Starbucks 2001 Annual Report Download - page 6

BUSINESS COMBINATIONS
During fiscal 2000, Starbucks acquired the outstanding stock of Tympanum, Inc. (d/ b/ a “Hear
Music”), a music retailer, and of Coffee Partners Co. Ltd., the company licensed to operate Starbucks
stores in Thailand.The combined purchase price for these two acquisitions was $14.1 million. During
fiscal 1999, Starbucks acquired the net assets of Tazo, L.L.C., a Portland, Oregon-based tea company
that produces premium tea products, and Pasqua Inc., a San Francisco, California-based roaster and
retailer of specialty coffee.The combined purchase price for these two acquisitions was $16.5 million.
All of the above acquisitions were accounted for under the purchase method of accounting. Results
of operations of the acquired companies are included on the accompanying consolidated financial
statements from the dates of acquisition.
RESULTS OF OPERATIONS—FISCAL 2001 COMPARED TO FISCAL 2000
Systemwide R etail Store Sales
Systemwide retail store sales, which include net sales for both Company-operated and licensed retail
stores, were $3.0 billion for fiscal 2001, an increase of 31% from $2.3 billion in fiscal 2000, primarily
due to the opening of an additional 1,208 stores. Systemwide retail store sales provides a broad
perspective of global brand sales; however, it excludes net revenues from non-retail channels.
Revenues
Consolidated net revenues increased 22% to $2.6 billion for fiscal 2001, compared to $2.2 billion for
fiscal 2000. Retail revenues increased 22% to $2.2 billion from $1.8 billion. The increase in retail
revenues was due to the addition of new Company-operated stores and comparable store sales growth
of 5%.The increase in comparable store sales resulted from a 2% increase in the number of transactions
and a 3% increase in the average dollar value per transaction.During fiscal 2001, the Company opened
525 stores in continental North America, 96 stores in the United Kingdom, 10 in Thailand and 16 in
Australia. As of fiscal year-end, there were 2,971 Company-operated stores in continental North
America, 252 in the United Kingdom, 25 in Thailand and 18 in Australia. During fiscal 2002, the
Company expects to open at least 525 Company-operated stores in North America and 100 in
international markets.
Specialty revenues increased 18% to $419 million for fiscal 2001 from $354 million for fiscal 2000.
The increase was driven primarily by higher sales to retail licensees, the Company’s grocery channel
and foodservice accounts.Licensees (including those in which the Company is a joint venture partner)
opened 282 stores in international markets and 279 stores in continental North America, of which
over 180 stores related to the Company’s expansion into grocery stores.The Company ended the year
with 809 licensed stores in continental North America and 634 licensed stores in international
markets. During fiscal 2002, the Company expects to open at least 300 licensed stores in North
America and 275 in international markets.
Expenses
Cost of sales and related occupancy costs decreased to 42.0% of net revenues for fiscal 2001 from
44.2% in fiscal 2000.The decrease resulted from several factors, including lower green coffee costs, the
impact of retail beverage sales price increases, continued cost savings from procurement initiatives and
shifts in sales mix to higher-margin products.These factors were partially offset by higher occupancy
costs as a result of higher average rent expense per square foot as well as the expansion of Company-
operated stores into international markets that have higher occupancy costs as a percentage of revenues
than North American retail operations.
Store operating expenses as a percentage of retail revenues increased to 39.3% for fiscal 2001 from
38.7% for fiscal 2000.The increase was primarily due to higher payroll-related expenditures resulting
from higher average wage rates and the continuing shift to more labor-intensive handcrafted beverages,
partially offset by leverage gained from regional overhead expenses distributed over an expanded
revenue base and reductions in advertising expenses.
Other operating expenses (expenses associated with the Company’s Specialty Operations) were 22.3%
of specialty revenues during fiscal 2001, compared to 22.2% for fiscal 2000.The increase is attributable
to the Company’s licensee channels, both international and domestic, as the Company expands these
businesses geographically and continues to develop its internal resources for future growth.These costs,
which are expected to increase through 2002, were partially offset by lower advertising expenses for
the Company’s direct-to-consumer business.