Fiscal Fourth Quarter 2009 Highlights:
Comparable store sales trends improved in U.S. and International segments on both sequential quarter and year-over-year basis.
Consolidated same store sales improved to negative 1% from negative 5% in the previous quarter.
Operating margin improved 760 basis points to 8.2%.
Non-GAAP operating margin improved 570 basis points to 10.4%.
EPS of $0.20 compared to $0.01 in Q408
Non-GAAP EPS increased to $0.24, a 140% increase from $0.10 in the prior year period.
Full Fiscal Year 2009 Highlights:

Cost savings initiatives delivered full-year savings of approximately $580 million, exceeding target by $30 million.
Operating margin improved 80 basis points to 5.7%.
Non-GAAP operating margin improved 110 basis points to 9.2%.
EPS increased 21% to $0.52 from $0.43 in the prior year; Non-GAAP EPS increased 13% to $0.80 from $0.71 in the prior year.
Operating cash flow totaled $1.4 billion and free cash flow exceeded $900 million.
SEATTLE--(BUSINESS WIRE)--Nov. 5, 2009-- Starbucks Corporation (NASDAQ:SBUX) today reported financial results for its fourth quarter and fiscal year ended September 27, 2009 and increased its FY10 earnings outlook based on improving same store sales trends and the increasing impact of its cost savings efforts.

“Starbucks strong performance in Q4 and fiscal 2009 overall is the result of our successful efforts to improve our customer and partner experiences, the initiatives and innovations we have introduced over the past 18 months and the significant, permanent changes we have made to our cost structure,” said Howard Schultz, chairman, president and ceo. “We are seeing broad-based improvement across our global business, and are cautiously optimistic about the upcoming holiday period,” added Schultz.

“Improving top line trends, coupled with a disciplined operational focus in both our stores and our support organization, position us well for long-term, profitable growth,” commented Troy Alstead, executive vice president and cfo. “As a result, we are increasing our non-GAAP EPS outlook for fiscal year 2010 to a range of 15% to 20% growth over fiscal 2009.”


13 Weeks Ended 52 Weeks Ended
27-Sep-09 28-Sep-08 Change 27-Sep-09 28-Sep-08 Change
GAAP EPS $ 0.20 $ 0.01 1,900% $ 0.52 $ 0.43 21%
Adjustments1 $ 0.04 $ 0.09 -56% $ 0.28 $ 0.28 $ -
Non-GAAP EPS $ 0.24 $ 0.10 140% $ 0.80 $ 0.71 13%

1 Adjustments include restructuring charges in 2008 and 2009, plus other transformation charges in 2008. See the Reconciliation of Selected GAAP Measures to Non-GAAP Measures at the end of this document for further detail.

Fourth Quarter Fiscal 2009 Summary


13 Weeks Ended
27-Sep-09 28-Sep-08 Change
Revenues (in $ millions) $ 2,422.2 $ 2,515.5 -4%
GAAP Operating Income (in $ millions) $ 199.4 $ 14.2 1,304%

GAAP Operating Margin 8.2% 0.6% 760 bps
Non-GAAP Operating Income (in $ millions) $ 252.6 $ 119.3 112%
Non-GAAP Operating Margin 10.4% 4.7% 570 bps


Consolidated company revenues for Q409 were $2.4 billion, compared to $2.5 billion in Q408. The revenue decline resulted primarily from the impact of foreign currency translation related to the strengthening of the U.S. dollar compared to UK and Canadian currencies, 385 net fewer company-operated stores open in Q409 compared to Q408, and a 1% decline in consolidated comparable store sales.

Non-GAAP Q409 operating income totaled $252.6 million, representing non-GAAP operating margin expansion of 570 basis points to 10.4%. This improvement was driven by cost savings initiatives implemented throughout the organization, culminating in Q409 savings of approximately $210 million. The majority of these savings are the result of in-store operating improvements focused on labor efficiencies and reduced product waste, and lower non-store support costs. These improvements were partially offset by higher general and administrative expenses, related to higher performance-based compensation expenses in the quarter. Results for both years exclude restructuring charges as well as other transformation charges in fiscal 2008.

Restructuring Charges

Restructuring charges of $53.2 million for the quarter were nearly all due to lease exit and other costs associated with the closure of U.S. and International company-operated stores. Starbucks actions to rationalize its global store portfolio included plans to close approximately 800 company-operated stores in the U.S., restructure the company’s business in Australia, and close approximately 100 additional International company-operated stores. At the end of fiscal 2009, nearly all of the approximately 800 U.S. stores, 61 stores in Australia and 40 stores in other International markets had been closed. The remaining International store closures are expected to be completed by the end of fiscal 2010, with related lease exit costs expected to be recognized concurrently with the actual closures.

Liquidity

Starbucks strong operating cash flow of $1.4 billion, combined with lower capital expenditures due to disciplined store growth during the year, resulted in free cash flow of over $900 million for fiscal 2009. The company had no short term debt at the end of the year, and had cash and liquid investments totaling more than $650 million.

Fiscal 2010 Targets

Starbucks has set the following financial and operational targets for fiscal 2010:

The company is targeting revenue growth in the low-to-mid single digits, driven by modestly positive comparable store sales, a 53rd fiscal week, and approximately 300 planned net new stores.
Starbucks is targeting approximately 100 net new stores in the U.S. and approximately 200 net new stores in International markets. Both the U.S. and International net new additions are expected to be primarily licensed stores.
Starbucks outlook on the U.S. operating margin has further improved; the company is now targeting full-year operating margin improvements for both the U.S. segment and the International segment (excluding restructuring charges) of 200 to 250 basis points. The CPG segment margin is expected to remain in its current range of 35% to 40%. The cumulative result of these expected margins is a consolidated non-GAAP operating margin that is anticipated to reach double digits.
The company now expects non-GAAP EPS growth in the range of 15% to 20% from FY09 non-GAAP EPS of $0.80, excluding $0.02 to $0.03 of expected restructuring charges, and including approximately $0.02 to $0.03 of additional EPS from the extra week in the fiscal fourth quarter, as fiscal 2010 is a 53-week year for Starbucks.
Starbucks expects to see little net impact from commodities, with higher dairy prices being offset by slightly favorable coffee prices.
The company is currently expecting an effective tax rate in the range of 34% to 35%.
Capital expenditures are expected to be in the range of $500 million to $550 million. Approximately half of this amount will be allocated to renovations and store equipment upgrades, one quarter to systems upgrades, and one quarter to new stores and other capital investments.
Starbucks expects cash flow from operations to be approximately $1.4 billion, and free cash flow of approximately $900 million.

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