Starbucks 2001 Annual Report Download - page 8

Revenues
Consolidated net revenues increased 29% to $2.2 billion for fiscal 2000, compared to $1.7 billion for
fiscal 1999. Retail revenues increased 28% to $1.8 billion from $1.4 billion. The increase in retail
revenues was due to the addition of new Company-operated stores and comparable store sales growth
of 9%.The increase in comparable store sales resulted from a 5% increase in the number of transactions
and a 4% increase in the average dollar value per transaction.During fiscal 2000, the Company opened
417 stores in continental North America, 63 stores in the United Kingdom, 8 in Thailand and 2 in
Australia. As of fiscal year-end, there were 2,446 Company-operated stores in continental North
America, 156 in the United Kingdom, 15 in Thailand and 2 in Australia.
Specialty revenues increased 34% to $354 million for fiscal 2000 from $263 million for fiscal 1999.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
361 stores in continental North America, of which over 280 stores related to the Company’s expansion
into grocery stores, and 184 stores relate to international markets.The Company ended the year with 530
licensed stores in continental North America and 352 licensed stores in international markets.
Expenses
Cost of sales and related occupancy costs decreased to 44.2% of net revenues for fiscal 2000 from
44.3% in fiscal 1999.The decrease was a result of lower green coffee costs and the impact of retail
beverage sales price increases, partially offset by higher occupancy costs. Occupancy costs, which are
primarily fixed costs, were higher as a percentage of revenues due, in part, to one less week of sales in
fiscal 2000.Also, occupancy costs have increased 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 revenue than North American retail operations.
Store operating expenses as a percentage of retail revenues increased to 38.7% for fiscal 2000 from 38.2%
for fiscal 1999.The increase was due to a number of factors. Higher average wage rates combined with
a continuing shift in retail sales to more labor-intensive handcrafted beverages resulted in higher payroll-
related expenditures.This shift in retail sales mix also resulted in more frequent maintenance on store
equipment.Provision for losses on asset disposals increased due to store remodel costs associated with the
expansion of lunch programs and computer system upgrades. These increases were partially offset by
leverage gained from retail beverage sales price increases and reductions in advertising expenses.
Other operating expenses were 22.2% of specialty revenues during fiscal 2000, compared to 20.7% for
fiscal 1999.This increase was primarily due to higher payroll-related expenditures for accelerating the
growth of the Company’s Specialty Operations.
Depreciation and amortization was 6.0% of net revenues, compared to 5.8% of net revenues for fiscal
1999. Excluding the extra week of sales in fiscal 1999,depreciation and amortization would have been
5.9% of net revenues in fiscal 1999.
General and administrative expenses were 5.1% of net revenues during fiscal 2000, compared to 5.3%
for fiscal 1999 primarily due to lower payroll-related expenses as a percentage of net revenues.
Joint Venture Income
The Company has two joint ventures to produce and distribute Starbucks branded products. The
North American Coffee Partnership is a 50/ 50 joint venture partnership with the Pepsi-Cola
Company to develop and distribute bottled Frappuccino coffee drink. The Starbucks Ice Cream
Partnership is a 50/ 50 joint venture partnership with Dreyer’s Grand Ice Cream, Inc. to develop and
distribute premium ice creams.
The Company is a partner in several other joint ventures that operate licensed Starbucks retail stores,
including Starbucks Coffee Japan, Ltd., a 50/ 50 joint venture partnership with Japanese retailer and
restauranteur SAZABY Inc. to develop Starbucks retail stores in Japan.
Joint venture income was $20.3 million for fiscal 2000, compared to $3.2 million for fiscal 1999.The
increase was primarily due to the crossover from losses to profitability of Starbucks Coffee Japan, Ltd. as
a result of improved ability to obtain preferred and more profitable store locations as well as the
distribution of infrastructure and administrative costs over an expanded revenue base. Starbucks Coffee