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Starbucks Coffee Starbucks Coffee CompanyCompany
Pete Bocian Pete Bocian EVP and CFO DesignateEVP and CFO Designate
Goldman SachsGoldman Sachs14th Annual Global Retailing Conference14th Annual Global Retailing Conference
New York, NYNew York, NYSept. 5, 2007Sept. 5, 2007
Forward Looking StatementForward Looking StatementThis presentation includes forward looking statements about This presentation includes forward looking statements about trends in or expectations regarding the Companytrends in or expectations regarding the Company’’s s anticipated anticipated store openings and growth in comparable store sales, net store openings and growth in comparable store sales, net revenue,revenue, net earnings and earnings per share.net earnings and earnings per share. These forward These forward looking statements are based on currently available operating, looking statements are based on currently available operating, financial, and competitive information and are subject to varioufinancial, and competitive information and are subject to various s risks and uncertainties. Actual future results and trends may risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors including budiffer materially depending on a variety of factors including but t not limited to, coffee, dairy and other raw material prices and not limited to, coffee, dairy and other raw material prices and availability, successful execution of internal performance and availability, successful execution of internal performance and expansion plans, fluctuations in U.S. and international expansion plans, fluctuations in U.S. and international economies and currencies, the impact of initiatives by economies and currencies, the impact of initiatives by competitors, the effect of legal proceedings, and other risks competitors, the effect of legal proceedings, and other risks detailed in the Companydetailed in the Company’’s filings with the Securities and s filings with the Securities and Exchange Commission, including the Exchange Commission, including the ““Risk FactorsRisk Factors”” section of section of Starbucks Annual Report on Form 10Starbucks Annual Report on Form 10--K for the fiscal year ended K for the fiscal year ended October 1, 2006. The Company assumes no obligation to update October 1, 2006. The Company assumes no obligation to update any of these forwardany of these forward--looking statements.looking statements.
StarbucksStarbucks……is a leading retailer and roaster of specialty coffeeis a leading retailer and roaster of specialty coffee
Broad geographic diversityBroad geographic diversitySignificant presence in North AmericaSignificant presence in North AmericaExpanding footprint in AsiaExpanding footprint in Asia--Pacific, Latin America & EMEAPacific, Latin America & EMEA
Brand strength / brand loyaltyBrand strength / brand loyaltyInnovative beverages, food & entertainment offeringsInnovative beverages, food & entertainment offeringsThird Place experience (between home and work)Third Place experience (between home and work)
Balanced growth strategyBalanced growth strategyStrong returns while investing for the futureStrong returns while investing for the future
History of strong financial performanceHistory of strong financial performanceGrowth and profitabilityGrowth and profitability
Our ProfileOur Profile**
Starbucks was founded in 1971, went public Starbucks was founded in 1971, went public in June 1992 with 126 stores...and now?in June 1992 with 126 stores...and now?
More than 14,000 stores in 42 countriesMore than 14,000 stores in 42 countriesApproximately 47 million customer visits per weekApproximately 47 million customer visits per week
2006 Revenues of $7.8 billion2006 Revenues of $7.8 billion2006 Net Earnings of $564 million2006 Net Earnings of $564 million
Approximately 150,000 partners (employees)Approximately 150,000 partners (employees)
* At YTD July 1, 2007, unless otherwise noted* At YTD July 1, 2007, unless otherwise noted
How we look at the businessHow we look at the business
Op Op IncomeIncome(2)(2)
RevsRevsComprised ofComprised ofSegmentsSegments
4%4%
17%17%
79%79%
% of the Total% of the Total(1)(1)
12%12%--Grocery and warehouse club Grocery and warehouse club business business -- Branded products Branded products
Consumer Consumer Products GroupProducts Group
8%8%-- CompanyCompany--operated stores operated stores -- Licensed stores / Joint ventures Licensed stores / Joint ventures -- Foodservice accountsFoodservice accounts
InternationalInternational80%80%
-- CompanyCompany--operated stores operated stores -- Licensed storesLicensed stores-- Foodservice accounts Foodservice accounts
U.S.U.S.
(1)(1) At Q3 YTD FY07At Q3 YTD FY07(2)(2) Represents % contribution to combined operating income of the tRepresents % contribution to combined operating income of the three business segments hree business segments
(excludes unallocated corporate expenses)(excludes unallocated corporate expenses)
Food Items15%
Equip. & Other Merch.
6%Beverages
76%
Whole Bean3%
U.S. Business SegmentU.S. Business Segment
U.S. Retail89%
Foodservice & Other
5%Licensing
6%
Investing in store countInvesting in store countFYE 2005 FYE 2005 –– 7,3537,353FYE 2007e FYE 2007e –– 10,59610,596FYE 2008e FYE 2008e –– 12,29612,296
Established and experienced businessEstablished and experienced businessStore DevelopmentStore DevelopmentOperations Operations Staffing Staffing
Continued growth opportunity Continued growth opportunity –– to 20,000 storesto 20,000 stores
CompanyCompany--operated Retail operated Retail Sales MixSales Mix
Revenue ProfileRevenue Profile
Q3 YTD FY07Q3 YTD FY07
JV/ Licensed
11%
Other Company-operated
17%
United Kingdom
38%
Canada34%
International Business SegmentInternational Business SegmentPresence in 41 countriesPresence in 41 countries
Variety of business modelsVariety of business modelsCanada & U.K. contribute majority of revenue todayCanada & U.K. contribute majority of revenue todayEarly stages of growthEarly stages of growth
Significant investment ahead of the curveSignificant investment ahead of the curveKey markets for future include China, Russia, Brazil and IndiaKey markets for future include China, Russia, Brazil and India
Increasing contribution to CompanyIncreasing contribution to Company’’s growth & profits growth & profitGrowth opportunity Growth opportunity -- to 20,000 storesto 20,000 stores
Licensing13%
Retail85%
Foodservice & Other
2%
Revenue DistributionRevenue Distribution
Q3 YTD FY07Q3 YTD FY07
Revenue ProfileRevenue Profile
UK & Canada includes total UK & Canada includes total geographic revenuegeographic revenue
Global Consumer Products SegmentGlobal Consumer Products SegmentExtends the Extends the Starbucks ExperienceStarbucks Experience outside our outside our retail storesretail storesProvides significant channel and product Provides significant channel and product expansion opportunitiesexpansion opportunitiesPartner with wellPartner with well--known consumer companiesknown consumer companies
Pepsi, Kraft, SuntoryPepsi, Kraft, SuntoryLow cost / high margin business structureLow cost / high margin business structure
Key Drivers To Support Growth StrategyKey Drivers To Support Growth StrategyKey Drivers To Support Growth Strategy
Expand store footprint in new & existing marketsStrong Store Development skills
Continue strong operational performanceQuick ramp to revenues and returns
On a per store basisImprove International margins
Promote continuous innovationIn the Store – Global with local relevance
Remain employer of choiceBenefits Stock optionsSkills learned
Continue to leverage G&A and back-office expensesCommitment to be a responsible company
Responsible sourcing – economic and socialContribution to our communities
Expand store footprint in new & existing marketsExpand store footprint in new & existing marketsStrong Store Development skillsStrong Store Development skills
Continue strong operational performanceContinue strong operational performanceQuick ramp to revenues and returnsQuick ramp to revenues and returns
On a per store basisOn a per store basisImprove International marginsImprove International margins
Promote continuous innovationPromote continuous innovationIn the Store In the Store –– Global with local relevanceGlobal with local relevance
Remain employer of choiceRemain employer of choiceBenefits Benefits Stock optionsStock optionsSkills learnedSkills learned
Continue to leverage G&A and backContinue to leverage G&A and back--office expensesoffice expensesCommitment to be a responsible companyCommitment to be a responsible company
Responsible sourcing Responsible sourcing –– economic and socialeconomic and socialContribution to our communitiesContribution to our communities
NearNear--Term Growth TargetsTerm Growth Targets
+2,600+2,600+2,400+2,400Net Store OpeningsNet Store Openings
+3% to 7%+3% to 7%
+20% to 22%+20% to 22%
~18%~18%
FY 2008FY 2008
+3% to 7%+3% to 7%
$0.87 to $0.89$0.87 to $0.89
~20%~20%
FY 2007FY 2007
Comparable Store SalesComparable Store Sales
Earnings Per ShareEarnings Per Share
Net RevenueNet Revenue
Growth Goals: Into the FutureGrowth Goals: Into the Future
20072007--2010:2010:
Open at least 10,000 new stores in next four yearsOpen at least 10,000 new stores in next four years
Double the size of the business in next 4 Double the size of the business in next 4 –– 5 years5 years
Grow Net Earnings faster than RevenueGrow Net Earnings faster than Revenue
LongLong--term Opportunity:term Opportunity:40,000 stores worldwide 40,000 stores worldwide –– CompanyCompany--operated and licensedoperated and licensed
Extend the brand through other channels and productsExtend the brand through other channels and products