Embracing our heritage and values while aiming higher than ever. Starbucks Corporation Fiscal
ANNUAL REPORT 2014
Table of Contents 3. Letter of the CEO 3. Business 6. Licensed store data 8. Financial Highlights 11. Operating Expenses
Dear Shareholders, revenues reached a record $13.3 billion, a 14 percent increase, with revenue growth driven by a 7 percent rise in global comparable store sales and a 50 percent rise in revenue from Channel Development.
Warm regards,
Howard Schultz
President and chief executive
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It is an honor to write you this year, not only because we have achieved record financial performance but because we have once again done so by living up to the heritage of our company, balancing profits with a social conscience. Our commitment to creating shareholder value through the lens of humanity is truly a cornerstone of Starbucks global strength, especially as we pursue the most ambitious agenda in our company’s history. Two years ago, we embarked on a strategic plan, the Blueprint for Profitable Growth, in which we would leverage multiple channels of distribution. I am proud to affirm that it is no longer theory but a true growth engine. The measure of our success can be seen in the past year’s performance: Starbucks consolidated global
Business
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General
Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 60 countries. Formed in 1985, Starbucks Corporation’s common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “SBUX.” We purchase and roast high-quality coffees that we sell, along with handcrafted coffee, tea and other beverages and a variety of fresh food items, through company-operated stores. We also sell a variety of coffee and tea products and license our trademarks through other channels such as licensed stores, grocery and national foodservice accounts. In addition to our flagship Starbucks brand, our portfolio also includes Tazo® Tea, Seattle’s Best Coffee®, Starbucks VIA® Ready Brew, Starbucks RefreshersTM beverages, Evolution FreshTM, La Boulange bakery brand and the VerismoTM System by Starbucks. Our objective is to maintain Starbucks standing as one of the most recognized and
respected brands in the world. To achieve this goal, we are continuing the disciplined expansion of our global store base. In addition, by leveraging the experience gained through our traditional store model, we continue to offer consumers new coffee products in a variety of forms, across new categories, and through diverse channels. Starbucks Global Responsibility strategy and commitments related to coffee and the communities we do
business in, as well as our focus on being an employer of choice, are also key complements to our business strategies. In this Annual Report on Form 10-K (“10-K” or “Report”) for the fiscal year ended September 30, 2012 (“fiscal 2012”), Starbucks Corporation (together with its subsidiaries) is referred to as “Starbucks,” the “Company,” “we,” “us” or “our.”
and warehousing operations. Approximately 40,000 employees were employed outside of the US, with 38,000 in companyoperated stores and the remainder in regional support facilities and roasting and warehousing operations. The number of Starbucks Employees employees Starbucks employed represented by approximately 160,000 people unions is not worldwide as of September significant. We 30, 2012. In the US, Starbucks believe our current employed approximately relations with our 120,000 people, with 113,000 in employees are good. company-operated stores and Starbucks employed the remainder in support facilities, approximately store development, and roasting 120,000 people.
Name
Age
Position
Howard Schultz
59
chairman, president and chief executive officer
Cliff Burrows
53
president, Starbucks Coffee Americas and US
John Culver
52
president, Starbucks Coffee China and Asia Pacific
Jeff Hansberry
48
president, Channel Development and Emerging Brands
05
Executive officers of the registrant
Licensed Store Data Revenue from company-operated stores accounted for 79% of total net revenues during fiscal 2012. Our retail objective is to be the leading retailer and brand of coffee in each of our target markets by selling the finest quality coffee and related products, and by providing each customer a unique Starbucks Experience. The Starbucks Experience is built upon superior customer service as well as clean and well-maintained companyoperated stores that reflect the personalities of the communities in which they operate, thereby building a high degree of customer loyalty. Our strategy for expanding our
06
Net Stores Opened (Closed) During the Fiscal Year Ended
global retail business is to increase our market share in a disciplined manner, by selectively opening additional stores in new and existing markets, as well as increasing sales in existing stores, to support our long-term strategic objective to maintain Starbucks standing as one of the most recognized and respected brands in the world that reflect the personalities of the communities of customer loyalty.
Stores Open as of
Sep 30, 2012
Oct 2, 2011 Sep 30, 2012
Oct 2, 2011
Americas: US
161
(2)
6,866
6,705
Canada
42
37
878
836
Chile
6
5
41
35
Brazil
25
5
53
28
Puerto Rico
-
(2)
19
19
Total:
234
43
7,857
7,623
Financial Highlights Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes. Beginning with the first quarter of fiscal 2012, we redefined our reportable operating segments to align with the three-region leadership and organizational structure of our retail business that took effect at the beginning of fiscal 2012. The three-region structure includes: 1) Americas, inclusive of the US, Canada, and Latin America; 2) Europe, Middle East, and Africa, collectively referred to as the “EMEA” region; and 3) China / Asia Pacific (“CAP”). Our chief executive officer, who is
our chief operating decision maker, manages these businesses, evaluates financial results, and makes key operating decisions based on the new organizational structure. Accordingly, beginning with the first quarter of fiscal 2012, we revised our reportable operating segments from 1) US, 2) International, and 3) Global Consumer Products Group to the following four reportable segments:
Net Revenues (in Billions) $13.3
$11.7
08
$10.4
2008
$10.7 $9.8
2009
2010
2011
2012
Operating Margin GAAP
13.3% 13.5%
14.8% 14.5%
15%
2011
2012
Non-GAAP 9.2% 8.1% 5.7%
4.9%
2008
2009
2010
Operating Income (in Millions) $2000 $1500 $1000
Non-GAAP* GAAP
$500
2008
2009
2010
2011
2012
1) Americas, 2) EMEA, 3) CAP, and 4) Global Consumer Products Group. In the second quarter of fiscal 2012, we renamed our Global Consumer Products Group segment “Channel Development.� Segment revenues as a percentage of total net revenues for fiscal year 2012 were as follows: Americas (75%), EMEA (9%), CAP (5%), and Channel Development (10%).
Concurrent with the change in reportable operating segments, we revised our prior period financial information to reflect comparable financial information for the new segment structure. Historical financial information presented reflects.
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* Non-GAAP measure. Excludes $339, $332 and $53 million in pretax restructuring and transformation charges in 2008, 2009 and 2010, respectively. Also excludes a benefit from the 53rd week in 2010 of approximately $59 million and a gain on the sale of properties in 2011 of $30 million.
Operating Expenses 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. 11
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 companyoperated 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
Thank for all of those who make part of Starbuks family for the great year!