Starbucks Announces Record First Quarter Fiscal 2005 Results & Raises

Starbucks Announces Record First Quarter Fiscal 2005 Results & Raises Full Year EPS Target Range; Net Revenues Increase 24 Percent to a Record $1.6 billion

    Business Editors

    SEATTLE--(BUSINESS WIRE)--Jan. 26, 2005--

    Earnings Per Share Increase 30 Percent to $0.35; Fiscal 2005 Earnings Per Share Target Range Raised to $1.15 to $1.17

    Starbucks Corporation (Nasdaq:SBUX) today announced record revenues and earnings for its fiscal first quarter ended January 2, 2005.
    For the 13 weeks ended January 2, 2005, consolidated net revenues increased 24 percent to $1.6 billion from $1.3 billion for the same period in fiscal 2004. Net earnings for the 13 weeks ended January 2, 2005, increased 31 percent to $145 million from $110 million for the same period in fiscal 2004. Earnings were $0.35 per share for the 13 weeks ended January 2, 2005, compared to $0.27 per share for the comparable period in fiscal 2004.
    "Starbucks first quarter was built around our holiday promotion, which included our popular seasonal beverages, strong customer response to Starbucks(R) Christmas Blend, and relevant gift options ranging from Starbucks Cards to Starbucks Hear Music offerings," commented Jim Donald, ceo designate. "This exciting line-up resulted in our strongest holiday ever. Looking forward, we believe the innovative winter promotion currently underway in our stores, together with the outstanding Starbucks Experience our partners provide on a daily basis, present customers with a compelling reason to redeem their holiday Starbucks Cards."

    Consolidated Financial and Operating Summary

    Company-operated retail revenues increased 26 percent to $1.4 billion for the 13 weeks ended January 2, 2005, from $1.1 billion for the same period in fiscal 2004. The increase was primarily attributable to the opening of 642 new Company-operated retail stores in the last 12 months and comparable store sales growth of 10 percent for the quarter. The increase in comparable store sales was due to a six percent increase in the number of customer transactions and a four percent increase in the average value per transaction.
    Specialty revenues increased 15 percent to $231 million for the 13 weeks ended January 2, 2005, compared to $201 million for the corresponding period of fiscal 2004. Licensing revenues increased 18 percent to $157 million primarily due to higher product sales and royalty revenues from opening 740 new licensed retail stores in the last 12 months. Foodservice and other revenues increased 10 percent to $74 million primarily due to growth in new and existing U.S. and International foodservice accounts.
    Cost of sales and related occupancy costs decreased to 40.9 percent of total net revenues for the 13 weeks ended January 2, 2005, compared to 41.4 percent in the corresponding 13-week period of fiscal 2004, primarily due to a higher average value per retail transaction, partially offset by higher initial costs associated with the Company's recent expansion of the food program in Company-operated retail stores.
    Store operating expenses as a percentage of Company-operated retail revenues increased to 38.3 percent for the 13 weeks ended January 2, 2005, from 37.6 percent for the corresponding period of fiscal 2004, primarily due to higher marketing and payroll-related expenditures for planned acceleration of Company-operated retail store growth and to ensure a consistent Starbucks Experience in existing stores, partially offset by strong revenue growth.
    Other operating expenses (expenses associated with the Company's specialty operations) decreased to 19.2 percent of total specialty revenues for the 13 weeks ended January 2, 2005, compared to 21.8 percent in the corresponding period of fiscal 2004. The decrease was primarily due to efficiencies gained from fully integrating the Seattle Coffee Company during fiscal 2004 and lower expenditures related to marketing and distribution within the grocery and warehouse club businesses.
    Depreciation and amortization expenses increased to $76 million for the 13 weeks ended January 2, 2005, compared to $66 million for the corresponding period of fiscal 2004. The increase was primarily due to the opening of 642 new Company-operated retail stores in the last 12 months. As a percentage of total net revenues, depreciation and amortization expenses decreased to 4.8 percent for the 13 weeks ended January 2, 2005, from 5.1 percent for the corresponding 13-week period of fiscal 2004.
    General and administrative expenses increased to $84 million for the 13 weeks ended January 2, 2005, compared to $70 million for the corresponding period of fiscal 2004, primarily due to higher payroll-related expenditures and professional fees in support of both domestic and international expansion. As a percentage of total net revenues, general and administrative expenses decreased to 5.3 percent for the 13 weeks ended January 2, 2005, from 5.5 percent for the corresponding period of fiscal 2004.
    Income from equity investees increased $3 million to $13 million for the 13 weeks ended January 2, 2005, from $10 million for the corresponding period of fiscal 2004. The increase was primarily due to volume driven operating results for The North American Coffee Partnership, which produces bottled Frappuccino(R) and Starbucks DoubleShot(R) coffee drinks, and improved results from international investees as a result of new licensed retail store openings.
    Operating income increased 30 percent to $227 million for the 13 weeks ended January 2, 2005, compared to $175 million for the corresponding 13-week period of fiscal 2004. Operating margin increased to 14.3 percent of total net revenues for the 13 weeks ended January 2, 2005, compared to 13.7 percent for the corresponding period of fiscal 2004, primarily due to strong revenue growth, partially offset by higher retail store operating expenses.
    Interest and other income increased to $5 million for the 13 weeks ended January 2, 2005, from $3 million in the corresponding period of fiscal 2004, primarily due to interest income earned on higher cash and liquid investment balances.
    Net earnings for the 13 weeks ended January 2, 2005, increased 31 percent to $145 million from $110 million for the same period in fiscal 2004. Earnings were $0.35 per share for the 13 weeks ended January 2, 2005, compared to $0.27 per share for the comparable period in fiscal 2004.

    Fiscal 2005 Targets

    The Company also provided updated fiscal 2005 targets:

--	The Company expects to open approximately 1,500 new stores on a global basis in fiscal 2005. In the United States, Starbucks plans to open approximately 550 Company-operated locations and 525 licensed locations. In International markets, Starbucks plans to open approximately 100 Company-operated stores and 325 licensed stores;
--	Starbucks is targeting total net revenue growth of approximately 20% in fiscal 2005, excluding the impact of the 53rd week in fiscal 2004;
--	The Company maintained its longer term comparable store sales target range of three percent to seven percent, and stated that it expects comparable store sales growth for the remainder of fiscal 2005 to be at the high end of the longer term range, with monthly anomalies;
--	Based on the Company's strong first quarter earnings and updated business forecast for the remainder of the year, Starbucks raised its earnings per share target range to $1.15 to $1.17 for fiscal 2005, excluding the impact from expensing stock options. This is an increase from the Company's original target range of $1.12 to $1.15 introduced in July 2004;
--	Starbucks reaffirmed its fiscal 2005 second and third quarter earnings per share growth targets and moderately increased its fourth quarter earnings per share targeted growth rate. Specifically, the Company is targeting quarterly earnings per share in the range of $0.23 - $0.24 for the second quarter, $0.29 - $0.30 for the third quarter, and $0.28 - $0.29 for fourth quarter of fiscal 2005, resulting in the fiscal year target range of $1.15 to $1.17. The Company recognizes the importance of balancing its short term profitability targets and its long term growth objectives, and as in the past where appropriate, will invest ahead of the curve. This important balance remains consistent with Starbucks commitment to building long term shareholder value;
--	The Company continues to target a full year effective tax rate of 37.5% with minor variations from quarter to quarter, and;
--	Capital expenditures are expected to be in the range of $600 to $650 million in fiscal 2005.

    Starbucks will be holding a conference call today at 1:30 p.m. Pacific time, which will be hosted by Howard Schultz, chairman, Orin Smith, president and chief executive officer, Jim Donald, ceo designate and Michael Casey, executive vice president and chief financial officer. The call will be broadcast live over the Internet and can be accessed at the Company's web site address of http://www.starbucks.com/aboutus/investor.asp. A replay of the call will be available via telephone through 5:00 p.m. Pacific time on Wednesday, February 2, 2005, by calling 1-800-642-1687, reservation number 3300662, or via the Investor Relations page on Starbucks.com through approximately 5:00 p.m. Pacific time on Thursday, February 24, 2005, at the following URL: http://www.starbucks.com/aboutus/investor.asp.
    The Company's consolidated financial statements, operating segment results, and other additional information have been provided on the following pages in accordance with current year classifications, and should be reviewed in conjunction with this press release. Please refer to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 10, 2004, for additional information.

STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)

13 Weeks Ended 13 Weeks Ended -------------------------------- ----------------- Jan. 2, Dec. 28, % Jan. 2, Dec. 28, 2005 2003 Change 2005 2003 ----------- ----------- -------- -------- -------- (in thousands, except per share As a % of total data) net revenues (unless otherwise indicated) ----------------- Net revenues: Company-operated retail $1,358,661 $1,080,495 25.7% 85.5% 84.3% Specialty: Licensing 157,213 133,499 17.8% 9.9% 10.4% Foodservice and other 73,670 67,197 9.6% 4.6% 5.3% ----------- ----------- -------- -------- Total specialty 230,883 200,696 15.0% 14.5% 15.7% ----------- ----------- -------- --------

Total net revenues 1,589,544 1,281,191 24.1% 100.0% 100.0%

Cost of sales and related occupancy costs 650,312 530,284 40.9% 41.4% Store operating expenses 521,006 405,821 (a)38.3% (a)37.6% Other operating expenses 44,281 43,698 (b)19.2% (b)21.8% Depreciation and amortization expenses 75,817 65,863 4.8% 5.1% General and administrative expenses 83,599 70,417 5.3% 5.5% ----------- ----------- Subtotal operating expenses 1,375,015 1,116,083 23.2%

Income from equity investees 12,890 10,044 0.8% 0.8% ----------- -----------

Operating income 227,419 175,152 29.8% 14.3% 13.7%

Interest and other income, net 5,122 3,208 0.3% 0.2% ----------- ----------- -------- --------

Earnings before income taxes 232,541 178,360 30.4% 14.6% 13.9%

Income taxes(c) 87,668 67,917 5.5% 5.3% ----------- ----------- -------- --------

Net earnings $ 144,873 $ 110,443 31.2% 9.1% 8.6% =========== =========== ======== ========

Net earnings per common share - Diluted $ 0.35 $ 0.27 =========== =========== Weighted average shares outstanding - Diluted 415,327 407,645 =========== ===========

(a) Calculated as a percentage of Company-operated retail revenues. (b) Calculated as a percentage of total specialty revenues. (c) The effective tax rates were 37.7 percent for the 13 weeks ended January 2, 2005, and 38.1 percent for the 13 weeks ended December 28, 2003.

STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

January 2, October 3, 2005 2004 ----------- ----------- ASSETS (unaudited) Current assets: Cash and cash equivalents $ 643,548 $ 299,128 Short-term investments - available-for-sale securities 303,285 329,082 Short-term investments - trading securities 31,587 24,799 Accounts receivable, net of allowances of $2,570 and $2,231, respectively 151,308 140,226 Inventories 379,475 422,663 Prepaid expenses and other current assets 71,718 71,347 Deferred income taxes, net 91,622 81,240 ----------- ----------- Total current assets 1,672,543 1,368,485

Long-term investments - available-for-sale securities 164,586 135,179 Equity and other investments 184,635 168,177 Property, plant and equipment, net 1,574,315 1,471,446 Other assets 62,584 85,561 Other intangible assets 27,726 26,800 Goodwill 72,462 68,950 ----------- -----------

TOTAL ASSETS $3,758,851 $3,324,598 =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 161,205 $ 199,346 Accrued compensation and related costs 197,808 208,927 Accrued occupancy costs 73,880 65,873 Accrued taxes 87,899 63,038 Other accrued expenses 145,481 123,684 Deferred revenue 222,344 121,377 Current portion of long-term debt 738 735 ----------- ----------- Total current liabilities 889,355 782,980

Deferred income taxes, net 39,744 46,683 Long-term debt 3,433 3,618 Other long-term liabilities 12,533 8,132

Shareholders' equity: Common stock and additional paid-in capital - Authorized, 600,000,000 shares; issued and outstanding, 402,805,418 and 397,405,844 shares, respectively, (includes 1,697,100 common stock units in both periods) 1,119,159 956,685 Other additional paid-in-capital 39,393 39,393 Retained earnings 1,602,761 1,457,888 Accumulated other comprehensive income 52,473 29,219 ----------- ----------- Total shareholders' equity 2,813,786 2,483,185 ----------- -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,758,851 $3,324,598 =========== ===========

STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands)

13 Weeks Ended ------------------------- January 2, December 28, 2005 2003 ----------- ------------ OPERATING ACTIVITIES: Net earnings $ 144,873 $ 110,443 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 82,502 72,028 Provision for impairments and asset disposals 2,889 2,176 Deferred income taxes, net (13,521) (6,861) Equity in income of investees (5,823) (3,379) Tax benefit from exercise of non-qualified stock options 71,050 9,439 Net amortization of premium on securities 3,260 1,831 Cash provided/(used) by changes in operating assets and liabilities: Inventories 46,487 39,450 Accounts payable (41,590) (25,835) Accrued taxes 23,778 58,456 Deferred revenue 100,658 72,545 Other accrued expenses 7,608 58,664 Other operating assets and liabilities (17,921) (10,209) ----------- ------------ Net cash provided by operating activities 404,250 378,748

INVESTING ACTIVITIES: Purchase of available-for-sale securities (161,453) (138,022) Maturity of available-for-sale securities 115,491 17,060 Sale of available-for-sale securities 38,669 14,585 Acquisition, net of cash acquired (11,282) - Net additions to equity, other investments and other assets 15,618 (4,394) Distributions from equity investees 5,743 5,085 Net additions to property, plant and equipment (158,466) (59,127) ----------- ------------ Net cash used by investing activities (155,680) (164,813)

FINANCING ACTIVITIES: Proceeds from issuance of common stock 91,423 30,675 Principal payments on long-term debt (183) (180) ----------- ------------ Net cash provided by financing activities 91,240 30,495 Effect of exchange rate changes on cash and cash equivalents 4,610 2,975 ----------- ------------ Net increase in cash and cash equivalents 344,420 247,405

CASH AND CASH EQUIVALENTS: Beginning of period 299,128 200,907 ----------- ------------

End of the period $ 643,548 $ 448,312 =========== ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the 13 weeks ended: Interest $ 47 $ 51 Income taxes $ 10,356 $ 14,858 -0-

    Stock Compensation Expense

    In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement No. 123R, "Share-Based Payment" ("FAS 123R"), a revision of FASB Statement No. 123, "Accounting for Stock-Based Compensation." FAS 123R will require Starbucks to measure all employee stock-based compensation awards using the fair value method and record compensation expense in the Company's consolidated financial statements. Starbucks is evaluating the impact of FAS 123R and will implement this new rule no later than the Company's fiscal fourth quarter of 2005. In the interim, the Company will continue to regularly disclose the pro forma impact of stock compensation on the Company's net earnings and earnings per share within its periodic filings with the Securities and Exchange Commission in accordance with current accounting rules. The pro forma impacts for the 13 weeks ended January 2, 2005, and December 28, 2003, were as follows for the information presented (in thousands, except earnings per share):

13 Weeks Ended -------------------------- January 2, December 28, 2005 2003 ----------- ------------

Net earnings $ 144,873 $ 110,443 Deduct: stock-based compensation expense determined under fair value method, net of tax (12,074) (8,332) ----------- ------------

Pro forma net income $ 132,799 $ 102,111 =========== ============

Earnings per share: Diluted - as reported $ 0.35 $ 0.27 Diluted - pro forma $ 0.32 $ 0.25

    Segment Results

    Segment information is prepared on the basis that the Company's management reviews financial information for operational decision-making purposes. The tables below present, by operating segment, total net revenues, operating income and operating income as a percentage of related revenues, net of intersegment eliminations for the periods ended (in thousands):

% of % of United Inter- 13 Weeks Ended United States Inter- national January 2, 2005 States Revenue national Revenue -------------------------- ----------- --------- --------- --------- Net revenues: Company-operated retail $1,149,630 85.9% $209,031 83.4% Specialty: Licensing 121,135 9.0 36,078 14.4 Foodservice and other 68,008 5.1 5,662 2.2 ----------- ----- --------- ----- Total specialty 189,143 14.1 41,740 16.6 ----------- ----- --------- ----- Total net revenues 1,338,773 100.0 250,771 100.0

Cost of sales and related occupancy costs 524,042 39.1 126,270 50.4 Store operating expenses 444,061 38.6(1) 76,945 36.8(1) Other operating expenses 37,103 19.6(2) 7,178 17.2(2) Depreciation and amortization expenses 54,736 4.1 12,946 5.2 General and administrative expenses 21,623 1.6 11,899 4.7

Income from equity investees 8,708 0.7 4,182 1.7 ----------- ----- --------- ----- Operating income/(loss) $ 265,916 19.9% $ 19,715 7.9% =========== ===== ========= =====

% of Total 13 Weeks Ended Unallocated Net January 2, 2005 Corporate Revenues Consolidated -------------------------- ----------- --------- ------------ Net revenues: Company-operated retail $ - - % $1,358,661 Specialty: Licensing - - 157,213 Foodservice and other - - 73,670 ----------- --------- ------------ Total specialty - - 230,883 ----------- --------- ------------ Total net revenues - - 1,589,544

Cost of sales and related occupancy costs - - 650,312 Store operating expenses - - 521,006 Other operating expenses - - 44,281 Depreciation and amortization expenses 8,135 0.5 75,817 General and administrative expenses 50,077 3.2 83,599

Income from equity investees - - 12,890 ----------- --------- ------------ Operating income/(loss) $(58,212) (3.7)% $ 227,419 =========== ========= ============

% of % of United Inter- 13 Weeks Ended United States Inter- national December 28, 2003 States Revenue national Revenue -------------------------- ----------- --------- --------- --------- Net revenues: Company-operated retail $ 924,544 84.8% $155,951 81.8% Specialty: Licensing 102,616 9.4 30,883 16.2 Foodservice and other 63,457 5.8 3,740 2.0 ----------- ----- --------- ----- Total specialty 166,073 15.2 34,623 18.2 ----------- ----- --------- ----- Total net revenues 1,090,617 100.0 190,574 100.0

Cost of sales and related occupancy costs 432,881 39.7 97,403 51.1 Store operating expenses 349,145 37.8(1) 56,676 36.3(1) Other operating expenses 36,957 22.3(2) 6,741 19.5(2) Depreciation and amortization expenses 47,064 4.3 10,606 5.6 General and administrative expenses 16,639 1.5 11,987 6.3

Income from equity investees 6,435 0.6 3,609 1.9 ----------- ----- --------- ----- Operating income/(loss) $ 214,366 19.7% $ 10,770 5.7% =========== ===== ========= =====

% of Total 13 Weeks Ended Unallocated Net December 28, 2003 Corporate Revenues Consolidated -------------------------- ----------- --------- ------------ Net revenues: Company-operated retail $ - - % $1,080,495 Specialty: Licensing - - 133,499 Foodservice and other - - 67,197 ----------- --------- ------------ Total specialty - - 200,696 ----------- --------- ------------ Total net revenues - - 1,281,191

Cost of sales and related occupancy costs - - 530,284 Store operating expenses - - 405,821 Other operating expenses - - 43,698 Depreciation and amortization expenses 8,193 0.6 65,863 General and administrative expenses 41,791 3.3 70,417

Income from equity investees - - 10,044 ----------- --------- ------------ Operating income/(loss) $(49,984) (3.9)% $ 175,152 =========== ========= ============

(1) Shown as a percentage of related Company-operated retail revenues. (2) Shown as a percentage of related total specialty revenues.

    United States

    United States total net revenues increased by $248 million, or 23 percent, to $1.3 billion for the 13 weeks ended January 2, 2005, compared to $1.1 billion for the corresponding period of fiscal 2004. United States Company-operated retail revenues increased by $225 million, or 24 percent, to $1.1 billion for the 13 weeks ended January 2, 2005, compared to $925 million for the corresponding period of fiscal 2004, primarily due to the opening of 515 new Company-operated retail stores in the last 12 months and comparable store sales growth of 11 percent for the quarter. The increase in comparable store sales was due to a six percent increase in the number of customer transactions and a five percent increase in the average value per transaction.
    Total United States specialty revenues increased $23 million, or 14 percent, to $189 million for the 13 weeks ended January 2, 2005, compared to $166 million in the corresponding period of fiscal 2004. United States licensing revenues increased $18 million, or 18 percent, to $121 million, compared to $103 million for the corresponding period of fiscal 2004. The increase was primarily due to higher product sales and royalty revenues as a result of opening 450 new licensed retail stores in the last 12 months. United States foodservice and other revenues increased $5 million, or seven percent, to $68 million from $63 million in fiscal 2004, primarily due to growth in new and existing foodservice accounts.
    United States operating income increased by 24 percent to $266 million for the 13 weeks ended January 2, 2005, from $214 million for the same period in fiscal 2004. Operating margin increased to 19.9 percent of related revenues from 19.7 percent in the corresponding period of fiscal 2004, primarily due to strong revenue growth and fixed costs being distributed over an expanded revenue base, partially offset by higher marketing and payroll-related expenditures, as well as higher initial costs associated with the recent expansion of the Company's food program in Company-operated retail stores.

    International

    International total net revenues increased by $60 million, or 32 percent, to $251 million for the 13 weeks ended January 2, 2005, compared to $191 million for the corresponding period of fiscal 2004. International Company-operated retail revenues increased by $53 million, or 34 percent, to $209 million for the 13 weeks ended January 2, 2005, compared to $156 million for the corresponding period for fiscal 2004, primarily due to the opening of 127 new Company-operated retail stores in the last 12 months, favorable foreign currency exchange rates for both the British pound sterling and Canadian dollar, and comparable store sales growth of seven percent for the quarter. The increase in comparable store sales resulted from a four percent increase in the number of customer transactions coupled with a three percent increase in the average value per transaction.
    Total international specialty revenues increased $7 million, or 21 percent, to $42 million for the 13 weeks ended January 2, 2005, compared to $35 million in the corresponding period of fiscal 2004. The increase was primarily due to higher product sales and royalty revenues from opening 290 licensed retail stores in the last 12 months and expansion of the Canadian grocery and warehouse club business.
    International operating income increased to $20 million for the 13 weeks ended January 2, 2005, from $11 million in the corresponding period of fiscal 2004. Operating margin increased to 7.9 percent of related revenues from 5.7 percent in the corresponding period of fiscal 2004, primarily due to leverage gained on fixed costs distributed over an expanded revenue base.

    Store Data

    The Company's store data for the periods presented are as follows:

Net stores opened during the 13 weeks ended Stores open as of ----------------- ----------------- Jan. 2, Dec. 28, Jan. 2, Dec. 28, 2005 2003 2005 2003 -------- -------- -------- -------- United States: Company-operated Stores 101 100 4,394 3,879 Licensed Stores 143 110 1,982 1,532 -------- -------- -------- -------- 244 210 6,376 5,411 International: Company-operated Stores(1) 40 43 997 870 Licensed Stores(1) 96 89 1,576 1,286 -------- -------- -------- -------- 136 132 2,573 2,156 -------- -------- -------- --------

Total 380 342 8,949 7,567 ======== ======== ======== ========

(1) International store data has been adjusted for the 100% acquisition of the Germany and Singapore operations by reclassifying historical information from Licensed Stores to Company-operated Stores.

    Starbucks Corporation is the leading retailer, roaster and brand of specialty coffee in the world, with more than 8,700 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim. The Company is committed to offering the highest quality coffee and the Starbucks Experience while conducting its business in ways that produce social, environmental and economic benefits for communities in which it does business. In addition to its retail operations, the Company produces and sells bottled Frappuccino(R) coffee drinks, Starbucks DoubleShot(R) coffee drink, and a line of superpremium ice creams through its joint venture partnerships. The Company's brand portfolio provides a wide variety of consumer products. Tazo Tea's line of innovative superpremium teas and Hear Music's exceptional compact discs enhance the Starbucks Experience through best-of-class products. The Seattle's Best Coffee(R) and Torrefazione Italia(R) Coffee brands enable Starbucks to appeal to a broader consumer base by offering an alternative variety of coffee flavor profiles.

    This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, including anticipated store openings, comparable store sales expectations, trends in or expectations regarding the Company's revenue and expense growth, capital expenditures, effective tax rate, net earnings and earnings per share results, are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors including but not limited to, coffee, dairy and other raw material prices and availability, successful execution of internal performance and expansion plans, fluctuations in U.S. and international economies and currencies, ramifications from the war on terrorism, or other international events or developments, the impact of initiatives by competitors, the effect of legal proceedings, and other risks detailed in the Company's filings with the Securities and Exchange Commission, including the "Certain Additional Risks and Uncertainties" section of Starbucks Annual Report on Form 10-K for the fiscal year ended October 3, 2004.

    (C) 2005 Starbucks Coffee Company. All rights reserved.

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CONTACT: Starbucks Corporation Investor Relations: Mary Ellen Fukuhara, 206-318-4025 Media: Audrey Lincoff, 206-447-7950 ext. 52690 http://www.businesswire.com/cnn/sbux.shtml

KEYWORD: WASHINGTON INDUSTRY KEYWORD: RESTAURANTS FOODS/BEVERAGES RETAIL EARNINGS CONFERENCE CALLS SOURCE: Starbucks Corporation

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