Starbucks 2012 Annual Report Download - page 45

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from and product sales to licensees (approximately $17 million), due to improved comparable store sales and net
new store openings. These increases were partially offset by the absence of the extra week in fiscal 2010
(approximately $9 million).
Operating Expenses
Cost of sales including occupancy costs as a percentage of total net revenues decreased by 130 basis points
compared to the prior year, primarily due to increased sales leverage on occupancy costs.
Store operating expenses as a percentage of total net revenues decreased 60 basis points. Excluding the impact of
licensed store revenues, store operating expenses decreased 230 basis points as a percent of company-operated
store revenues in fiscal 2011 compared to fiscal 2010, primarily driven by lower compensation costs
(approximately 210 basis points) as a percentage of total net revenues.
Other operating expenses as a percentage of total net revenues decreased 90 basis points. Increased company-
operated store revenues contributed approximately 30 basis points to the decrease. Other operating expenses as a
percentage of licensed store revenues decreased 60 basis points, primarily driven by lower compensation related
costs (approximately 140 basis points), partially offset by increasing costs related to our expansion efforts into key
emerging markets, primarily China.
Income from equity investees increased $20 million in fiscal 2011, driven by improved performance in our joint
venture operations, primarily in Japan, Shanghai and Taiwan.
The changes in the above line items combined with increased sales leverage on general and administrative
expenses (approximately 70 basis points) and depreciation and amortization (approximately 60 basis points)
contributed to an overall increase in operating margin of 320 basis points in fiscal 2011.
Channel Development
Fiscal Year Ended
Oct 2,
2011
Oct 3,
2010
Oct 2,
2011
Oct 3,
2010
As a % of Channel Development
Total Net Revenues
Total net revenues $ 860.5 $ 707.4 100.0% 100.0%
Cost of sales including occupancy costs 487.5 383.2 56.7% 54.2%
Other operating expenses 151.8 115.6 17.6% 16.3%
Depreciation and amortization expenses 2.4 3.7 0.3% 0.5%
General and administrative expenses 6.6 4.5 0.8% 0.6%
Total operating expenses 648.3 507.0 75.3% 71.7%
Income from equity investees 75.6 70.6 8.8% 10.0%
Operating income $ 287.8 $ 271.0 33.4% 38.3%
Revenues
Total Channel Development net revenues for fiscal 2011 increased 22%, or $153 million. The increase was
primarily due to the benefit of recognizing full revenue from packaged coffee and tea sales under the direct
distribution model for the majority of the year (approximately $70 million). On March 1, 2011, we successfully
transitioned to a direct distribution model from our previous distribution arrangement with Kraft for the sale of
packaged Starbucks®and Seattle’s Best Coffee®coffee products in grocery and warehouse club stores throughout
the US, and to grocery stores in Canada, the UK and other European countries. We successfully transitioned the
Tazo®tea business to a direct distribution model in January 2011. Also contributing to the increase were improved
revenues from US foodservice (approximately $26 million) and the expanded distribution of Starbucks VIA®