Starbucks 2004 Annual Report Download - page 2

Fiscal 2004 Annual Report 13
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
and net earnings growth, comparable store sales growth, cash fl ow
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, fi nancial 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; fl uctuations in United States and international
economies and currencies; ramifi cations 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 fi lings with the Securities
and Exchange Commission. Please also see “Certain Additional Risks
and Uncertainties” in the Starbucks Annual report on Form 10-K for
the fi scal year ended October 3, 2004.
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. Starbucks Corporation is under no obligation to
update or alter any forward-looking statements, whether as a result
of new information, future events or otherwise.
BUSINESS
Starbucks Corporation (together with its subsidiaries, “Starbucks”
or the “Company”), purchases and roasts high-quality whole
bean coffees and sells them, along with fresh, rich-brewed
coffees, Italian-style espresso beverages, cold blended beverages,
a variety of complementary food items, coffee-related accessories
and equipment, a selection of premium teas and a line of
compact discs, primarily through Company-operated retail
stores. Starbucks also sells coffee and tea products through
other channels, and through certain of its equity investees
Starbucks produces and sells bottled Frappuccino® and Starbucks
DoubleShot® coffee drinks and a line of superpremium ice
creams. These nonretail channels are collectively known as
“Specialty Operations.” The Company’s objective is to establish
Starbucks as the most recognized and respected brand in the
world. To achieve this goal, the Company plans to continue rapid
expansion of its retail operations, to grow its Specialty Operations
and to selectively pursue other opportunities to leverage the
Starbucks brand through the introduction of new products and
the development of new channels of distribution.
The Company has two operating segments, United States and
International, each of which includes Company-operated retail
stores and Specialty Operations.
Company-operated Retail Stores
The Company’s retail goal is to become the leading retailer
and brand of coffee in each of its target markets by selling the
fi nest quality coffee and related products and by providing
each customer a unique Starbucks Experience. This third place
experience, after home and work, is built upon superior customer
service as well as clean and well-maintained Company-operated
retail stores that refl ect the personalities of the communities in
which they operate, thereby building a high degree of customer
loyalty. Starbucks strategy for expanding its retail business is
to increase its market share in existing markets primarily by
opening additional stores and to open stores in new markets
where the opportunity exists to become the leading specialty
coffee retailer. In support of this strategy, Starbucks opened
634 new Company-operated stores during the fi scal year ended
October 3, 2004 (“fi scal 2004”). Company-operated retail stores
accounted for 84% of total net revenues during fi scal 2004.
The following table summarizes total Company-operated retail store data for the periods indicated:
Net stores opened during
the fi scal year ended Stores open as of
Oct 3, 2004 Sept 28, 2003
(53 Wks) (52 Wks) Oct 3, 2004 Sept 28, 2003
United States 514 506 4,293 3,779
International:
United Kingdom 49 51 422 373
Canada 56 29 372 316
Thailand 11 9 49 38
Australia 4 7 44 40
Singapore – 3 35 35
Total International 120 99 922 802
Total Company-operated 634 605 5,215 4,581
Starbucks retail stores are typically located in high-traffi c,
high-visibility locations. Because the Company can vary the
size and format, its stores are located in or near a variety of
settings, including downtown and suburban retail centers,
offi ce buildings and university campuses. While the Company
selectively locates stores in shopping malls, it focuses on locations
that provide convenient access for pedestrians and drivers. With
the fl exibility in store size and format, the Company also locates
retail stores in select rural and off-highway locations to serve a
broader array of customers outside major metropolitan markets
and further expand brand awareness. To provide a greater
degree of access and convenience for nonpedestrian customers,
the Company has increased focus on drive-thru retail stores. At
the end of fi scal 2004, the Company had approximately 700
Company-operated drive-thru locations.
All Starbucks stores offer a choice of regular and decaffeinated
coffee beverages, a broad selection of Italian-style espresso
beverages, cold blended beverages, iced shaken refreshment
beverages and a selection of teas and distinctively packaged
roasted whole bean coffees. Starbucks stores also offer a
selection of fresh pastries and other food items, sodas, juices,
coffee-making equipment and accessories, a selection of
compact discs, games and seasonal novelty items. Each
Starbucks store varies its product mix depending upon the size
of the store and its location. Larger stores carry a broad
selection of the Company’s whole bean coffees in various sizes
and types of packaging, as well as an assortment of coffee and
espresso-making equipment and accessories such as coffee
grinders, coffee fi lters, storage containers, travel tumblers and
mugs. Smaller Starbucks stores and kiosks typically sell a full