The increased investment in the infrastructure necessary for the Company’s continued expansion in developing markets, such as China, is expected to be reflected in the International segment expenses and operating margin throughout the remainder of fiscal 2006.

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. Unallocated corporate expenses increased to $87 million for the 13 weeks ended April

18

2, 2006, compared to $56 million in the corresponding period of fiscal 2005, primarily due to higher payroll-related expenses from stock-based compensation, higher provisions for incentive compensation based on the Company’s strong operating results for the quarter and additional employees to support continued rapid global growth. Total unallocated corporate expenses as a percentage of total net revenues increased to 4.6% for the 13 weeks ended April 2, 2006, compared to 3.7% for the corresponding period of fiscal 2005.

Results of Operations for the 26 Weeks Ended April 2, 2006 and April 3, 2005

CONSOLIDATED RESULTS

The following table presents the consolidated statements of earnings as well as the percentage relationship to total net revenues of items included in the Company’s consolidated statements of earnings (amounts in thousands):

	26 Weeks Ended							26 Weeks Ended
	April 2,		April 3,		%			April 2		April 3,
	2006		2005		Change			2006		2005
STATEMENTS OF EARNINGS DATA
								As a % of total net revenues
Net revenues:
Company-operated retail	$	3,227,827	$	2,642,608		22.2	%		84.5%		85.0%
Specialty:
Licensing		421,504		318,505		32.3	%		11.0		10.3
Foodservice and other		170,583		147,147		15.9	%		4.5		4.7
Total specialty		592,087		465,652		27.2	%		15.5		15.0
Total net revenues		3,819,914		3,108,260		22.9	%		100.0		100.0
Cost of sales including occupancy costs		1,538,911		1,276,495					40.3		41.1
Store operating expenses (1)		1,287,439		1,053,950					33.6		33.8
Other operating expenses (2)		122,796		90,628					3.2		2.9
Depreciation and amortization expenses		185,796		166,331					4.9		5.4
General and administrative expenses		242,936		165,528					6.4		5.3
Subtotal operating expenses		3,377,878		2,752,932		22.7	%		88.4		88.5
Income from equity investees		39,705		29,105					1.0		0.9
Operating income		481,741		384,433		25.3	%		12.6		12.4
Interest and other income, net		3,411		9,136					0.1		0.3
Earnings before income taxes		485,152		393,569		23.3	%		12.7		12.7
Income taxes		183,680		148,434					4.8		4.8
Net earnings	$	301,472	$	245,135		23.0	%		7.9%		7.9%

(1)	As a percentage of related Company-operated retail revenues, store operating expenses were 39.9% for both the 26 weeks ended April 2, 2006, and April 3, 2005.
(2)	As a percentage of related total specialty revenues, other operating expenses were 20.7% for the 26 weeks ended April 2, 2006, and 19.5% for the 26 weeks ended April 3, 2005.

Net revenues for the 26 weeks ended April 2, 2006, increased 23% to $3.8 billion from $3.1 billion for the corresponding period of fiscal 2005, driven by increases in both Company-operated retail revenues and specialty operations. Net revenues are expected to grow approximately 20% in fiscal 2006 compared to fiscal 2005.

During the 26-week period ended April 2, 2006, Starbucks derived 85% of total net revenues from its Company-operated retail stores. Company-operated retail revenues increased 22% to $3.2 billion for the 26 weeks ended April 2, 2006, from $2.6 billion for the same period in fiscal 2005. The increase was primarily attributable to the opening of 874 new Company-operated retail stores in the last 12 months and comparable store sales growth of 8% for the 26 weeks ended April 2, 2006. The increase in comparable store sales was due to a 6% increase in the number of customer transactions and a 2% increase in the average value per transaction. Management believes increased traffic in Company-operated retail stores continues to be driven by sustained popularity of core products, new product innovation, a high level of customer satisfaction and improved service with speed through enhanced technology, training and execution at retail stores.

The Company derived the remaining 15% of total net revenues from its specialty operations. Specialty revenues, which include licensing revenues and foodservice and other revenues, increased 27% to $592 million for the 26 weeks ended April 2, 2006, from $466 million for the corresponding period of fiscal 2005.

Licensing revenues, which are derived from retail store licensing arrangements, grocery, warehouse club, and certain other branded-product licensing operations, increased 32% to $422 million for the 26 weeks ended April 2, 2006, from $319 million for the corresponding period of fiscal 2005. The increase was primarily attributable to higher product sales and royalty revenues from the opening of 1,090 new licensed retail stores in the last 12 months and growth in the licensed grocery and warehouse club business.

19

Foodservice and other revenues increased 16% to $171 million for the 26 weeks ended April 2, 2006, from $147 million for the corresponding period of fiscal 2005. The increase was primarily attributable to the growth in new and existing U.S. and International foodservice accounts.

Cost of sales including occupancy costs decreased to 40.3% of total net revenues for the 26 weeks ended April 2, 2006, from 41.1% for the corresponding period of fiscal 2005, primarily due to fixed rent costs in fiscal 2006 being distributed over an expanded revenue base, as well as increased occupancy costs in fiscal 2005 resulting from intensified store maintenance activities. These favorable items, together with other lesser improvements, offset higher green coffee costs for the 26 weeks ended April 2, 2006.

Store operating expenses as a percentage of Company-operated retail revenues were 39.9% for both the 26 weeks ended April 2, 2006 and April 3, 2005. Increases due to higher payroll-related expenditures from higher provisions for incentive compensation based on the Company’s strong operating results in fiscal 2006 and the recognition of stock-based compensation expense were offset by higher costs in the prior year associated with the North American leadership conference held for retail management employees, as well as leverage gained from higher retail revenues. Regional leadership conferences in fiscal 2006 will be held during the Company’s third fiscal quarter.

Other operating expenses (expenses associated with the Company’s specialty operations) increased to 20.7% of total specialty revenues for the 26 weeks ended April 2, 2006, compared to 19.5% in the corresponding period of fiscal 2005. The increase was primarily due to the recognition of stock-based compensation expense, as well as higher payroll-related expenditures to support the expansion of U.S. and International licensed retail store businesses.

Depreciation and amortization expenses increased to $186 million for the 26 weeks ended April 2, 2006, compared to $166 million for the corresponding period of fiscal 2005. The increase was primarily due to the opening of 874 new Company-operated retail stores in the last 12 months. As a percentage of total net revenues, depreciation and amortization expenses decreased to 4.9% for the 26 weeks ended April 2, 2006, from 5.4% for the corresponding 26-week period of fiscal 2005.

General and administrative expenses increased to $243 million for the 26 weeks ended April 2, 2006, compared to $166 million for the corresponding period of fiscal 2005. The increase was primarily due to higher payroll-related expenditures from stock-based compensation and increased provisions for incentive compensation in fiscal 2006 based on the Company’s strong operating results, as well as increased charitable contributions. As a percentage of total net revenues, general and administrative expenses increased to 6.4% for the 26 weeks ended April 2, 2006 from 5.3% for the corresponding period of fiscal 2005.

Income from equity investees increased to $40 million for the 26 weeks ended April 2, 2006, compared to $29 million for the corresponding period of fiscal 2005. The increase was primarily due to volume-driven results for The North American Coffee Partnership, which produces bottled Frappuccino^® and Starbucks DoubleShot^® coffee drinks, and improved results from international investees primarily as a result of new licensed retail store openings.

Operating income increased 25% to $482 million for the 26 weeks ended April 2, 2006, compared to $384 million for the corresponding 26-week period of fiscal 2005. Operating margin increased to 12.6% of total net revenues for the 26 weeks ended April 2, 2006, compared to 12.4% for the corresponding period of fiscal 2005, primarily due lower cost of sales including occupancy costs as well as depreciation and amortization expenses, partially offset by higher general and administrative expenses.

Interest and other income decreased to $3 million for the 26 weeks ended April 2, 2006, compared to $9 million in the corresponding period of fiscal 2005, primarily due to interest expense recognized on borrowings under the Company’s revolving credit facility, which was entered into in August of 2005.

Income taxes for the 26 weeks ended April 2, 2006 resulted in an effective tax rate of 37.9%, compared to 37.7% in the corresponding period of fiscal 2005. The Company currently estimates that its effective tax rate for fiscal year 2006 will approximate 38%, with quarterly variations.

20

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 operating segment results net of intersegment eliminations for the 26 weeks ended April 2, 2006 and April 3, 2005 (in thousands):

	26 Weeks Ended							26 Weeks Ended
	April 2,		April 3,		%			April 2,			April 3,
	2006		2005		Change			2006			2005
								As a % of U.S. total net
United States								revenues
Net revenues:
Company-operated retail	$	2,708,805	$	2,234,367		21.2	%		84.9	%		85.4	%
Specialty:
Licensing		325,317		245,271		32.6	%		10.2	%		9.4	%
Foodservice and other		156,955		135,553		15.8	%		4.9	%		5.2	%
Total specialty		482,272		380,824		26.6	%		15.1	%		14.6	%
Total net revenues		3,191,077		2,615,191		22.0	%		100.0	%		100.0	%
Cost of sales including occupancy costs		1,237,531		1,025,789					38.8	%		39.2	%
Store operating expenses		1,091,204		900,899					40.3	%(1)		40.3	%(1)
Other operating expenses		98,581		75,944					20.4	%(2)		19.9	%(2)
Depreciation and amortization expenses		136,820		122,154					4.3	%		4.7	%
General and administrative expenses		44,734		45,973					1.4	%		1.8	%
Income from equity investees		22,460		17,272					0.7	%		0.7	%
Operating income	$	604,667	$	461,704		31.0	%		18.9	%		17.7	%

							As a % of International
International							total net revenues
Net revenues:
Company-operated retail	$	519,022	$	408,241	27.1	%		82.5	%	82.8	%
Specialty:
Licensing		96,187		73,234	31.3	%		15.3	%	14.9	%
Foodservice and other		13,628		11,594	17.5	%		2.2	%	2.3	%
Total specialty		109,815		84,828	29.5	%		17.5	%	17.2	%
Total net revenues		628,837		493,069	27.5	%		100.0	%	100.0	%
Cost of sales including occupancy costs		301,380		250,706				47.9	%	50.8	%
Store operating expenses		196,235		153,051				37.8	%(1)	37.5	%(1)
Other operating expenses		24,215		14,684				22.1	%(2)	17.3	%(2)
Depreciation and amortization expenses		31,754		27,217				5.0	%	5.5	%
General and administrative expenses		34,757		22,115				5.5	%	4.5	%
Income from equity investees		17,245		11,833				2.7	%	2.4	%
Operating income	$	57,741	$	37,129	55.5	%		9.2	%	7.5	%

							As a % of total net
Unallocated Corporate							revenues
Depreciation and amortization expenses	$	17,222		$	16,960			0.4	%	0.6	%
General and administrative expenses		163,445			97,440			4.3	%	3.1	%
Operating loss	$	(180,667	)	$	(114,400	)		(4.7	)%	(3.7	)%

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

21

United States

United States total net revenues increased by 22% to $3.2 billion for the 26 weeks ended April 2, 2006, compared to $2.6 billion for the corresponding period of fiscal 2005.

United States Company-operated retail revenues increased by 21% to $2.7 billion for the 26 weeks ended April 2, 2006, compared to $2.2 billion for the corresponding period of fiscal 2005, primarily due to the opening of 660 new Company-operated retail stores in the last 12 months and comparable store sales growth of 8% for the 26 weeks ended April 2, 2006. The increase in comparable store sales was due to a 7% increase in the number of customer transactions and a 1% increase in the average value per transaction.

Total United States specialty revenues increased 27% to $482 million for the 26 weeks ended April 2, 2006, compared to $381 million in the corresponding period of fiscal 2005. United States licensing revenues increased 33% to $325 million, compared to $245 million for the corresponding period of fiscal 2005. The increase was primarily due to higher product sales and royalty revenues as a result of opening 685 new licensed retail stores in the last 12 months and growth in the licensed grocery and warehouse club business. United States foodservice and other revenues increased 16% to $157 million from $136 million in fiscal 2005, primarily due to growth in new and existing foodservice accounts.

United States operating income increased by 31% to $605 million for the 26 weeks ended April 2, 2006, from $462 million for the same period in fiscal 2005. Operating margin increased to 18.9% of related revenues from 17.7% in the corresponding period of fiscal 2005, primarily due to leverage gained from fixed costs, including occupancy, depreciation and general and administrative expenses, distributed over an expanded revenue base in the current year period, and to higher costs in the prior year period for intensified store maintenance activities in Company-operated retail stores.

International

International total net revenues increased 28% to $629 million for the 26 weeks ended April 2, 2006, compared to $493 million for the corresponding period of fiscal 2005.

International Company-operated retail revenues increased 27% to $519 million for the 26 weeks ended April 2, 2006, compared to $408 million for the corresponding period for fiscal 2005, primarily due to the opening of 214 new Company-operated retail stores in the last 12 months and comparable store sales growth of 9% for the 26 weeks ended April 2, 2006, The increase in comparable store sales resulted from a 6% increase in the number of customer transactions coupled with a 3% increase in the average value per transaction.

Total International specialty revenues increased 29% to $110 million for the 26 weeks ended April 2, 2006, compared to $85 million in the corresponding period of fiscal 2005. The increase was primarily due to higher product sales and royalty revenues from opening 405 new licensed retail stores in the last 12 months and revenues from the introduction of new ready-to-drink beverages in Japan, Taiwan and Korea.

International operating income increased 56% to $58 million for the 26 weeks ended April 2, 2006, from $37 million in the corresponding period of fiscal 2005. Operating margin increased to 9.2% of related revenues from 7.5% in the corresponding period of fiscal 2005, primarily due to lower costs of sales including occupancy costs due to leverage gained from fixed costs distributed over an expanded revenue base as well as improvements in the food program. These improvements were partially offset by higher general and administrative expenses due to higher payroll-related expenditures for additional employees for expanding infrastructure to support global growth, as well as the recognition of stock-based compensation expense.

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. Unallocated corporate expenses increased to $181 million for the 26 weeks ended April 2, 2006, compared to $114 million in the corresponding period of fiscal 2005. The increase was primarily due to higher payroll-related expenses from stock-based compensation, higher provisions for incentive compensation based on the Company’s strong operating results for fiscal 2006, and increased charitable contributions. Total unallocated corporate expenses as a percentage of total net revenues increased to 4.7% for the 26 weeks ended April 2, 2006 compared to 3.7% for the corresponding period of fiscal 2005.

22

Liquidity and Capital Resources

Components of the Company’s most liquid assets are as follows (in thousands):

	April 2,		October 2,
	2006		2005
Cash and cash equivalents	$	202,671	$	173,809
Short-term investments – available-for-sale securities		193,231		95,379
Short-term investments – trading securities		49,546		37,848
Long-term investments – available-for-sale securities		37,639		60,475
Total cash, cash equivalents and liquid investments	$	483,087	$	367,511

The Company manages its cash, cash equivalents and liquid investments in order to internally fund operating needs. The $116 million increase in total cash and cash equivalents and liquid investments from October 2, 2005 to April 2, 2006, was primarily due to strong operating cash flows.

The Company intends to use its cash and liquid investments, including any borrowings under its revolving credit facility, to invest in its core businesses and other new business opportunities related to its core businesses. The Company may use its available cash resources to make proportionate capital contributions to its equity method and cost method investees, as well as purchase larger ownership interests in selected equity method investees, particularly in international markets. Depending on market conditions, Starbucks may repurchase shares of its common stock under its authorized share repurchase program. Management believes that strong cash flow generated from operations, existing cash and liquid investments, as well as borrowing capacity under the revolving credit facility, should be sufficient to finance capital requirements for its core businesses for the foreseeable future. Significant new joint ventures, acquisitions, share repurchases and/or other new business opportunities may require additional outside funding.

Other than normal operating expenses, cash requirements for the remainder of fiscal 2006 are expected to consist primarily of capital expenditures for new Company-operated retail stores and the remodeling and refurbishment of existing Company-operated retail stores, as well as for additional share repurchases, if any. Management expects capital expenditures for fiscal 2006 to be in the range of $750 million to $775 million, primarily related to opening approximately 850 Company-operated stores on a global basis and remodeling certain existing stores. The capital expenditures also include costs related to expanding its corporate headquarters and enhancing its production capacity and information systems to support its future growth.

Cash provided by operating activities totaled $762 million for the 26 weeks ended April 2, 2006. Net earnings provided $301 million and non-cash depreciation and amortization expenses further increased operating activities by $199 million. In addition, a decrease in inventory due to holiday build-up and usage provided $92 million.

Cash used by investing activities for the 26 weeks ended April 2, 2006, totaled $494 million. Net capital additions to property, plant and equipment used $310 million, primarily from opening 433 new Company-operated retail stores for the 26 weeks ended April 2, 2006, and remodeling certain existing stores. Gross capital additions for the 26 weeks ended April 2, 2006 were $318 million and were offset by impairment provisions and foreign currency translation adjustments totaling $8 million. During the 26 weeks ended April 2, 2006, the Company used $90 million for acquisitions, net of cash acquired. In addition, the net activity in the Company’s portfolio of available-for-sale securities used $75 million for the 26 weeks ended April 2, 2006.

Cash used by financing activities for the 26 weeks ended April 2, 2006, totaled $240 million. Cash used to repurchase shares of the Company’s common stock totaled $204 million. This amount includes the effect of the net change in unsettled trades from October 2, 2005. Share repurchases, up to the limit authorized by the Board of Directors, are at the discretion of management and depend on market conditions, capital requirements and other factors. The total remaining amount of shares authorized for repurchase as of April 2, 2006 was 16.0 million. The Company made net repayments under its revolving credit facility of $182 million during the 26 weeks ended April 2, 2006, which consisted of additional gross borrowings of $178 million offset by gross principal repayments of $360 million. Partially offsetting cash used for share repurchases and net repayments of the revolving credit facility were $92 million of proceeds from the exercise of employee stock options and the sale of the Company’s common stock from employee stock purchase plans. As options granted are exercised, the Company will continue to receive proceeds and a tax deduction; however, the amounts and the timing cannot be predicted.

23

Store Data

The following table summarizes the Company’s retail store information:

	Net stores opened during the period
	13-week period				26-week period				Stores open as of
	April 2,		April 3,		April 2,		April 3,		April 2,		April 3,
	2006		2005		2006		2005		2006		2005
United States:
Company-operated stores		157		131		318		232		5,185		4,525
Licensed stores		132		98		330		241		2,765		2,080
		289		229		648		473		7,950		6,605
International:
Company-operated stores (1)		55		22		115		73		1,310		1,096
Licensed stores (1)		80		61		221		146		1,965		1,560
		135		83		336		219		3,275		2,656
Total		424		312		984		692		11,225		9,261

(1) International store data has been adjusted for the 100% acquisition of the Hawaii and Puerto Rico operations by reclassifying historical information from Licensed stores to Company-operated stores.

Starbucks plans to open at least 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.

Contractual Obligations

There have been no material changes during the period covered by this report, outside of the ordinary course of the Company’s business, to the contractual obligations specified in the table of contractual obligations included in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Fiscal 2005 Annual Report on Form 10-K.

Off-Balance Sheet Arrangement

The Company has unconditionally guaranteed the repayment of certain Japanese yen-denominated bank loans and related interest and fees of an unconsolidated equity investee, Starbucks Coffee Japan, Ltd. The guarantees continue until the loans, including accrued interest and fees, have been paid in full, with the final loan amount due in 2014. The maximum amount is limited to the sum of unpaid principal and interest amounts, as well as other related expenses. These amounts will vary based on fluctuations in the yen foreign exchange rate. As of April 2, 2006, the maximum amount of the guarantees was approximately $6.7 million. Since there has been no modification of these loan guarantees subsequent to the Company’s adoption of FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indebtedness of Others,” Starbucks has applied the disclosure provisions only and has not recorded the guarantee on its consolidated balance sheet.

Commodity Prices, Availability and General Risk Conditions

The Company manages its exposure to various risks within the consolidated financial statements according to an umbrella risk management policy. Under this policy, market-based risks, including commodity costs and foreign currency exchange rates, are quantified and evaluated for potential mitigation strategies, such as entering into hedging transactions. Additionally, this policy restricts, among other things, the amount of market-based risk the Company will tolerate before implementing approved hedging strategies and prohibits speculative trading activity.

The Company purchases significant amounts of coffee and dairy products to support the needs of its Company-operated retail stores. The price and availability of these commodities directly impacts the Company’s results of operations and can be expected to impact its future results of operations. For additional details see “Product Supply” in Item 1, as well as “Risk Factors” in Item 1A of the Company’s Form 10-K for the fiscal year ended October 2, 2005.

Seasonality and Quarterly Results

The Company’s business is subject to seasonal fluctuations. Historically, significant portions of the Company’s net revenues and profits were, and may continue to be realized during the first quarter of the Company’s fiscal year, which includes the December holiday season. In addition, quarterly results are affected by the timing of the opening of new stores, and the Company’s rapid growth

24

may conceal the impact of other seasonal influences. Because of the seasonality of the Company’s business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

Critical Accounting Policies

Critical accounting policies are those that management believes are both most important to the portrayal of the Company’s financial conditions and results, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions.

As discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2005, Starbucks considers its policies on impairment of long-lived assets and accounting for self insurance reserves to be the most critical in understanding the judgments that are involved in preparing its consolidated financial statements. With the adoption of SFAS 123R at the beginning of the Company’s first fiscal quarter of 2006, Starbucks has added “Stock-Based Compensation” as a critical accounting policy.

Stock-Based Compensation

Starbucks accounts for stock-based compensation in accordance with the fair value recognition provisions of SFAS 123R. The Company uses the Black-Scholes-Merton option-pricing model which requires the input of highly subjective assumptions. These assumptions include estimating the length of time employees will retain their stock options before exercising them (“expected term”), the estimated volatility of the Company’s common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amount recognized on the consolidated statements of earnings.

Recently Issued Accounting Pronouncements

In November 2005, the FASB issued Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards” (“FSP 123R-3”). The Company has elected to adopt the alternative transition method provided in FSP 123R-3 for calculating the tax effects of stock-based compensation under SFAS 123R. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in-capital pool (“APIC pool”) related to the tax effects of stock-based compensation, and for determining the subsequent impact on the APIC pool and consolidated statements of cash flows of the tax effects of stock-based compensation awards that are outstanding upon adoption of SFAS 123R.

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 requires the recognition of a liability for the fair value of a legally-required conditional asset retirement obligation when incurred, if the liability’s fair value can be reasonably estimated. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for fiscal years ending after December 15, 2005, or no later than Starbucks fiscal fourth quarter of 2006. The Company has not yet determined the impact of adoption on its consolidated financial statements.

In December 2004, the FASB issued Staff Position No. FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP 109-2”). The American Jobs Creation Act allows a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer (“repatriation provision”), provided certain criteria are met. The law allows the Company to make an election to repatriate earnings through fiscal 2006. FSP 109-2 provides accounting and disclosure guidance for the repatriation provision. Although FSP 109-2 was effective upon its issuance, it allows companies additional time beyond the enactment date to evaluate the effects of the provision on its plan for investment or repatriation of unremitted foreign earnings. The Company continues to evaluate the impact of the new Act to determine whether it will repatriate foreign earnings and the impact, if any, this pronouncement will have on its consolidated financial statements. As of April 2, 2006, the Company has not made an election to repatriate earnings under this provision. The Company may or may not elect to repatriate earnings in fiscal 2006. Earnings under consideration for repatriation range from $0 to $75 million and the related income tax effects range from $0 to $5 million. As provided in FSP 109-2, Starbucks has not adjusted its tax expense or deferred tax liability to reflect the repatriation provision.

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

As of April 2, 2006, the Company had forward foreign exchange contracts that qualify as cash flow hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to hedge a portion of anticipated international revenue and product purchases. In addition, Starbucks had forward foreign exchange contracts that qualify as a hedge of its net investment in Starbucks Japan. These contracts expire within 30 months.

Based on the foreign exchange contracts outstanding as of April 2, 2006, a 10% devaluation of the U.S. dollar as compared to the level of foreign exchange rates for currencies under contract as of April 2, 2006, would result in a reduced fair value of these derivative financial instruments of approximately $21.5 million, of which $15.2 million may reduce the Company’s future net earnings. Conversely, a 10% appreciation of the U.S. dollar would result in an increase in the fair value of these instruments of approximately $20.1 million, of which $15.0 million may increase the Company’s future net earnings. Consistent with the nature of the economic hedges provided by these foreign exchange contracts, increases or decreases in the fair value would be mostly offset by corresponding decreases or increases in the dollar value of the Company’s foreign investment, future foreign currency royalty fee payments and product purchases that would occur within the hedging period.

There has been no material change in the equity security price risk or interest rate risk discussed in Item 7A of the Company’s Fiscal 2005 Annual Report on Form 10-K.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that material information required to be disclosed in the Company’s periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

During the quarter the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of the disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective, as of the end of the period covered by this Report (April 2, 2006).

During the second quarter of fiscal 2006, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that materially affected or are reasonably likely to materially affect internal control over financial reporting.

The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits 31.1 and 31.2, respectively, to this Quarterly Report on Form 10-Q.

26

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

See discussion of Legal Proceedings in Note 11 to the consolidated financial statements included in Item 1 of this Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding repurchases by the Company of its common stock during the 13-week period ended April 2, 2006:

ISSUER PURCHASES OF EQUITY SECURITIES

					Total Number		Maximum
					of Shares		Number of
					Purchased as		Shares that May
	Total		Average		Part of Publicly		Yet Be
	Number of		Price		Announced		Purchased
	Shares		Paid per		Plans or		Under the Plans
Period (1)	Purchased		Share		Programs(2)		or Programs(2)
Jan 2, 2006 — Jan 29, 2006		1,690,000	$	31.06		1,690,000		16,100,182
Jan 30, 2006 — Feb 26, 2006		150,000	$	31.48		150,000		15,950,182
Feb 27, 2006 — April 2, 2006		-		-		-		15,950,182
Total		1,840,000				1,840,000

(1)

Monthly information is presented by reference to the Company’s fiscal months during the second quarter of fiscal 2006.

(2)

The Company’s share repurchase program is conducted under authorizations made from time to time by the Company’s Board of Directors. The shares reported in the table are covered by Board authorizations to repurchase shares of common stock, as follows: 20 million shares announced on May 5, 2005 and 10 million shares announced on September 22, 2005. Shares remaining for repurchase relate to both authorizations. Neither of these authorizations has an expiration date.

Item 4. Submission of Matters to a Vote of Security Holders

At the Annual Meeting of Shareholders of the Company held on February 8, 2006, the shareholders elected four Class 1 directors and two Class 2 directors to serve until the 2007 Annual Meeting of Shareholders and approved a management proposal to amend the Company’s Amended and Restated Articles of Incorporation to declassify the Board of Directors and establish annual elections, whereby all directors will stand for re-election annually. In addition, shareholders ratified the Audit and Compliance Committee of the Board’s selection of Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for fiscal 2006. The terms of the other members of the Company’s Board of Directors, William W. Bradley, Gregory B. Maffei, Barbara Bass, Mellody Hobson, Olden Lee and Howard Schultz, continued after the Annual Meeting of Shareholders. As previously reported, Gregory B. Maffei resigned from the Company’s Board of Directors effective March 3, 2006. Javier G. Teruel, a Board member since September 2005, was appointed Chair of the Audit Committee on May 2, 2006, succeeding Gregory B. Maffei. The Company filed Amended and Restated Articles of Incorporation with the Washington Secretary of State after shareholders approved the management proposal to declassify the Board. As a result, all directors will stand for re-election at the 2007 Annual Meeting of Shareholders.

The table below shows the results of the shareholders’ voting:

	Votes in	Votes	Votes Withheld/
	Favor	Against	Abstentions
Election of Class 1 Directors:
Howard P. Behar	685,036,543	N/A		7,510,017
James G. Shennan, Jr.	673,171,515	N/A		19,375,045
Myron E. Ullman, III	684,149,146	N/A		8,397,414
Craig E. Weatherup	683,253,762	N/A		9,292,798
Election of Class 2 Directors:
James L. Donald	686,938,538	N/A		5,608,022
Javier G. Teruel	685,891,768	N/A		6,654,792
Approval of Management Proposal to Declassify the Board	681,477,832	6,406,294		4,662,434
Ratification of independent registered public accounting firm	686,308,735	1,788,437		4,449,388

27

Item 6. Exhibits

(a) Exhibits:

		Incorporated by Reference
Exhibit				Date of First	Exhibit	Filed
Number	Exhibit Description	Form	File No.	Filing	Number	Herewith
3.1	Restated Articles of Incorporation of Starbucks Corporation	–	–	–	–	X
3.2	Amended and Restated Bylaws of Starbucks Corporation	–	–	–	–	X
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	–	–	–	–	X
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	–	–	–	–	X
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	–	–	–	–	X
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	–	–	–	–	X

28

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
May 12, 2006	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

29

INDEX TO EXHIBITS

		Incorporated by Reference
Exhibit				Date of First	Exhibit	Filed
Number	Exhibit Description	Form	File No.	Filing	Number	Herewith
3.1	Restated Articles of Incorporation of Starbucks Corporation	–	–	–	–	X
3.2	Amended and Restated Bylaws of Starbucks Corporation	–	–	–	–	X
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	–	–	–	–	X
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	–	–	–	–	X
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	–	–	–	–	X
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	–	–	–	–	X

30

EX-3.1

                                                                     Exhibit 3.1

                       RESTATED ARTICLES OF INCORPORATION
                                       OF
                              STARBUCKS CORPORATION

     Pursuant to RCW 23B10.070, the following Restated Articles of Incorporation
are hereby submitted for filing.

                                 ARTICLE 1. NAME

     The name of the corporation is Starbucks Corporation.

                               ARTICLE 2. DURATION

     The period of the corporation's duration is perpetual.

                               ARTICLE 3. PURPOSES

     The corporation is organized for the purposes of transacting any and all
business for which corporations may be incorporated under Title 23B of the
Revised Code of Washington, as amended, including, but not limited to,
establishing and operating retail coffee and espresso bars in the State of
Washington and in other states.

                                ARTICLE 4. SHARES

     The corporation shall have authority to issue 1,207,500,000 shares of
capital stock, of which 1,200,000,000 shares will be common stock, and,
7,500,000 shares will be preferred stock.

     4.1 Common Stock. The corporation shall have authority to issue up to
1,200,000,000 shares of common stock, $0.001 par value per share.

     4.2 Preferred Stock. The corporation shall have authority to issue up to
7,500,000 shares of preferred stock, $0.001 par value per share. The Board of
Directors shall have all rights afforded by applicable law to establish series
of said preferred shares, the rights and preferences of each such series to be
set forth in appropriate resolutions of the Board of Directors.

                              ARTICLE 5. DIRECTORS

     5.1 Number of Directors. The number of directors of the corporation shall
be fixed in the Bylaws and may be increased or decreased from time to time in
the manner specified therein.



     5.2 Terms of Directors. Beginning with the corporation's annual meeting of
shareholders to be held in 2007, the directors shall be elected for terms
lasting until the next annual meeting of shareholders following their election,
and until their successors are elected and qualified, subject to their earlier
death, resignation or removal from the Board of Directors.

                          ARTICLE 6. PREEMPTIVE RIGHTS

     6.1 Common Stock. Shareholders of the Common Stock of the corporation shall
not have preemptive rights to acquire shares of stock or securities convertible
into shares of stock issued by the corporation.

     6.2 Preferred Stock. Holders of Preferred Stock shall have preemptive
rights subject to the rights and preferences as described under Article 4 of
these Articles of Incorporation.

                          ARTICLE 7. CUMULATIVE VOTING

     Shareholders of the corporation shall not have the right to cumulate votes
in the election of directors.

               ARTICLE 8. AMENDMENTS OF ARTICLES OF INCORPORATION

     The corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation, in the manner now or hereafter
prescribed by law. All rights and powers conferred herein on shareholders and
directors are subject to this reserved power.

                   ARTICLE 9. LIMITATION OF DIRECTOR LIABILITY

     To the full extent that the Washington Business Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of directors, a director of the corporation shall
not be liable to the corporation or its shareholders for monetary damages for
his or her acts or omissions as a director. Any amendment to or repeal of this
Article 9 shall not adversely affect any right or protection of a director of
the corporation for or with respect to any acts or omissions occurring prior to
such amendment or repeal.

     The undersigned, as Secretary of Starbucks Corporation, executes these
Amended and Restated Articles of Incorporation this 8th day of February, 2006.

                                        STARBUCKS CORPORATION


                                        /s/ Paula E. Boggs
                                        ----------------------------------------
                                        Paula E. Boggs,
                                        executive vice president, general
                                        counsel and secretary



                       OFFICER'S CERTIFICATE ACCOMPANYING
                       RESTATED ARTICLES OF INCORPORATION
                                       OF
                              STARBUCKS CORPORATION

     The Restated Articles of Incorporation do not contain an amendment to the
Articles of Incorporation.

     Dated: February 8, 2006

                                        STARBUCKS CORPORATION


                                        /s/ Paula E. Boggs
                                        ----------------------------------------
                                        Paula E. Boggs,
                                        executive vice president, general
                                        counsel and secretary

EX-3.2

                                                                     Exhibit 3.2

                              AMENDED AND RESTATED
                                     BYLAWS
                                       OF
                              STARBUCKS CORPORATION

               (AS AMENDED AND RESTATED THROUGH FEBRUARY 8, 2006)

                             ARTICLE I. SHAREHOLDERS

     Section 1.1 Annual Meeting. The annual meeting of the shareholders of the
Corporation shall be held each year on a date between January l and June 30,
with a specific date and time to be determined from time to time by the Board of
Directors. The failure to hold an annual meeting at the time stated in these
bylaws does not affect the validity of any corporate action. At each annual
meeting of shareholders, the shareholders shall elect a class of directors as
set forth in Section 2.1 hereof and in the Corporation's Articles of
Incorporation, and transact such other business as may properly be brought
before the meeting. No business may be transacted at an annual meeting of
shareholders other than business that is (a) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any shareholder of the corporation (i) who
is a shareholder on the date of the giving of the notice provided for in Section
1.4 hereof and on the record date for the determination of shareholders entitled
to vote at such annual meeting and (ii) who complies with the notice procedures
set forth in Section 1.12 hereof.

     Section 1.2 Special Meetings. Special meetings of the shareholders may be
held upon call of the Board of Directors or of the President and shall be called
by the Board of Directors or the President upon the delivery of a written
request of the holders of ten percent of the outstanding stock entitled to vote
to the Secretary of the Corporation.

     Section 1.3 Meeting Place. All meetings of the shareholders shall be held
at a location determined from time to time by the Board of Directors, and the
place at which any such meeting shall be held shall be stated in the notice of
the meeting.

     Section 1.4 Notice of Meetings. Written notice of the time and place of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called shall be delivered personally or mailed not less than ten
days nor more than 60 days before the date of the meeting to each shareholder of
record entitled to vote, at the address appearing upon the stock transfer books
of the Corporation. If the shareholders will be voting on (i) an amendment to
the Articles of Incorporation, (ii) a plan of merger or share exchange, (iii)
the sale of all or substantially all of the Corporation's assets, or (iv) the
dissolution of the Corporation, notice shall be delivered personally or mailed
not less than 20 nor more than 60 days before the date of the meeting. Meetings
may be held without notice if all shareholders entitled to vote are present or
represented by proxy or if notice is waived by those not present or so
represented at the beginning of the meeting.

     Section 1.5 Waiver of Notice. Notice of time, place and purpose of any
meeting may be waived in writing before or after the time of the meeting, and
will be waived by any shareholder by his or her attendance at such meeting in
person or by proxy unless at the beginning of the meeting such shareholder
objects to the meeting or the transaction of business at such meeting. Any
shareholder waiving his or her right to notice shall be bound by the proceedings
of any such meeting in all respects as if due notice thereof had been given.



     Section 1.6 Quorum. Except as otherwise required by law:

     (a) A quorum at any annual or special meeting of shareholders shall consist
of shareholders representing, either in person or by proxy, a majority of the
outstanding shares of the Corporation entitled to vote at such meeting. If a
quorum is not present, the holders of a majority of the shares so present or
represented may adjourn the meeting from time to time until a quorum is present.

     (b) Action on a matter other than the election of directors is approved if
the votes cast favoring the action exceed the number of votes cast opposing the
action.

     Section 1.7 Organization of Meetings. Meetings of the shareholders shall be
presided over by the President, but if the President is not present, then by a
Vice President. If neither the President nor a Vice President is present, by a
chairman to be chosen at the meeting. The Secretary of the Corporation shall act
as Secretary of the meeting, if present.

     Section 1.8 Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the Secretary of the
Corporation or other officer of the Corporation or agent authorized to tabulate
votes before or at the time of the meeting. No proxy shall be valid after eleven
months from the date of its execution, unless otherwise provided in such proxy.
Any proxy regular on its face shall be presumed to be valid.

     Section 1.9 Shareholders' Action Without Meeting. Any action required or
which may be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing setting forth the action so taken shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.

     Section 1.10 Action of Shareholders by Communication Equipment.
Shareholders may participate in a meeting of shareholders by means of a
conference telephone or similar communication equipment by means of which all
persons participating in the meeting can hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.

     Section 1.11 List of Shareholders. At least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, shall be made. Such list shall be arranged
in alphabetical order with the address of and number of shares held by each
shareholder. Such record shall be kept on file at the principal office of the
Corporation for a period of ten days prior to such meeting. The record shall be
produced and kept open at the time and place of such meeting for the inspection
of any shareholder. Failure to comply with the requirements of this section
shall not affect the validity of any action taken at such meeting.

     Section 1.12 Notice of Shareholder Business to be Conducted at the Annual
Meeting of Shareholders. In order for a shareholder to properly bring any item
of business before an annual meeting of shareholders, such shareholder must give
timely notice thereof in proper written form to the Secretary of the
Corporation. This Section 1.12 shall constitute an "advance notice provision"
for purposes of Rule 14a-4(c)(1), promulgated under the Securities Exchange Act
of 1934, as such rule may be amended from time to time (the "Exchange Act").

     (a) To be timely, a shareholder's notice to the Secretary must be delivered
at the principal executive offices of the Corporation not less than one hundred
twenty (120) days prior to the anniversary of the date of the Corporation's
proxy statement released to shareholders in connection with the previous year's
annual meeting; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after the date
of the immediately preceding annual meeting of shareholders, notice by the
shareholder must be received no later than the close of business on the tenth
(10th) day following the day on which notice of the date of the annual meeting
was mailed or public disclosure of the date of the annual meeting was made,
whichever first occurs.


                                       2



     (b) To be in proper form, a shareholder's notice to the Secretary must set
forth as to each matter such shareholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address of such shareholder, (iii) the class or
series and number of shares of capital stock of the Corporation that are owned
beneficially or of record by such shareholder, (iv) a description of all
arrangements or understandings between such shareholder and any other person or
persons (including their names) in connection with the proposal of such business
by such shareholder and any material interest of such shareholder in such
business and (v) a representation that such shareholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.

     (c) A shareholder intending to nominate one or more persons for election as
a Director at an annual meeting must comply with the notice provisions set forth
in Section 1.12(a) and Section 1.12(b) hereof (as such provisions may be amended
from time to time) for such nomination or nominations to be properly brought
before such meeting. In addition, for a nomination to be made properly by a
shareholder, the notice to the Secretary of the Corporation must set forth (i)
as to each person whom the shareholder proposes to nominate for election as a
director (A) the name, age, business address and residence address of the person
being nominated, (B) the principal occupation or employment of the person being
nominated, (C) the class or series and number of shares of capital stock of the
Corporation that are owned beneficially or of record by the person being
nominated and (D) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with the solicitation of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder; and (b) as to the shareholder giving the notice, any
information (in addition to the information required pursuant to Section 1.12
(a) and Section 1.12(b) hereof) relating to such shareholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with the solicitation of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.

                              ARTICLE II. DIRECTORS

     Section 2.1 Number, Election, and Powers.

     (a) All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be managed under the
direction of the Board of Directors, except as may be otherwise provided in the
Articles of Incorporation. The Board of Directors shall consist of nine members.
The number of directors may be changed by a resolution of the Board of Directors
or by a vote of the shareholders at the annual shareholders' meeting.

     (b) All directors shall be elected for terms lasting until the next annual
meeting of shareholders following their election, and until their successors are
elected and qualified, subject to their earlier death, resignation or removal
from the Board of Directors.

     (c) Directors need not be shareholders or residents of the state of
Washington. In addition to the powers and authorities expressly conferred upon
the Corporation by these Bylaws and the Articles of Incorporation, the Board of
Directors may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Articles of Incorporation or by
these Bylaws directed or required to be exercised or done by the shareholders.

     Section 2.2 Vacancies. Any vacancy occurring in the Board of Directors,
whether caused by resignation, death, increase in size or otherwise, may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. A director elected to fill any
vacancy shall hold office until the next election of directors by the
shareholders


                                       3



     Section 2.3 Quorum. A majority of the members of the Board of Directors
then holding office shall constitute a quorum for the transaction of business,
but if at any meeting of the Board of Directors there shall be less than a
quorum present, a majority of those present may adjourn the meeting from time to
time until a quorum shall have been obtained.

     Section 2.4 Removal of Directors. Except as otherwise provided by law or by
the Articles of Incorporation, at a meeting of shareholders called expressly for
that purpose at which a quorum exists, the entire Board of Directors or any
member thereof may be removed with or without cause by a vote of the holders of
a majority of the shares present and entitled to vote for the election of
directors.

     Section 2.5 Regular Meetings.

     (a) Meetings of the Board of Directors shall be held from time to time at
the principal place of business of the Corporation or at such other place or
places, either within or without the state of Washington, as the Board of
Directors may from time to time designate.

     (b) Regular meetings of any committee designated by the Board of Directors
may be held at the principal place of business of the Corporation or at such
other place or places, either within or without the state of Washington as such
committee may from time to time designate. The schedule for meetings of any
committee shall be set by said committee.

     Section 2.6 Special Meetings.

     (a) Special meetings of the Board of Directors may be called at any time by
the President, Secretary or by any one Director, to be held at the principal
place of business of the Corporation or at such other place or places as the
Board of Directors or the person or persons calling such meeting may from time
to time designate.

     (b) Special meetings of any committee may be called at any time by such
person or persons and with such notice as shall be specified for such committee
by the Board of Directors, or in the absence of such specification, in the
manner and with the notice required for special meetings of the Board of
Directors.

     Section 2.7 Notice of Special Meetings. Notice of each special meeting of
the Board of Directors shall be delivered to each Director at least two days
before the meeting. The notice of any special meeting shall identify the
business to be transacted at or the purpose of the special meeting.

     Section 2.8 Committees. The Board of Directors may, in its discretion, by
resolution passed by a majority of the whole Board of Directors, appoint various
committees consisting of two or more members, including an Executive Committee,
which shall have and may exercise such powers as shall be conferred or
authorized by the resolution appointing such committee. A majority of any such
committee, composed of more than two members, may determine its action and fix
the time and place of its meetings, unless the Board of Directors shall
otherwise provide. The Board of Directors shall have the power at any time to
change the members of any such committee, to fill vacancies, and to discharge
any such committee.

     Section 2.9 Action by Directors Without a Meeting. Any action required or
which might be taken at a meeting of the Board of Directors or of a committee
thereof may be taken without a meeting if a consent in writing, setting forth
the action so taken or to be taken, shall be signed by all of the directors, or
all of the members of the committee, as the case may be. Such consent shall be
filed in the Corporation's minute book, or with the records of the committee so
acting.


                                       4



     Section 2.10 Meeting by Telephone. Members of the Board of Directors or any
committee designated by the Bylaws or appointed by the Board of Directors may
participate in a meeting of such Board of Directors or committee by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence in person at a meeting.

                       ARTICLE III. CONFLICTS OF INTEREST

     The Corporation may enter into contracts and otherwise transact business as
vendor, purchaser, or otherwise, with its directors and officers and with
corporations, associations, firms, and entities in which they are or may be or
become interested as directors, officers, shareholders, members, or otherwise,
as freely as though such adverse interest did not exist, even though the vote,
action, or presence of such director or officer may be necessary to obligate the
Corporation upon such contracts or transactions; and, in the absence of fraud,
no such contract or transaction shall be voided and no such director or officer
shall be held liable to account to the Corporation, by reason of such adverse
interests or by reason of any fiduciary relationship to the Corporation arising
out of such office or stock ownership, for any profit or benefit realized
through any such contract or transaction; provided that in the case of
directors, such director makes the disclosures required by RCW 23B.08.710
through RCW 23.B.08.710, and in the case of officers of the Corporation the
nature of the interest of such officer, be disclosed or known to the Board of
Directors of the Corporation. Officers need make no disclosure under this
article when their interest is less than or equal to five percent of the voting
power or control of the other corporation, association, firm or entity.

                              ARTICLE IV. OFFICERS

     Section 4.1 Election or Appointment. The Board of Directors, as soon as
practicable after the election of directors held each year, shall appoint a
President and a Secretary, and from time to time may appoint a Chairman of the
Board, one or more Vice Presidents, a Treasurer and such Assistant Secretaries,
Assistant Treasurers and other officers as it may deem proper. Any two or more
offices may be held by the same person, except the offices of President and
Secretary. Unless otherwise required by law, no officer need be a shareholder of
the Corporation or a member of the Board of Directors.

     Section 4.2 Term. The term of office of all officers shall be one year or
until their respective successors are appointed. Any officer may be removed from
office at any time by the affirmative vote of a majority of the Board of
Directors or by the action of the duly appointed superior officer to whom he or
she reports. The vacancy so created may be filled by the Board of Directors or
by such duly appointed superior officer.

     Section 4.3 Removal. Any officer appointed by the Board of Directors may be
removed with or without cause by the Board of Directors or the duly appointed
superior officer to which such officer reports, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.

     Section 4.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause, may be filled by the
Board of Directors or by a duly appointed superior officer.

     Section 4.5 Delegation. In the case of the absence or inability to act of
any officer of the Corporation and of any person herein authorized to act in
such person's place, the Board of Directors may from time to time delegate the
powers or duties of such officer to any other officer, employee or agent.

     Section 4.6 Bonds. The Board of Directors may, by resolution, require any
or all of the officers to give bonds to the Corporation, with sufficient surety
or sureties, conditioned for the faithful performance of the duties of their
respective offices, and to comply with such other conditions as may from time to
time be required by the Board of Directors.


                                       5



     Section 4.7 President. The President shall be the principal executive
officer of the Corporation and, subject to the Board of Directors' control,
shall supervise and control all of the business and affairs of the Corporation.
When present, the President shall preside over all meetings of shareholders and
directors. With the Secretary or other officer of the Corporation authorized by
the Board of Directors, he may sign certificates for shares of the Corporation,
deeds, mortgages, bonds, contracts, or other instruments that the Board of
Directors has authorized to be executed, except when the signing and execution
thereof has been expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the Corporation or is required by law
to be otherwise signed or executed by some other officer or in some other
manner. In general, he shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time.

     Section 4.8 Secretary. The Secretary shall: (a) keep the minutes of
shareholders' and Board of Directors' meetings in one or more books provided for
that purpose; (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c) have responsibility for
maintaining the corporate records and the seal of the Corporation and see that
the seal of the Corporation is affixed to all documents, the execution of which
on behalf of the Corporation under its seal is duly authorized; (d) sign with
the President or other officer of the Corporation authorized by the Board of
Directors certificates for shares of the Corporation, the issuance of which have
been authorized by resolution of the Board of Directors; (e) have general
responsibility for the stock transfer books of the Corporation; and (f) in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him or her by the President or by
the Board of Directors.

                ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS

     Section 5.1 Contracts. The Board of Directors may authorize any officer,
employee or agent to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation.

     Section 5.2 Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by such officer, employee or agent of the
Corporation and in such manner as is from time to time determined by resolution
of the Board of Directors.

             ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER

     Section 6.1 Issuance of Shares. No shares of the Corporation shall be
issued unless authorized by the Board of Directors. Such authorization shall
include the maximum number of shares to be issued and the consideration to be
received for each share. No certificate shall be issued for any share until such
share is fully paid.

     Section 6.2 Certificates for Shares. Certificates representing shares of
the Corporation shall be signed by the Chairman of the Board or the President
and by the Secretary and shall include on their face written notice of any
restrictions which the Board of Directors may impose on the transferability of
such shares. All certificates shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the Corporation. All certificates
surrendered to the Corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificates for a like number of
shares shall have been surrendered and canceled except that in case of a lost,
destroyed or mutilated certificate, a new one may be issued therefor upon such
terms and indemnity to the Corporation as the Board of Directors may prescribe.


                                       6



     Section 6.3 Transfers.

     (a) Transfers of shares shall be made only upon the share transfer books of
the Corporation, kept at the registered office of the Corporation or at its
principal place of business, or at the office of its transfer agent or
registrar, and before a new certificate is issued the old certificate shall be
surrendered for cancellation. The Board of Directors may, by resolution, open a
share register in any state of the United States, and may employ an agent or
agents to keep such register, and to record transfers of shares therein.

     (b) Shares shall be transferred by delivery of the certificates therefor,
accompanied either by an assignment in writing on the back of the certificate or
an assignment separate from certificate, or by a written power of attorney to
sell, assign and transfer the same, signed by the holder of said certificate. No
shares of stock shall be transferred on the books of the Corporation until the
outstanding certificates therefor have been surrendered to the Corporation. The
Board of Directors may, by resolution, adopt appropriate procedures to allow
transfers of shares, the certificates for which have been lost, stolen,
mutilated or destroyed.

     Section 6.4 Restriction on Transfer. All certificates representing
unregistered shares of the Corporation shall bear an appropriate restrictive
legend on the face of the certificate or on the reverse of the certificate.

                                ARTICLE VII. SEAL

     The seal of this Corporation shall consist of the name of the Corporation
and the state and year of its incorporation.

                          ARTICLE VIII. INDEMNIFICATION

     Section 8.1 Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved (including, without
limitation, as a witness) in any actual or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director, officer, employee, or agent of
the Corporation or, being or having been such a director, officer, employee or
agent, he or she is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation or of a
partnership, joint venture, trust, or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee, or
agent or in any other capacity while serving as a director, officer, employee,
or agent, shall be indemnified and held harmless by the Corporation to the full
extent authorized by the Washington Business Corporation Act or other applicable
law, as the same exists or may hereafter be amended, against all expense,
liability, and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts to be paid in settlement) actually and reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of his or her heirs,
executors, and administrators; provided, however, that except as provided in
Paragraph 8.2 of this Article with respect to proceedings seeking to enforce
rights to indemnification, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Paragraph 8.1 shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that the payment of such expenses in advance of the final disposition
of a proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director, officer, employee, or agent, to
repay all amounts so advanced if it shall ultimately be determined that such
director, officer, employee, or agent is not entitled to be indemnified under
this Paragraph 8.1 or otherwise.


                                       7



     Section 8.2 Right of Claimant To Bring Suit. If a claim under Paragraph 8.1
of this article is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for expenses incurred in defending a proceeding in advance of its final
disposition, in which case the applicable period shall be twenty days, the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, to the extent successful in whole or
in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. The claimant shall be presumed to be entitled to
indemnification under this article upon submission of a written claim (and, in
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition, where the required undertaking
has been tendered to the Corporation) and thereafter the Corporation shall have
the burden of proof to overcome the presumption that the claimant is not so
entitled. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that indemnification of,
or reimbursement or advancement, of expenses to the claimant is proper in the
circumstances nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its shareholders) that the
claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses shall be a defense to the action or create a presumption
that the claimant is not so entitled.

     Section 8.3 Non-exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Articles of Incorporation, Bylaws, agreement, vote of shareholders or
disinterested directors, or otherwise.

     Section 8.4 Insurance Contracts and Funding. The Corporation may maintain
insurance, at its expense, to protect itself and any director, officer,
employee, or agent of the Corporation or another corporation, partnership, joint
venture, trust, or other enterprise against any expense, liability, or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability, or loss under the Washington Business
Corporation Act. The Corporation may enter into contracts with any director,
officer, employee, or agent of the Corporation in furtherance of the provisions
of this Article and may create a trust fund, grant a security interest, or use
other means (including, without limitation, a letter of credit) to ensure the
payment of such amounts as may be necessary to effect indemnification as
provided in this article.

     Section 8.5 Indemnification of Employees and Agents of the Corporation. The
Corporation may, by action of its Board of Directors from time to time, provide
indemnification and pay expenses in advance of the final disposition of a
proceeding to employees and agents of the Corporation with the same scope and
effect as the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation or pursuant
to rights granted pursuant to, or provided by, the Washington Business
Corporation Act or otherwise.

                          ARTICLE IX. BOOKS AND RECORDS

     The Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders and Board
of Directors; and shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
shareholders, giving the names and addresses of all shareholders and the number
and class of the shares held by each. Any books, records, and minutes may be in
written form or any other form capable of being converted into written form
within a reasonable time.


                                       8



                              ARTICLE X. AMENDMENTS

     Except to the extent prohibited by law, and only upon a vote of two-thirds
of the Board of Directors, these Bylaws may be altered, amended or repealed, and
new Bylaws may be adopted by the Board of Directors at any regular or special
meeting of the Board of Directors.

                             CERTIFICATE OF ADOPTION

     The undersigned secretary of Starbucks Corporation (the "Company") does
hereby certify that the above and foregoing Bylaws of the Company are the
Amended and Restated Bylaws of the Company, as amended through February 8, 2006,
and that the same do now constitute the Bylaws of the Company.

                                        STARBUCKS CORPORATION


                                        /s/ Paula E. Boggs
                                        ----------------------------------------
                                        Paula E. Boggs,
                                        executive vice president, general
                                        counsel and secretary

Amended December 14, 1987; January l8, 1991; May 29, 1991; June 4, 1992;
September 27, 1993; May 17, 1995; December 20, 1995; November 14, 2000; May 8,
2002; January 7, 2004; and February 8, 2006


                                        9

EX-31.1

                                                                    EXHIBIT 31.1

  CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934
      AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

   I, James L. Donald, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter
   ended April 2, 2006 of Starbucks Corporation (the "Registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a
   material fact or omit to state a material fact necessary to make the
   statements made, in light of the circumstances under which such statements
   were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
   information included in this report, fairly present in all material respects
   the financial condition, results of operations and cash flows of the
   Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer and I are responsible for
   establishing and maintaining disclosure controls and procedures (as defined
   in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
   financial reporting (as defined in Exchange Act Rules 13a-15(f) and
   15d-15(f)) for the Registrant and we have:

   a) designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our supervision,
      to ensure that material information relating to the Registrant, including
      its consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;

   b) designed such internal control over financial reporting, or caused such
      internal control over financial reporting to be designed under our
      supervision, to provide reasonable assurance regarding the reliability of
      financial reporting and the preparation of financial statements for
      external purposes in accordance with generally accepted accounting
      principles;

   c) evaluated the effectiveness of the Registrant's disclosure controls and
      procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of
      the period covered by this report based on such evaluation; and

   d) disclosed in this report any change in the Registrant's internal control
      over financial reporting that occurred during the Registrant's most recent
      fiscal quarter (the Registrant's fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially affect, the Registrant's internal control over financial
      reporting; and

5. The Registrant's other certifying officer and I have disclosed, based on our
   most recent evaluation of internal control over financial reporting, to the
   Registrant's auditors and the audit committee of the Registrant's board of
   directors (or persons performing the equivalent functions):

   a) all significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the Registrant's ability to record,
      process, summarize and report financial information; and

   b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the Registrant's internal control
      over financial reporting.

May 12, 2006                           /s/ James L. Donald
                                       -----------------------------------------
                                       James L. Donald
                                       president and chief executive officer

EX-31.2

                                                                    EXHIBIT 31.2

  CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934
      AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

   I, Michael Casey, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter
   ended April 2, 2006 of Starbucks Corporation (the "Registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a
   material fact or omit to state a material fact necessary to make the
   statements made, in light of the circumstances under which such statements
   were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
   information included in this report, fairly present in all material respects
   the financial condition, results of operations and cash flows of the
   Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer and I are responsible for
   establishing and maintaining disclosure controls and procedures (as defined
   in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
   financial reporting (as defined in Exchange Act Rules 13a-15(f) and
   15d-15(f)) for the Registrant and we have:

   a) designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our supervision,
      to ensure that material information relating to the Registrant, including
      its consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;

   b) designed such internal control over financial reporting, or caused such
      internal control over financial reporting to be designed under our
      supervision, to provide reasonable assurance regarding the reliability of
      financial reporting and the preparation of financial statements for
      external purposes in accordance with generally accepted accounting
      principles;

   c) evaluated the effectiveness of the Registrant's disclosure controls and
      procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of
      the period covered by this report based on such evaluation; and

   d) disclosed in this report any change in the Registrant's internal control
      over financial reporting that occurred during the Registrant's most recent
      fiscal quarter (the Registrant's fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially affect, the Registrant's internal control over financial
      reporting; and

5. The Registrant's other certifying officer and I have disclosed, based on our
   most recent evaluation of internal control over financial reporting, to the
   Registrant's auditors and the audit committee of the Registrant's board of
   directors (or persons performing the equivalent functions):

   a) all significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the Registrant's ability to record,
      process, summarize and report financial information; and

   b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the Registrant's internal control
      over financial reporting.

May 12, 2006                           /s/ Michael Casey
                                       -----------------------------------------
                                       Michael Casey
                                       executive vice president, chief financial
                                       officer and chief administrative officer

EX-32.1

                                                                    EXHIBIT 32.1

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

   In connection with the Quarterly Report of Starbucks Corporation
   ("Starbucks") on Form 10-Q for the fiscal quarter ended April 2, 2006, as
   filed with the Securities and Exchange Commission on May 12, 2006 (the
   "Report"), I, James L. Donald, president and chief executive officer of
   Starbucks, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
   to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

   (1) the Report fully complies with the requirements of Section 13(a) or 15(d)
       of the Securities Exchange Act of 1934; and

   (2) the information contained in the Report fairly presents, in all material
       respects, the financial condition and results of operations of Starbucks.

May 12, 2006                           /s/ James L. Donald
                                       -----------------------------------------
                                       James L. Donald
                                       president and chief executive officer

EX-32.2

                                                                    EXHIBIT 32.2

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

   In connection with the Quarterly Report of Starbucks Corporation
   ("Starbucks") on Form 10-Q for the fiscal quarter ended April 2, 2006, as
   filed with the Securities and Exchange Commission on May 12, 2006 (the
   "Report"), I, Michael Casey, executive vice president, chief financial
   officer and chief administrative officer of Starbucks, certify, pursuant to
   18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
   Sarbanes-Oxley Act of 2002, that, to my knowledge:

   (1) the Report fully complies with the requirements of Section 13(a) or 15(d)
       of the Securities Exchange Act of 1934; and

   (2) the information contained in the Report fairly presents, in all material
       respects, the financial condition and results of operations of Starbucks.

May 12, 2006                           /s/ Michael Casey
                                       -----------------------------------------
                                       Michael Casey
                                       executive vice president, chief financial
                                       officer and chief administrative officer