Starbucks 2011 Annual Report Download - page 3

Dear Shareholders,
On almost every level, fi scal 2011 was a remarkable year for Starbucks. Our global business delivered the highest levels
of service to our customers, a truly rewarding experience to our partners (employees), and a record-level performance to
shareholders. As of the end of calendar 2011, Starbucks stock price had increased 43 percent from a year earlier.
What’s more, we achieved this success without losing sight of our core values. I cannot think of a more authentic way to
have honored our 40th Anniversary than by living up to our long-held mission of balancing profi tability with a social
conscience. This is such a powerful coupling, and I say with confi dence that Starbucks has never been so well positioned
for profi table growth.
Last year, I wrote to you that the company’s improved operational foundation, invigorated innovative muscle,
and heightened customer relevance presented us with an opportunity to build a different kind of organization.
One that would leverage and extend our strengths both inside and outside our stores. I am pleased to report that in
fi scal 2011 we delivered.
During the past year global revenues reached a record $11.7 billion, an 11 percent increase on a comparable 52-week
basis. That revenue growth was driven by an 8 percent rise in global comparable store sales as Starbucks stores
welcomed more visitors than ever before—approximately 60 million each week—and by growth in CPG revenues.
By leveraging effi ciencies and tightly managing spend, we fl owed sales increases through to the bottom line,
setting new records for operating income of $1.7 billion, up 22 percent, as well as for consolidated operating margin,
which was 14.8 percent, up 150 basis points from last year.
We ended fi scal 2011 with record earnings per share of $1.62, up 31 percent from last year’s $1.24 per share.
Through share repurchases and dividends, we returned approximately $945 million to shareholders, more than
doubling the amount returned in fi scal 2010.
It is signifi cant that we achieved these results against the backdrop of stubbornly higher commodity costs and a
diffi cult global economy. Our momentum is also worth noting, as fourth-quarter global same-store sales grew at
a rate not seen since 2006.
This strong performance is attributable to our unique business model, which continues to leverage our emotional
connection to consumers, our global retail footprint, our diversifi ed CPG channel distribution capabilities and ongoing
innovation across all areas.
Breakout, Relevant Innovation in Coffee, CPG and the Customer Experience
In 2011, we continued to evolve into a truly dynamic global organization, offering a portfolio of products to serve
customers in our retail stores, at home, at work, on the go and online. Coffee remains our core and continues to drive
our global business, and last year we launched fantastic new products while dramatically improving the ways in which
those products reach customers.
Our evolving channel-development strategy continues to extend our portfolio of branded products. Among our most
signifi cant moves in 2011 was transitioning our packaged coffee business in-house to a direct distribution model,
allowing us to take control of our powerful relationship with grocery, drugstore, club and other sales channels. In
addition, our continued growth of Starbucks VIA® Ready Brew and fi scal 2012 launch of K-Cup® packs position us
to lead in the multibillion-dollar single-cup category. By the end of December, more than 103 million Starbucks® K-Cup®
packs had already been shipped to U.S. food, drug, mass, club and specialty retailers. Meanwhile, Starbucks VIA®
continued its acceleration, with an expanded platform of Starbucks VIA® branded products at 70,000 points of
distribution generating $250 million in systemwide sales in fi scal 2011, a remarkable achievement for a product less
than two years old.
In these ways and more, fi scal 2011 was a breakout year for CPG, which remains on track to one day rival the profi tability
of our retail business.
In our stores, new products continued to generate excitement as well as sales. Personalized Frappuccino® blended
beverages launched across the globe, and we just introduced Starbucks® Blonde Roast in the United States, providing a
light roast coffee that—along with K-Cup® packs and Starbucks VIA®—each represents another $1 billion opportunity for
the company. In food, we answered consumers’ desire for more choices with wholesome ingredients by introducing our
Bistro Box platform, and response has been strong.
Our loyalty program also continues to distinguish us from competitors, with participation in My Starbucks Rewards™
now reaching more than 3.6 million active members. The 20 million mobile payments made at Starbucks stores in fi scal
2011—plus another six million by December’s end—were fueled by our hugely popular Starbucks Card Apps for the
Android™ and iPhone,
® once again refl ecting our ability to respond to the constantly changing marketplace in ways that
strengthen our connections with customers.