8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported): November 16, 2006

STARBUCKS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

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

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

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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

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

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

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

TABLE OF CONTENTS

	Item 2.02.      Results of Operations and Financial Condition.
	Item 9.01.     Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1

Item 2.02.      Results of Operations and Financial Condition.

     On November 16, 2006, Starbucks Corporation (the “Company”) issued an earnings release announcing its financial results for the 13 weeks and 52 weeks ended October 1, 2006. A copy of the earnings release is attached as Exhibit 99.1.

     Effective October 3, 2005, the Company adopted the fair value recognition provisions of Financial Accounting Standards Board Statement No. 123(R), “Share-Based Payment” (“SFAS 123R”), requiring all stock-based compensation, including grants of employee stock options, to be recognized in the statement of earnings based on their fair values. The Company adopted this accounting treatment using the modified-prospective transition method, as permitted under SFAS 123R; therefore, results for prior periods have not been restated. Prior to the adoption of SFAS 123R, the Company 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. In addition to disclosing financial results calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), the attached press release (at page 7) includes certain “non-GAAP financial measures” under applicable SEC rules because they exclude the stock-based payment expense that is included in the directly comparable measures calculated in accordance with GAAP, to which the non-GAAP financial measures are reconciled in a table. The non-GAAP financial measures provided on page 7 of the attached press release and calculated in this manner are:

• cost of sales including occupancy costs

• store operating expenses

• other operating expenses

• general and administrative expenses

• operating income

• earnings before income taxes

• income taxes

• earnings before cumulative effect of change in accounting principle

• earnings per share before cumulative effect of accounting change for FIN 47 — diluted

     These non-GAAP financial measures are not a substitute for the reported GAAP measures and may be different from non-GAAP financial measures used by other companies.

     The Company’s management finds these non-GAAP financial measures useful, and believes they provide useful information to investors regarding the Company’s results of operations, because they have been prepared on a basis comparable to that used in prior periods. Management also uses the foregoing non-GAAP financial measures, in addition to the corresponding GAAP measures, in reviewing the financial results of the Company, both on a segment and on a consolidated basis. Management uses these non-GAAP financial measures to review financial results because the Company’s internal budgets and targets (including under the Company’s incentive compensation plans) for fiscal 2006 were established prior to the Company’s adoption of SFAS 123R. Therefore, assessing performance against those budgets and targets, and the related management reporting, requires exclusion of stock-based compensation expense. Management further believes that, where the adjustments used in calculating non-GAAP (pro forma) earnings before cumulative effect of change in accounting principle and earnings per share before cumulative effect of accounting change for FIN 47- diluted are based on specific, identified charges that impact different line items in the consolidated statement of earnings, investors may find it useful to know how these specific line items in the consolidated statement of earnings are affected by these adjustments. In particular, now that the Company has adopted SFAS 123R, management believes investors may find it useful to understand how the expenses recorded as a result of the adoption of SFAS 123R are reflected in its consolidated statement of earnings.

Item 9.01.     Financial Statements and Exhibits.

(c)     Exhibits.

Exhibit No.		Description
	99.1	Earnings release of Starbucks Corporation dated November 16, 2006

SIGNATURES

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

	STARBUCKS CORPORATION
Dated: November 16, 2006	By:	/s/ Michael Casey
		Michael Casey
		executive vice president, chief financial officer and chief administrative officer

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Earnings release of Starbucks Corporation dated November 16, 2006

EX-99.1

Exhibit 99.1

Starbucks Contact, Investor Relations:	Starbucks Contact, Media:
JoAnn DeGrande	Valerie O’Neil
206-318-7893	206-318-8953
jdegrand@starbucks.com	voneil@starbucks.com

Starbucks Reports Record Full Year 2006 Results
Fiscal Year 2006 Consolidated Net Revenues Increase 22 Percent to $7.8 Billion
Fiscal Year 2006 Net Earnings of $564 Million
Company Targets Record Openings of 2,400 New Stores in Fiscal 2007

SEATTLE; November 16, 2006 – Starbucks Corporation (NASDAQ: SBUX) today announced revenues and earnings for its fiscal fourth quarter and fiscal year ended October 1, 2006. During fiscal 2006, the Company adopted two new accounting requirements which make the financial results for the fourth quarter and full year not comparable with the prior year. SFAS 123R, the expensing of stock compensation, was adopted at the beginning of the fiscal year and reduced earnings by $0.02 per share and $0.09 per share for the fourth quarter and the full year, respectively. FIN 47, which addresses asset retirement obligations, was adopted at the end of the fiscal year and impacted earnings by $0.02 per share in both the fourth quarter and the full year. Except where noted, the fiscal 2006 financial results reflect the reductions to earnings resulting from these accounting changes, and the results presented for the prior year do not include these expenses. These accounting changes are described in more detail on pages 7 and 8 of this release.

Fiscal Year End 2006 Highlights:

• Record worldwide store openings of 2,199

• Consolidated net revenues of $7.8 billion for the full fiscal year, an increase of 22 percent

• Net earnings of $564 million, compared to $494 million in fiscal year 2005

• Earnings before FIN 47 of $581 million, an increase of 18 percent

• Earnings per share before FIN 47 of $0.73, compared to $0.61 per share in fiscal year 2005, an increase of 20 percent

Fiscal Fourth Quarter 2006 Highlights:

• Consolidated net revenues of $2.0 billion for the fourth quarter, an increase of 21 percent

• Net earnings of $117 million, compared to $124 million in the fourth quarter of 2005

• Earnings before FIN 47 of $135 million, an increase of nine percent

• Earnings per share before FIN 47 of $0.17, compared to $0.16 per share in the fourth quarter of 2005

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“In fiscal 2006, Starbucks continued to deliver strong operating results,” commented Jim Donald, Starbucks president and ceo. “We demonstrated the strength of our business model as we opened a record number of new stores around the world, which contributed to strong top line growth, and we enhanced and expanded our product offerings through innovation and entry into new channels. We accomplished all of this through the hard work of our passionate partners who maintain a consistent focus on the needs of our customers.”

Donald added, “Customer demand for the Starbucks brand remains strong in domestic and international markets and we are very excited to bring the Starbucks Experience to two new markets – Egypt and Brazil – in the first quarter of our new fiscal year. Our solid performance in fiscal 2006 also included foundational work for the future. We continued to build on our well-developed pipeline of product innovation, make meaningful progress toward Starbucks entry into several significant new markets in 2007, and explore opportunities to extend the brand outside our retail stores. We entered the new fiscal year with a continued focus on execution and meeting our aggressive financial targets.”

Consolidated Financial and Operating Summary

Company-operated retail revenues increased 22 percent to $1.7 billion for the 13 weeks ended October 1, 2006, from $1.4 billion for the same period in fiscal 2005. The increase was primarily attributable to the opening of 1,040 new Company-operated retail stores in the last 12 months and comparable store sales growth of five percent for the quarter. The increase in comparable store sales was due to a four percent increase in the number of customer transactions and a one percent increase in the average value per transaction.

Specialty revenues increased 16 percent to $309 million for the 13 weeks ended October 1, 2006, compared to $267 million for the corresponding period of fiscal 2005. Licensing revenues increased 21 percent to $223 million primarily due to higher product sales and royalty revenues from the opening of 1,159 new licensed retail stores in the last 12 months and, to a lesser extent, growth in the licensed grocery and warehouse club business. Foodservice and other revenues increased five percent to $86 million. This increase was primarily due to growth in the U.S. foodservice business, partially offset by lower entertainment revenues which included revenue from the sales of Ray Charles’ Genius Loves Company CDs outside of Starbucks retail stores in the fiscal fourth quarter of 2005.

Cost of sales including occupancy costs increased to 41.7 percent of total net revenues for the 13 weeks ended October 1, 2006, compared to 40.9 percent in the corresponding 13-week period of fiscal 2005. This increase was due to higher green coffee costs, a shift in retail sales mix to products with gross margins lower than beverages, and to higher utility and distribution costs, offset in part by favorable dairy costs.

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Store operating expenses as a percentage of Company-operated retail revenues increased to 42.1 percent for the 13 weeks ended October 1, 2006, from 40.6 percent for the corresponding period of fiscal 2005. This increase was primarily due to higher payroll expenditures for U.S. retail stores, including an increase in the number of assistant store managers and regional support positions in order to facilitate accelerated retail store growth. In addition, payroll-related expenditures increased due to the recognition of stock-based compensation expense.

Other operating expenses (expenses associated with the Company’s specialty operations) increased to 21.9 percent of total specialty revenues for the 13 weeks ended October 1, 2006, compared to 21.7 percent in the corresponding period of fiscal 2005. The increase was primarily due to the recognition of stock-based compensation expense.

Depreciation and amortization expenses increased to $103 million for the 13 weeks ended October 1, 2006, compared to $88 million for the corresponding period of fiscal 2005. The increase was primarily due to the opening of 1,040 new Company-operated retail stores in the last 12 months. As a percentage of total net revenues, depreciation and amortization expenses decreased to 5.1 percent for the 13 weeks ended October 1, 2006, from 5.3 percent for the corresponding 13-week period of fiscal 2005.

General and administrative expenses increased to $115 million for the 13 weeks ended October 1, 2006, compared to $101 million for the corresponding period of fiscal 2005. The increase was primarily due to higher payroll-related expenditures from the recognition of stock-based compensation expense and higher professional fees in support of global systems infrastructure development, partially offset by lower provisions for incentive compensation. As a percentage of total net revenues, general and administrative expenses decreased to 5.7 percent for the 13 weeks ended October 1, 2006, from 6.1 percent for the corresponding period of fiscal 2005.

Income from equity investees decreased 3 percent to $28.6 million for the 13 weeks ended October 1, 2006, compared to $29.5 million for the corresponding period of fiscal 2005. The decrease was primarily due to accounting corrections totaling $4.1 million related to two international joint venture markets. This was partially offset by favorable volume-driven results for The North American Coffee Partnership, which produces bottled Frappuccino^® and Starbucks DoubleShot^® coffee drinks.

Operating income was $198 million for the 13 weeks ended October 1, 2006, compared to $197 million for the corresponding 13-week period of fiscal 2005. Operating margin decreased to 9.9 percent of total net revenues for the 13 weeks ended October 1, 2006, compared to 11.8 percent for the corresponding period of fiscal 2005, primarily due to the recognition of stock-based compensation and higher store operating expenses. Excluding the impact of stock-based compensation expense, the operating margin was 11.2 percent.

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Income taxes for the 13 weeks ended October 1, 2006 resulted in an effective tax rate of 33.2 percent, compared to 38.1 percent for the corresponding 13-week period of fiscal 2005. The effective tax rate in the current period was lower than normal due to recognition of the full-year benefit of a shift in the mix of profitability to lower-tax international markets and increased effectiveness of the Company’s long-term tax planning strategies as well as several favorable audit settlements, closures and adjustments. In addition, there was a valuation allowance recorded in the fourth quarter of fiscal 2005 which resulted in a higher effective tax rate in that period.

Financial Statements

This press release includes consolidated statements of earnings for the fiscal fourth quarter and fiscal year end 2006. The consolidated balance sheets and statements of cash flows usually presented here will be presented in the Company’s Form 10-K.

Fiscal 2007 Targets

Looking ahead, fiscal 2007 targets include the opening of approximately 2,400 net new stores on a global basis, total net revenue growth of approximately 20 percent, comparable store sales growth in the range of three percent to seven percent and earnings per share in the range of $0.87 per share to $0.89 per share for the fiscal year.

Starbucks will be holding a conference call today at 2:00 p.m. Pacific Time, which will be hosted by Howard Schultz, chairman, Jim Donald, president and ceo, and Michael Casey, executive vice president and chief financial officer. The call will be broadcast live over the Internet and can be accessed at the Company’s web site address of http://investor.starbucks.com. A replay of the call will be available via telephone through 5:30 p.m. Pacific Time on Thursday, November 23, 2006, by calling 1-800-642-1687, reservation number 3728606. A posting of speaker remarks and a replay of the call will also be available via the Investor Relations page on Starbucks.com through approximately 5:00 p.m. Pacific Time on Thursday, December 14, 2006, at the following URL: http://investor.starbucks.com.

The Company’s consolidated statements of earnings, operating segment results, and other additional information have been provided on the following pages in accordance with current year classifications. This information should be reviewed in conjunction with this press release. Please refer to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 16, 2005, for additional information.

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STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

	13 Weeks Ended							13 Weeks Ended
	October 1,		October 2,		%			October 1,			October 2,
	2006		2005		Change			2006			2005
	(in thousands, except per share data)							As a % of total net revenues
Net revenues:
Company-operated retail	$	1,694,294	$	1,392,714		21.7	%		84.6	%		83.9	%
Specialty:
Licensing		222,905		184,180		21.0			11.1			11.1
Foodservice and other		86,156		82,347		4.6			4.3			5.0
Total specialty		309,061		266,527		16.0			15.4			16.1
Total net revenues		2,003,355		1,659,241		20.7			100.0			100.0
Cost of sales including occupancy costs		834,991		678,886					41.7			40.9
Store operating expenses (a)		713,774		565,953					35.6			34.2
Other operating expenses (b)		67,813		57,932					3.4			3.5
Depreciation and amortization expenses		102,876		88,475					5.1			5.3
General and administrative expenses		114,829		100,949					5.7			6.1
Subtotal operating expenses		1,834,283		1,492,195		22.9			91.5			90.0
Income from equity investees		28,566		29,469					1.4			1.8
Operating income		197,638		196,515		0.6			9.9			11.8
Interest and other income, net		3,852		3,458					0.2			0.3
Earnings before income taxes		201,490		199,973		0.8			10.1			12.1
Income taxes(c)		66,987		76,251					3.4			4.6
Earnings before cumulative effect of change in accounting principle		134,503		123,722		8.7			6.7			7.5
Cumulative effect of accounting change for FIN 47, net of taxes		17,214		—					0.8			—
Net earnings	$	117,289	$	123,722		(5.2	%)		5.9	%		7.5	%
Earnings before cumulative effect of accounting change for FIN 47- diluted	$	0.17	$	0.16
Cumulative effect of accounting change for FIN 47, net of taxes		0.02		—
Net earnings per common share — diluted	$	0.15	$	0.16
Weighted avg. shares outstanding — diluted		784,196		794,942

(a)	As a percentage of related Company-operated retail revenues, store operating expenses were 42.1 percent for the 13 weeks ended October 1, 2006, and 40.6 percent for the 13 weeks ended October 2, 2005.
(b)	As a percentage of related total specialty revenues, other operating expenses were 21.9 percent for the 13 weeks ended October 1, 2006, and 21.7 percent for the 13 weeks ended October 2, 2005.
(c)	The effective tax rates were 33.2 percent for the 13 weeks ended October 1, 2006, and 38.1 percent for the 13 weeks ended October 2, 2005.

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STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

	52 Weeks Ended							52 Weeks Ended
	October 1,		October 2,		%			October 1,			October 2,
	2006		2005		Change			2006			2005
	(in thousands, except per share data)							As a % of total net revenues
Net revenues:
Company-operated retail	$	6,583,098	$	5,391,927		22.1	%		84.5	%		84.7	%
Specialty:
Licensing		860,676		673,015		27.9			11.1			10.5
Foodservice and other		343,168		304,358		12.8			4.4			4.8
Total specialty		1,203,844		977,373		23.2			15.5			15.3
Total net revenues		7,786,942		6,369,300		22.3			100.0			100.0
Cost of sales including occupancy costs		3,178,791		2,605,212					40.8			40.9
Store operating expenses (a)		2,687,815		2,165,911					34.5			34.0
Other operating expenses (b)		260,087		197,024					3.3			3.1
Depreciation and amortization expenses		387,211		340,169					5.0			5.3
General and administrative expenses		473,023		357,114					6.1			5.6
Subtotal operating expenses		6,986,927		5,665,430		23.3			89.7			88.9
Income from equity investees		93,937		76,648					1.2			1.2
Operating income		893,952		780,518		14.5			11.5			12.3
Interest and other income, net		12,291		15,829					0.1			0.2
Earnings before income taxes		906,243		796,347		13.8			11.6			12.5
Income taxes(c)		324,770		301,977					4.1			4.7
Earnings before cumulative effect of change in accounting principle		581,473		494,370		17.6			7.5			7.8
Cumulative effect of accounting change for FIN 47, net of taxes		17,214		—					0.3			—
Net earnings	$	564,259	$	494,370		14.1	%		7.2	%		7.8	%
Earnings before cumulative effect of accounting change for FIN 47 - diluted	$	0.73	$	0.61
Cumulative effect of accounting change for FIN 47, net of taxes		0.02		—
Net earnings per common share — diluted	$	0.71	$	0.61
Weighted avg. shares outstanding — diluted		792,556		815,417

(a)	As a percentage of related Company-operated retail revenues, store operating expenses were 40.8 percent for the 52 weeks ended October 1, 2006 and 40.2 percent for the 52 weeks ended October 2, 2005.
(b)	As a percentage of related total specialty revenues, other operating expenses were 21.6 percent for the 52 weeks ended October 1, 2006 and 20.2 percent for the 52 weeks ended October 2, 2005.
(c)	The effective tax rates were 35.8 percent for the 52 weeks ended October 1, 2006, and 37.9 percent for the 52 weeks ended October 2, 2005.

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Stock Compensation Expense

Effective October 3, 2005, the beginning of Starbucks first fiscal quarter of 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123R “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires all stock-based compensation, including grants of employee stock options, to be recognized in the statement of earnings based on their fair values. The Company adopted this accounting treatment using the modified prospective transition method, as permitted under SFAS 123R; therefore results for prior periods have not been restated. Prior to the adoption of SFAS 123R, the Company 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. Accordingly, stock-based compensation was included as pro forma disclosure in the financial statement footnotes. The Company is providing the table below because management believes it provides useful information to investors regarding the Company’s results of operations by separately identifying the stock-based compensation expense and providing reported amounts on a basis comparable to that used in prior periods. In addition, the Company’s internal reporting and budgeting, as well as the calculation of its incentive compensation payments, excludes stock-based compensation expense from reported amounts. The amounts shown in the column below entitled “Using Previous Accounting” are considered “non-GAAP financial measures” under applicable SEC rules because they exclude the stock-based payment expense that is included in the directly comparable measures calculated in accordance with generally accepted accounting principles (“GAAP”) in the United States, which are shown in the column entitled “As Reported.” These non-GAAP financial measures are not a substitute for the reported GAAP measures.

The application of SFAS 123R had the following effect on reported amounts for the 13 and 52 weeks ended October 1, 2006 relative to the amounts that would have been reported using the intrinsic value method under the Company’s previous accounting (in thousands, except earnings per share):

	Consolidated Statements of Earnings
	13 Weeks Ended October 1, 2006							52 Weeks Ended October 1, 2006
	Using							Using
	Previous		Stock-based			As		Previous		Stock-based			As
	Accounting		Compensation			Reported		Accounting		Compensation			Reported
Cost of sales including occupancy costs	$	832,808	$	2,183		$	834,991	$	3,168,786	$	10,005		$	3,178,791
Store operating expenses		705,231		8,543			713,774		2,658,458		29,357			2,687,815
Other operating expenses		64,704		3,109			67,813		249,057		11,030			260,087
General and administrative expenses		101,698		13,131			114,829		418,415		54,608			473,023
Operating income		224,604		(26,966	)		197,638		998,952		(105,000	)		893,952
Earnings before income taxes		228,456		(26,966	)		201,490		1,011,243		(105,000	)		906,243
Income taxes		76,464		(9,477	)		66,987		360,828		(36,058	)		324,770
Earnings before cumulative effect of change in accounting principle		151,992		(17,489	)		134,503		650,415		(68,942	)		581,473
Earnings per share before cumulative effect of accounting change for FIN 47-diluted	$	0.19	$	(0.02	)	$	0.17	$	0.82	$	(0.09	)	$	0.73

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Accounting Change — FIN 47

Effective October 1, 2006, the last day of its fiscal year, Starbucks adopted FASB Interpretation No. 47 (“FIN 47”), “Accounting for Conditional Asset Retirement Obligations – An Interpretation of FASB Statement No. 143.” FIN 47 requires the recognition of a liability for the estimated fair value of a legally required conditional asset retirement obligation (“ARO”) when incurred, if the liability’s fair value can be reasonably estimated, along with an associated offsetting capital asset. The Company’s ARO liabilities are primarily associated with the future costs of removing leasehold improvements at the termination of its leases. Previously, these expenses were recorded as they were incurred when leases were terminated; now these costs will be estimated at the inception of each applicable lease and the expense will be recognized over the expected lease term. The cumulative catch up amount recorded of $17.2 million, net of tax, represents the total amount of liability accretion expense and related depreciation expense that would have been recorded in all prior years as if the new accounting guidance had always been in effect. FIN 47 requires that the cumulative approach to adoption be used, rather than retrospectively revising prior year financials.

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Segment Results

Segment information is prepared on the basis that the Company’s management reviews financial information for operational decision-making purposes. The tables below present operating segment results net of intersegment eliminations for the 13 weeks ended October 1, 2006 (in thousands):

	13 Weeks Ended							13 Weeks Ended
	October 1,		October 2,		%			October 1,			October 2,
	2006		2005		Change			2006			2005
								As a % of U.S. total net
								revenues
United States
Net revenues:
Company-operated retail	$	1,375,459	$	1,163,533		18.2	%		84.8	%		84.3	%
Specialty:
Licensing		168,407		140,306		20.0			10.4			10.2
Foodservice and other		78,226		75,990		2.9			4.8			5.5
Total specialty		246,633		216,296		14.0			15.2			15.7
Total net revenues		1,622,092		1,379,829		17.6			100.0			100.0
Cost of sales including occupancy costs		655,830		544,550					40.4			39.5
Store operating expenses		593,849		482,916					43.2	(1)		41.5	(1)
Other operating expenses		49,868		46,056					20.2	(2)		21.3	(2)
Depreciation and amortization expenses		74,341		65,234					4.6			4.7
General and administrative expenses		22,873		20,123					1.4			1.5
Income from equity investees		21,133		18,202					1.3			1.3
Operating income	$	246,464	$	239,152		3.1	%		15.2	%		17.3	%

							As a % of International
							total net revenues
International
Net revenues:
Company-operated retail	$	318,835	$	229,181	39.1	%		83.6	%	82.0	%
Specialty:
Licensing		54,498		43,874	24.2			14.3		15.7
Foodservice and other		7,930		6,357	24.7			2.1		2.3
Total specialty		62,428		50,231	24.3			16.4		18.0
Total net revenues		381,263		279,412	36.5			100.0		100.0
Cost of sales including occupancy costs		179,161		134,336				47.0		48.1
Store operating expenses		119,925		83,037				37.6	(1)	36.2	(1)
Other operating expenses		17,945		11,876				28.7	(2)	23.6	(2)
Depreciation and amortization expenses		19,094		15,473				5.0		5.5
General and administrative expenses		24,422		15,622				6.4		5.6
Income from equity investees		7,433		11,267				1.9		4.0
Operating income	$	28,149	$	30,335	(7.2	%)		7.4	%	10.9	%

							As a % of total net
							revenues
Unallocated Corporate
Depreciation and amortization expenses	$	9,441		$	7,768			0.4	%	0.5	%
General and administrative expenses		67,534			65,204			3.4		3.9
Operating loss	$	(76,975	)	$	(72,972	)		(3.8	%)	(4.4	)%

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

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The tables below present operating segment results net of intersegment eliminations for the 52 weeks ended October 1, 2006 (in thousands):

	52 Weeks Ended							52 Weeks Ended
	October 1,		October 2,		%			October 1,			October 2,
	2006		2005		Change			2006			2005
								As a % of U.S. total net
								revenues
United States
Net revenues:
Company-operated retail	$	5,448,339	$	4,539,455		20.0	%		84.9	%		85.1	%
Specialty:
Licensing		656,145		514,932		27.4			10.2			9.7
Foodservice and other		314,162		280,073		12.2			4.9			5.2
Total specialty		970,307		795,005		22.1			15.1			14.9
Total net revenues		6,418,646		5,334,460		20.3			100.0			100.0
Cost of sales including occupancy costs		2,527,143		2,086,707					39.4			39.1
Store operating expenses		2,259,513		1,848,836					41.5	(1)		40.7	(1)
Other operating expenses		202,037		162,793					20.8	(2)		20.5	(2)
Depreciation and amortization expenses		282,596		250,415					4.4			4.7
General and administrative expenses		91,034		85,362					1.4			1.6
Income from equity investees		59,071		45,579					0.9			0.9
Operating income	$	1,115,394	$	945,926		17.9	%		17.4	%		17.7	%

							As a % of International
							total net revenues
International
Net revenues:
Company-operated retail	$	1,134,759	$	852,472	33.1	%		82.9	%	82.4	%
Specialty:
Licensing		204,531		158,083	29.4			14.9		15.3
Foodservice and other		29,006		24,285	19.4			2.2		2.3
Total specialty		233,537		182,368	28.1			17.1		17.6
Total net revenues		1,368,296		1,034,840	32.2			100.0		100.0
Cost of sales including occupancy costs		651,648		518,505				47.6		50.1
Store operating expenses		428,302		317,075				37.7	(1)	37.2	(1)
Other operating expenses		58,050		34,231				24.9	(2)	18.8	(2)
Depreciation and amortization expenses		68,937		56,705				5.0		5.5
General and administrative expenses		81,057		53,069				5.9		5.1
Income from equity investees		34,866		31,069				2.5		3.0
Operating income	$	115,168	$	86,324	33.4	%		8.4	%	8.3	%

							As a % of total net
							revenues
Unallocated Corporate
Depreciation and amortization expenses	$	35,678		$	33,049			0.4	%	0.5	%
General and administrative expenses		300,932			218,683			3.9		3.4
Operating loss	$	(336,610	)	$	(251,732	)		(4.3	%)	(3.9	)%

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

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United States

United States total net revenues increased by $242 million, or 18 percent, to $1.6 billion for the 13 weeks ended October 1, 2006, compared to $1.4 billion for the corresponding period of fiscal 2005. United States Company-operated retail revenues increased by $212 million, or 18 percent, to $1.4 billion, primarily due to the opening of 801 new Company-operated retail stores in the last 12 months and comparable store sales growth of five percent for the quarter. The increase in comparable store sales was due to a four percent increase in the number of customer transactions and a one percent increase in the average value per transaction.

Total United States specialty revenues increased by $30 million, or 14 percent, to $247 million for the 13 weeks ended October 1, 2006, compared to $216 million in the corresponding period of fiscal 2005. United States licensing revenues increased 20 percent to $168 million from $140 million in fiscal 2005 primarily due to higher product sales and royalty revenues as a result of opening 733 new licensed retail stores in the last 12 months and, to a lesser extent, growth in the licensed grocery and warehouse club business. United States foodservice and other revenues increased by three percent to $78 million, from $76 million in fiscal 2005. This increase was primarily due to growth in new and existing foodservice accounts, partially offset by lower entertainment revenues which included revenue from the sales of Ray Charles’ Genius Loves Company CDs outside of Starbucks retail stores in the fiscal fourth quarter of 2005.

United States operating income increased by three percent to $246 million for the 13 weeks ended October 1, 2006, from $239 million for the same period in fiscal 2005. Operating margin decreased to 15.2 percent of related revenues from 17.3 percent in the corresponding period of fiscal 2005. The decrease was primarily due to higher store operating expenses, the recognition of stock-based compensation expense and higher cost of sales including occupancy. The higher store operating expenses were primarily due to higher payroll expenditures for U.S. retail stores, including an increase in the number of assistant store managers and regional support positions in order to facilitate accelerated retail store growth. Cost of sales including occupancy increased primarily due to higher green coffee costs, a shift in retail sales mix to products with gross margins lower than beverages, as well as higher utility and distribution costs, offset in part by favorable dairy costs.

International

International total net revenues increased by $102 million, or 36 percent, to $381 million for the 13 weeks ended October 1, 2006, compared to $279 million for the corresponding period of fiscal 2005. International Company-operated retail revenues increased by $90 million, or 39 percent, to $319 million, primarily due to the opening of 239 new Company-operated retail stores in the last 12 months and comparable store sales growth of eight percent for the quarter. The increase in comparable store sales resulted from a five percent increase in the number of customer transactions coupled with a three percent increase in the average value per transaction.

Total international specialty revenues increased by $12 million, or 24 percent, to $62 million for the 13 weeks ended October 1, 2006, compared to $50 million in the corresponding period of fiscal 2005. The increase was primarily due to higher product sales and royalty revenues from opening 426 licensed retail stores in the last 12 months and sales of ready-to-drink coffee beverages in Japan, Taiwan and Korea.

International operating income decreased by seven percent to $28 million for the 13 weeks ended October 1, 2006, compared to $30 million in the corresponding period of fiscal 2005. Operating margin decreased to 7.4 percent of related revenues from a record fourth-quarter high 10.9 percent in the corresponding period of fiscal 2005. This decrease was primarily due to lower reported income from the Company’s equity investees, higher store operating expenses, as well as higher other operating expenses, offset in part by lower cost of sales including occupancy costs. The decrease in equity investee income was primarily due to accounting corrections totaling $4.1 million related to two international joint venture markets in the fourth quarter of fiscal 2006. The increase in store operating expenses and other operating expenses was due to higher payroll expenditures primarily to support global expansion as well as the recognition of stock-based compensation expense. The decrease in cost of sales including occupancy costs was due primarily to leverage gained from fixed costs distributed over an expanded revenue base, as well as favorable dairy costs, offset in part by higher green coffee costs.

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Unallocated Corporate

Unallocated corporate expenses increased to $77 million for the 13 weeks ended October 1, 2006, compared to $73 million in the corresponding period of fiscal 2005. The increase was due to higher payroll-related expenditures from the recognition of stock-based compensation expense and to additional employees as well as higher professional fees primarily in support of global systems infrastructure development. These increases were offset by lower provisions for incentive compensation and lower charitable contributions. Total unallocated corporate expenses as a percentage of total net revenues was 3.8 percent for the 13 weeks ended October 1, 2006 and 4.4 percent for the 13 weeks ended October 2, 2005.

Store Data

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

	Net stores opened during the period
	13-week period				52-week period				Stores open as of
	October 1,		October 2,		October 1,		October 2,		October 1,		October 2,
	2006		2005		2006		2005		2006		2005
United States:
Company-operated Stores		275		201		801		574		5,668		4,867
Licensed Stores		216		213		733		596		3,168		2,435
		491		414		1,534		1,170		8,836		7,302
International:
Company-operated Stores (1)		77		66		239		172		1,434		1,195
Licensed Stores (1)		88		90		426		330		2,170		1,744
		165		156		665		502		3,604		2,939
Total		656		570		2,199		1,672		12,440		10,241

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

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Through the dedication of our passionate partners (employees), Starbucks Coffee Company has transformed the way people in 37 countries enjoy their coffee, one cup at a time. Starbucks is the premier purveyor of the finest coffee in the world, with more than 12,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim. The Company is committed to offering its customers the highest quality coffee and human connection through the Starbucks Experience, while striving to improve the social, environmental and economic well being of its partners, coffee farmers, countries of coffee origin, and the communities which it serves. Through Ethos Water, Starbucks demonstrates its long history of integrating a social conscience into all aspects of its business. The Company surprises and delights its customers by producing and selling bottled Starbucks Frappuccino® coffee drinks, Starbucks DoubleShot® espresso drinks and Starbucks® superpremium ice creams through its joint-venture partnerships, and Starbucks™ Coffee and Cream Liqueurs through a marketing and distribution agreement, in other convenient locations outside its retail operations. The Company’s brand portfolio includes superpremium Tazo® teas, Starbucks Hear Music™ compact discs, Seattle’s Best Coffee and Torrefazione Italia. These brands’ unique and innovative personalities allow Starbucks to appeal to a broad consumer base.

This release includes forward-looking statements regarding trends in or expectations regarding: store openings, comparable store sales, net revenue, and earnings per share results. These forward-looking 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 material prices and availability, successful execution of internal performance and expansion plans, fluctuations in U.S. and international economies and currencies, the impact of initiatives by competitors, the effect of legal proceedings, and other risks detailed in the Company’s filings with the Securities and Exchange Commission, including the “Risk Factors” section of Starbucks Annual Report on Form 10-K for the fiscal year ended October 2, 2005. The Company assumes no obligation to update any of these forward-looking statements.

^© 2006 Starbucks Coffee Company. All rights reserved.

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