New store openings spur earnings growth at Starbucks

by Staff
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SEATTLE — A record number of new store openings spurred top-line growth and contributed to full-year earnings at Starbucks Corp. in the fiscal year ended Oct. 1. Net income in fiscal 2006 rose to $564,259,000, equal to 71c per share on the common stock, up 14% from $494,370,000, or 61c per share, in fiscal 2005. Net sales in the full year rose 22% to $6,583,098,000, up from $5,391,927,000.

Fourth-quarter profit, however, slipped 5% to $117,289,000, or 15c per share, from the prior year. Starbucks said changes in accounting rules make financial results for the fourth quarter and full year not comparable with the prior year.

Excluding a change in the way it accounts for future costs of ending leases, Starbucks said it earned $581,473,000 in the full year, up 18% from fiscal 2005, and $134,503,000 in the fourth quarter, up 9% from the fourth quarter of fiscal 2005.

Revenue for the fourth quarter was $1,694,294,000, up 22% from $1,392,714,000 in the same period last year.

"Customer demand for the Starbucks brand remains strong in domestic and international markets and we are very excited to bring the Starbucks experience to two new markets — Egypt and Brazil — in the first quarter of our new fiscal year," said Jim Donald, president and chief executive officer. "Our solid performance in fiscal 2006 also included foundational work for the future. We continued to build on our well-developed pipeline of product innovation, make meaningful progress toward Starbucks entry into several significant new markets in 2007, and explore opportunities to extend the brand outside our retail stores. We entered the new fiscal year with a continued focus on execution and meeting our aggressive financial targets."

Starbucks opened 2,199 new store stores in fiscal 2006, setting a company record and boosting its worldwide store count to 12,440. The company plans to open 2,400 stores in fiscal 2007, about 700 of them overseas, where it will soon be making its debut in Sao Paulo, Brazil, and Cairo, Egypt. The company has more than 3,600 stores in 36 countries outside the United States, and aims for half of its eventual goal of 40,000 stores to be overseas.

In a conference call with analysts, Mr. Donald said he’s been pleased with the rollout of warm breakfast sandwiches in several markets, most recently New York, and said the company expects 3,400 stores to offer them by this time next year — up from about 1,000 today.

For fiscal 2007, Starbucks said it expects revenue growth of 20%, sales at stores open at least 13 months to grow between 3% and 7% and for earnings per share to range from 87c to 89c.

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