Starbucks Corporation Fiscal 2009 Annual Report
Starbucks Corporation Fiscal 2009 Annual Report
Fiscal 2009 Financial Highlights
Net Revenues (In Billions)
Stores Open at Fiscal Year End
(Company-Operated and Licensed Stores)
International
16,680
United States
16,635
15,011
$9.4
$9.8
2008
2009
$7.8
12,440
$6.4
10,241
2005
$10.4
2006
2007
2008
2009
2005
2006
2007
Operating Income (In Millions) & Operating Margin (In %)
Comparable Store Sales Growth
(Company-Operated Stores Open 13 Months or Longer)
GAAP
GAAP
Non-GAAP
Non-GAAP
$1,054
8%
7%
$894
5%
$894***
$843**
$781
$332
$339
12.3%
11.5%
11.2%
$562
$504
2005
2006
2007
2009
2008
9.2%***
8.1%**
- 3%
5.7%
4.9%
- 6%
2005
2006
2007
2008
2009
Operating Cash Flow & Capital Expenditures (In Millions)
Earnings per Diluted Share
GAAP EPS
Cash from Operations
$0.87
Non-GAAP EPS
Capital Expenditures
$0.71**
$0.71*
$1,259
$1,132
$0.28
$1,080
$923
$0.61
$1,389
$1,331
$0.80***
$0.28
$985
$771
$0.52
$643
$0.43
2005
2006
2007
* 2006 includes $0.02 of expense resulting from the
cumulative impact of the adoption of an accounting
change for asset retirement obligations.
2008
$446
2009
2005
** 2008 Non-GAAP measure. Excludes $339 million in pretax
restructuring charges and transformation expenses.
2006
2007
2008
2009
*** 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 ?rst time, we were beginning to see traf?c 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 of?cer, it was obvious to me, and to our leadership team, that
Starbucks needed nothing less than a full-?edged transformation to return to pro?table growth. Since then, we have
worked through the multitude of challenges required to revitalize our brand and transform our company¡ªall 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 signi?cant progress in transforming Starbucks
and returning the company to sustainable, pro?table 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 ef?ciency; reigniting our emotional
attachment with customers; and realigning Starbucks organization for the long
term. In ?scal 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¡ªfrom 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¡ªand 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 ?scal 2009 alone.
But it was clear to us that cost reductions and improved operating ef?ciencies
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 signi?cant 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 ?scal 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 de?ne 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 reaf?rmed
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)? continues to outperform
expectations, generating enough money during its ?rst year to buy more than seven million daily doses of medicine to help
?ght AIDS in Africa. Our decision to offer both Pike Place Roast? and a bolder roast pro?le 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 arti?cial trans fat, high-fructose corn syrup and arti?cial ?avors 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 ?nd our stores, determine nutrition information and reload
their Starbucks Cards.
In ?scal 2009, we unveiled a bold and innovative store design approach, with new concepts in Seattle, Paris and London¡ªall
enthusiastically received. All newly constructed company-operated stores worldwide will be LEED?-certi?ed beginning this
calendar year, moving us closer to our goal of signi?cantly 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¡ªone person, one cup and one
neighborhood at a time. For our partners, despite economic pressure, we continued to offer health care bene?ts 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¡ªanother bene?t that many companies retreated from in 2009.
We reaf?rmed our commitment to doing business responsibly. This year we became the world¡¯s largest purchaser of Fair Trade
Certi?ed? 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 ?scal 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 pro?table
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 signi?cant 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 ?scal 2009, we wrote a new playbook for just
that with the launch of Starbucks VIA? 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 ?rst
signi?cant innovation in more than 50 years in the $21 billion global instant coffee category. Starbucks VIA? also gives
customers an easy and affordable single-serve option at home and on-the-go. We look forward to extending the product
internationally¡ªboth in our stores and in grocery channels¡ªin ?scal 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¡ªideally 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¡ªfor 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 of?cer
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 n
No ?
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 (¡ì 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 n
Non-accelerated filer n
Smaller reporting company 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 n
No ?
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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