Starbucks Corporation Fiscal 2009 Annual Report

Starbucks Corporation Fiscal 2009 Annual Report

Fiscal 2009 Financial Highlights

Stores Open at Fiscal Year End (Company-Operated and Licensed Stores)

International United States

15,011

16,680 16,635

10,241

12,440

Net Revenues (In Billions)

$9.4

$10.4

$9.8

$7.8 $6.4

2005

2006

2007

2008

2009

Comparable Store Sales Growth (Company-Operated Stores Open 13 Months or Longer)

8% 7%

5%

2005

2006

2007

2008

2009

- 3%

Earnings per Diluted Share GAAP EPS Non-GAAP EPS

$0.87

$0.61

$0.71*

- 6%

$0.71** $0.28

$0.80*** $0.28

$0.43

$0.52

2005

2006

2007

2008

2009

Operating Income (In Millions) & Operating Margin (In %)

GAAP

GAAP

Non-GAAP

Non-GAAP

$1,054

$894 $781 12.3%

$843** $339

$894*** $332

11.5%

11.2%

$562

$504

9.2%*** 8.1%**

5.7%

4.9%

2005

2006

2007

2008

2009

Operating Cash Flow & Capital Expenditures (In Millions)

Cash from Operations Capital Expenditures

$1,331

$1,259

$1,389

$1,132 $923

$1,080 $985

$771 $643

$446

2005

2006

2007

2008

2009

2005

2006

2007

2008

2009

* 2006 includes $0.02 of expense resulting from the cumulative impact of the adoption of an accounting change for asset retirement obligations.

** 2008 Non-GAAP measure. Excludes $339 million in pretax restructuring charges and transformation expenses.

*** 2009 Non-GAAP measure. Excludes $332 million in pretax restructuring charges.

Dear Shareholders,

In my letter to you two years ago, I expressed concern over challenges confronting our business of a breadth and magnitude unlike anything I had ever seen before. For the first time, we were beginning to see traffic in our U.S. stores slow. Strong competitors were entering our business. And perhaps most troublesome, where in the past Starbucks had always been forward-thinking and nimble in its decision-making and execution, like many fast-growing companies before us, we had allowed our success to make us complacent.

As I returned to the role of president and chief executive officer, it was obvious to me, and to our leadership team, that Starbucks needed nothing less than a full-fledged transformation to return to profitable growth. Since then, we have worked through the multitude of challenges required to revitalize our brand and transform our company--all in the face of the worst global economic environment of our generation.

Today, I am pleased to report that we have made and continue to make significant progress in transforming Starbucks and returning the company to sustainable, profitable growth while preserving our values and guiding principles.

Our Transformation Journey Our blueprint for change was the transformation agenda: improving the state of our business through better training, tools and products; renewing our attention to store-level economics and operating efficiency; reigniting our emotional attachment with customers; and realigning Starbucks organization for the long term. In fiscal 2009, the seeds of our transformation began to take root.

Disciplined Operations We applied rigor and discipline to all areas of the business and put sharp focus on unit economics. We focused on operational excellence--from supply chain to back-end IT systems to store operations. We also developed a better go-tomarket engine, with stronger creative execution and more effective channels to reach our customers. Together, these efforts are enabling us to make betterinformed decisions--and to bring products and initiatives to market faster and more cost effectively. At the same time, we took steps to permanently improve our cost structure, which resulted in removing $580 million in costs from the business in fiscal 2009 alone.

But it was clear to us that cost reductions and improved operating efficiencies alone were not enough. True transformation would require us to improve our customer experience, and to once again aggressively differentiate and innovate.

Innovating for a Better Customer Experience In conjunction with our focus on operations, we made significant investments to improve the customer experience in our stores. Our store partners have made measurable improvements in service, beverage quality and store condition. As a result, over the past fiscal year, our already high customer satisfaction scores have increased a full 10 percentage points. For this, I applaud our store partners all over the world, who define the Starbucks Experience one cup at a time, every day.

As consumer trends evolved in the face of the weakening global economy, we responded quickly with relevant innovation in our loyalty card program and with compelling value offerings and innovative food pairings. We elevated and reaffirmed our leadership in coffee quality, evolving our sustainable sourcing, roasting and blending approaches. We also renewed our commitment to espresso excellence, ensuring that we are providing the highest-quality handcrafted, customized beverages to suit every customer's taste. The results have validated our focus. Sales of Starbucks? Anniversary Blend coffee exceeded those of any year since it launched in 1996. Our partnership with (RED)TM continues to outperform expectations, generating enough money during its first year to buy more than seven million daily doses of medicine to help fight AIDS in Africa. Our decision to offer both Pike Place RoastTM and a bolder roast profile with fresher brew times has been extremely well received by our core customers. And our seasonal beverages such as Pumpkin Spice Latte and Caramel Brul?e Latte were customer favorites this holiday season.

As consumers have increasingly requested healthier food choices, we responded by offering new products with whole grains and other wholesome ingredients. We also thoroughly revamped our food offerings: simplifying recipes and taking out artificial trans fat, high-fructose corn syrup and artificial flavors and dyes. Customers will continue to see improved choices and an expanded menu of healthier food choices in the months and year ahead.

We applied technology to revolutionize the way we communicate with consumers through social and digital media. Starbucks has been named the most engaged consumer brand, using communities such as Facebook, Twitter and My Starbucks Idea to connect with our customers outside the store environment. We are in constant dialogue with our

customers, allowing us to understand their needs and stay top-of-mind in this increasingly competitive retail environment. We also launched popular iPhone applications to help customers find our stores, determine nutrition information and reload their Starbucks Cards.

In fiscal 2009, we unveiled a bold and innovative store design approach, with new concepts in Seattle, Paris and London--all enthusiastically received. All newly constructed company-operated stores worldwide will be LEED?-certified beginning this calendar year, moving us closer to our goal of significantly reducing our environmental footprint. This initiative, coupled with locally relevant store designs and renovations, is helping us form deep and long-lasting connections with customers in their own neighborhoods.

Finally, we stayed true to who we are and our mission to inspire and nurture the human spirit--one person, one cup and one neighborhood at a time. For our partners, despite economic pressure, we continued to offer health care benefits to eligible fulland part-time partners, something we have done for over 20 years. We were also proud to be able to contribute a match under our 401(k) program this year--another benefit that many companies retreated from in 2009.

We reaffirmed our commitment to doing business responsibly. This year we became the world's largest purchaser of Fair Trade CertifiedTM coffee and partnered with Conservation International to address climate change in coffee-growing regions. And we continued to give back to the communities we serve through volunteer activities and community programs. These efforts are also good business, as consumers increasingly want to build relationships with companies that share their values.

Our Path Forward With our progress over the past two years, we are now in a position to take advantage of the global opportunity for Starbucks. Improvements in the U.S. business will allow us to pursue disciplined new store growth internationally. While Starbucks now operates in more than 50 countries (we added Portugal, Bulgaria and Poland in fiscal 2009), we are still in the early stages of international growth. We expect future growth for Starbucks to come from deeper expansion in markets where we already have a strong presence, such as the UK, Canada and Japan. Our progress in China continues, and we believe it will one day be the largest market for Starbucks outside the U.S.

As part of our international strategy, we will also seize opportunities to move beyond our retail stores. Extending our profitable global consumer products group allows us to reach more customers in more places, and we plan to grow this business at an accelerated pace around the world. We see significant runway for CPG to grow, and we will be poised to capture that opportunity with an evolution of our distribution structure and with an increasing variety of offerings in the grocery channel.

Our future lies in our ability to innovate, to be forward-thinking and nimble. In fiscal 2009, we wrote a new playbook for just that with the launch of Starbucks VIATM Ready Brew. We have been extremely excited to see our customers in North America embrace this 100 percent natural roasted soluble coffee that maintains the high standards of quality and taste of freshly brewed Starbucks? coffee. This is a substantial new global growth platform within our core business, representing the first significant innovation in more than 50 years in the $21 billion global instant coffee category. Starbucks VIATM also gives customers an easy and affordable single-serve option at home and on-the-go. We look forward to extending the product internationally--both in our stores and in grocery channels--in fiscal 2010.

Another growth vehicle will be Seattle's Best Coffee. Our research tells us we can aggressively position SBC with new customers, and we plan to create compelling franchising and distribution opportunities in 2010. We have ambitious goals for the brand and look forward to making some big moves in the coming months.

I am incredibly proud of the loyalty, commitment, passion and tireless efforts of our partners all over the world. Because of them we have been able to successfully navigate some formidable and dangerous headwinds, and to emerge a better and stronger company than we have ever been--ideally positioned to grow and capitalize on global opportunities in the years ahead. I am as optimistic about Starbucks future as I have ever been.

In closing, I would like to offer my heartfelt thanks to everyone who touches Starbucks. To our people, who stepped up to the challenge of delivering an exceptional customer experience, to the farmers and suppliers who grow our coffee, to our business partners around the world, to our shareholders for their continued support, and ultimately to our customers--for inviting us into their lives and for giving us the opportunity to earn their loyalty and trust every day.

Warm regards,

Howard Schultz chairman, president and chief executive officer

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) ?

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 27, 2009

or

n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to .

Commission File Number: 0-20322

Starbucks Corporation

(Exact Name of Registrant as Specified in Its Charter)

Washington

91-1325671

(State of Incorporation)

(IRS Employer ID)

2401 Utah Avenue South Seattle, Washington 98134

(206) 447-1575

(Address of principal executive offices, zip code, telephone number)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, $0.001 par value per share

Nasdaq Global Select Market

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes ? No n

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes

No

n

?

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the

Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was

required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ? No n Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,

every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (? 232.405 of this

chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post

such files). Yes

No

?

n

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation of S-K is not contained herein,

and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements

incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ?

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a

smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting

company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ?

Accelerated filer

Non-accelerated filer

Smaller reporting company

n

n

n

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes

No

n

?

The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the

registrant's most recently completed second fiscal quarter, based upon the closing sale price of the registrant's common

stock on March 27, 2009 as reported on the NASDAQ Global Select Market was $8.4 billion. As of November 13, 2009,

there were approximately 740.2 million shares of the registrant's Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the registrant's Annual Meeting of Shareholders to be held on March 24,

2010 have been incorporated by reference into Part III of this Annual Report on Form 10-K.

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