Starbucks 2005 Annual Report Download - page 26

from $4.5 billion for the 53-week period of fiscal 2004. Company-operated retail revenues increased 23% when
calculated on a comparative 52-week basis for both fiscal 2005 and 2004. This increase was primarily due to
the opening of 735 new Company-operated retail stores in the last 12 months and comparable store sales
growth of 8% for the 52 weeks ended October 2, 2005. The increase in comparable store sales was due to a 4%
increase in the number of customer transactions and a 4% increase in the average value per transaction.
Comparable store sales growth percentages were calculated excluding the extra week of fiscal 2004.
Management believes increased customer traffic continues to be driven by new product innovation, continued
popularity of core products, a high level of customer satisfaction and improved speed of service through
enhanced technology, training and execution at retail stores. The increase in the average value per transaction
was primarily due to a beverage price increase in October 2004 in the Company's U.S. and Canadian markets.
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 17% to $977 million for the fiscal year ended 2005,
from $837 million for the 53-week period of fiscal 2004. Excluding the impact of the extra week in fiscal 2004,
total specialty revenues increased 19%.
Licensing revenues, which are derived from retail store licensing arrangements, as well as grocery, warehouse
club and certain other branded-product licensed operations, increased 19% to $673 million for the 52 week
period of 2005, from $566 million for the 53-week period of fiscal 2004. Excluding the impact of the extra
week in fiscal 2004, total licensing revenues increased 21%, primarily due to higher product sales and royalty
revenues from the opening of 937 new licensed retail stores in the last 12 months.
Foodservice and other revenues increased 12% to $304 million for the 52-week period of fiscal 2005, from
$271 million for the 53-week period of fiscal 2004. Excluding the impact of the extra week in fiscal 2004,
foodservice and other revenues increased 15%, primarily attributable to growth in new and existing U.S. and
International foodservice accounts and, to a lesser extent, growth in the Company's emerging entertainment
business.
Cost of sales including occupancy costs decreased to 40.9% of total net revenues in the 52-week period of fiscal
2005, from 41.4% in the 53-week period of 2004. The decrease was primarily due to higher average revenue
per retail transaction, offset in part by higher initial costs associated with the continued expansion of a lunch
program in Company-operated retail stores. Approximately 3,800 Company-operated stores had the lunch
program at the end of fiscal 2005, compared to approximately 2,600 at the end of fiscal 2004.
Store operating expenses as a percentage of Company-operated retail revenues were 40.2% for both the
52-week period of fiscal 2005 and the 53-week period of fiscal 2004, primarily due to higher average revenue
per retail transaction in fiscal 2005, offset by higher payroll-related expenditures, as well as higher
maintenance and repair expenditures to ensure a consistent Starbucks Experience in existing stores. In order to
facilitate ongoing retail store revenue growth, the Company opened a higher number of drive-thru locations
over the past year and extended store operating hours, which contributed to the higher payroll-related
expenditures.
Other operating expenses (expenses associated with the Company's Specialty Operations) decreased to 20.2%
of specialty revenues in the 52-week period of fiscal 2005, compared to 20.5% in the 53-week period of fiscal
2004. The decrease was primarily due to lower expenditures within the grocery, warehouse club and
foodservice businesses, partially offset by higher payroll-related expenditures to support the Company's
emerging entertainment business and to support the growth of Seattle's Best Coffee licensed cafπe operations.
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