Starbucks 2007 Annual Report Download - page 27

(2) As a percentage of related total specialty revenues, other operating expenses were 26.0% and 27.9% for the
fiscal years ended September 30, 2007 and October 1, 2006, respectively.
The United States operating segment (“United States”) sells coffee and other beverages, complementary food,
whole bean coffees, and coffee brewing equipment and merchandise primarily through Company-operated retail
stores. Specialty operations within the United States include licensed retail stores, foodservice accounts and other
initiatives related to the Company’s core business.
United States total net revenues increased 19% to $7.3 billion for the fiscal year ended 2007, compared to
$6.2 billion for fiscal 2006.
United States Company-operated retail revenues increased 19% to $6.6 billion for the fiscal year ended 2007,
compared to $5.5 billion for fiscal 2006, primarily due to the opening of 1,065 new Company-operated retail stores
in the last 12 months and comparable store sales growth of 4% for fiscal 2007, nearly all resulting from an increase
in the average value per transaction. The U.S. Company-operated retail business experienced deteriorating trends in
transactions late in the year, driven by, management believes, the U.S. economic slowdown combined with two
price increases in U.S. retail stores implemented in fiscal 2007. Management believes that several initiatives
underway in the U.S. business, namely an enhanced focus on operational excellence in the stores, a more robust
marketing strategy, meaningful product innovation and a renewed focus on the core beverage and coffeehouse
experience, will help address those challenges in the U.S. retail business. In addition, in fiscal 2008 the Company
plans to slightly reduce the pace of new store openings in the U.S. from the previous year in order to ensure the
selection of store location and store format are the best fit for its customers and the business.
Total United States specialty revenues increased 15% to $788 million for the fiscal year ended 2007, compared to
$683 million in fiscal 2006. United States licensing revenues increased 19% to $439 million, compared to
$369 million for fiscal 2006 primarily due to higher product sales and royalty revenues as a result of opening 723
new licensed retail stores in the last 12 months. United States foodservice and other revenues increased 11% to
$349 million, from $314 million in fiscal 2006, primarily due to growth in new and existing foodservice accounts.
United States operating income increased 12% to $1.1 billion for the fiscal year ended 2007, compared to
$955 million for fiscal 2006. Operating margin decreased to 14.6% of related revenues from 15.5% in fiscal 2006.
The decrease was due to higher cost of sales including occupancy costs, primarily due to a shift in sales mix to
higher cost products such as food and merchandise, higher distribution costs, higher rent expense and higher dairy
costs. Partially offsetting these were lower store operating expenses, lower general and administrative expenses, and
lower other operating expenses as a percentage of total net revenues. The decline in store operating expenses as a
percentage of total net revenues was primarily due to higher provisions for incentive compensation in the prior year
as well as leverage on regional overhead costs in fiscal 2007. General and administrative expenses were lower
primarily due to decreased salary and related benefits expense as well as lower professional fees. The decline in
other operating expenses as a percentage of total net revenues was primarily due to controlled discretionary
spending in the current year.
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