What was the primary driver of Starbucks' revenue growth in this quarter?

The primary drivers of revenue growth were the opening of new retail stores, both company-operated and licensed, and a 7% increase in comparable store sales in company-operated stores. Specialty operations, including licensing and foodservice, also contributed significantly to revenue growth.

How did the adoption of SFAS 123R affect the company's financial results?

Starbucks adopted SFAS 123R, 'Share-Based Payment,' effective October 3, 2005. This new accounting standard required the company to recognize stock-based compensation expense in its consolidated financial statements for the first time. This resulted in an increase in general and administrative expenses and other operating expenses, impacting net earnings compared to prior periods where such expenses were only disclosed pro forma.

What is the outlook for store expansion?

Starbucks plans to open approximately 1,800 new stores globally in fiscal year 2006. This includes plans for around 700 company-operated and 600 licensed stores in the United States, and approximately 150 company-operated and 350 licensed stores in international markets.

How is the company managing its liquidity and capital resources?

The company managed its liquidity through strong operating cash flows, a healthy balance of cash and liquid investments, and a revolving credit facility. Management expects these resources, along with anticipated cash flow from operations, to be sufficient for planned capital expenditures for new stores and business investments for the foreseeable future. The company also repurchased approximately $121 million of its common stock during the quarter as part of its capital management program.

SBUX 10-Q Quarterly Report Q2 FY2006 — Revenue, Net Income, EPS

Summary

Starbucks Corporation (SBUX) reported strong financial results for the first quarter of fiscal year 2006, ended January 1, 2006. Total net revenues increased by a significant 22% year-over-year, reaching $1.93 billion. This growth was driven by both company-operated retail stores, which saw a 20% increase in revenue, and specialty operations, which grew by 33%. The company benefited from new store openings, with 560 new stores added in the quarter, and comparable store sales growth of 7%. Net earnings for the quarter rose 20% to $174.2 million, or $0.22 per diluted share. Notably, this period reflects the adoption of new accounting standards for stock-based compensation (SFAS 123R), which resulted in the recognition of stock-based compensation expense. Despite this, operating margin slightly improved to 14.5% from 14.3% in the prior year, due to efficiencies in cost of sales and store operating expenses, partially offset by higher general and administrative costs. The company remains optimistic about its expansion plans, targeting approximately 1,800 new stores globally in fiscal 2006.

Key Highlights

1Total net revenues surged 22% to $1.93 billion in the first quarter of fiscal 2006.
2Company-operated retail revenues grew 20% to $1.63 billion, supported by 7% comparable store sales growth and new store openings.
3Specialty operations revenue increased by a strong 33% to $306 million, primarily driven by licensing and foodservice segments.
4Net earnings increased 20% to $174.2 million, with diluted earnings per share at $0.22.
5Operating margin improved slightly to 14.5% from 14.3% year-over-year, despite the impact of new stock-based compensation accounting.
6Starbucks continued its aggressive expansion, opening 560 new stores globally in the quarter and planning for approximately 1,800 new stores in fiscal 2006.
7The company adopted SFAS 123R, recognizing stock-based compensation expense for the first time in this reporting period.

STARBUCKS CORP Quarterly Report for Q2 Ended Jan 1, 2006

Summary

Key Highlights

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