Starbucks 2006 Annual Report Download - page 30

well as lower dairy costs. These improvements were partially offset by higher store operating expenses and other operating
expenses due to higher payroll-related expenditures primarily to support global expansion as well as the recognition of
stock-based compensation expense.
Global Consumer Products Group
The Company’s CPG segment represents 25% of total specialty revenues and 4% of total net revenues. CPG operations
sell a selection of whole bean and ground coffees as well as a selection of premium Tazo»teas through licensing
arrangements with Kraft and other grocery and warehouse club stores in United States and international markets. CPG
operations also produce and sell ready-to-drink beverages which include, among others, bottled Frappuccino»coffee
drinks and Starbucks DoubleShot»espresso drinks, and Starbucks»superpremium ice creams, through its joint venture
partnerships, and Starbucks
TM
Coffee and Cream Liqueurs through a marketing and distribution agreement. Through
other manufacturing, distribution and co-packing agreements, the Company produces and sells ready-to-drink products
in international locations.
CPG total net revenues increased 23% to $305 million for the fiscal year ended 2006, compared to $249 million for fiscal
2005, primarily due to volume growth in the licensed grocery and warehouse club business as well as sales of
ready-to-drink coffee beverages introduced in Japan, Taiwan and Korea in the fall of 2005.
CPG operating income increased to $167 million for the fiscal year ended 2006, compared to $131 million for fiscal
2005. Operating margin increased to 54.6% of related revenues, from 52.7% in fiscal 2005, primarily due to higher
income from the Company’s equity investees and lower cost of sales as a percentage of revenues. The increase in equity
investee income was primarily due to volume-driven results for The North American Coffee Partnership, which produces
ready-to-drink beverages which include, among others, bottled Frappuccino»coffee drinks and Starbucks Doubleshot»
espresso drinks. Lower cost of sales was due to a sales mix shift to products with higher gross margins.
Unallocated Corporate
Unallocated corporate expenses pertain to corporate administrative functions that support but are not specifically
attributable to the Company’s operating segments, and include related depreciation and amortization expenses.
Unallocated corporate expenses increased to $337 million for the fiscal year ended 2006, from $252 million in 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. Total unallocated corporate expenses as a percentage of total net revenues were 4.3%
for the fiscal year ended 2006, compared to 3.9% for fiscal 2005.
RESULTS OF OPERATIONS — FISCAL 2005 COMPARED TO FISCAL 2004
CONSOLIDATED RESULTS OF OPERATIONS
Net revenues for the fiscal year ended 2005 increased 20% to $6.4 billion from $5.3 billion for the 53-week period of
fiscal 2004, driven by increases in both Company-operated retail revenues and specialty operations. Net revenues
increased 23% when calculated on a comparative 52-week basis for both fiscal 2005 and 2004.
During the fiscal year ended 2005, Starbucks derived 85% of total net revenues from its Company-operated retail stores.
Company-operated retail revenues increased 21% to $5.4 billion for the fiscal year ended 2005, 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 746 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. 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.
26 STARBUCKS CORPORATION, FORM 10-K