Starbucks once again experienced financial success during the fiscal year 2006. Our net revenues totaled $7.8 billion, an increase of 22 percent over fiscal year 2005. Starbucks has now experienced 15 consecutive years of 5 percent or greater store sales growth. At the same time, Starbucks made $564 million in net income, which is a 25 percent increase from the previous fiscal year. Stockholders earned $0.71 per diluted share. Finally, Starbucks’ operating income in 2006 increased by 11.5 percent to $894 million.
During fiscal 2006, we worked diligently to maintain our company’s growth and brand power. We provided long-term value for shareholders and kept our company profitable. Listed below are highlights from 2006:
Starbucks opened 2,199 stores globally – a pace of six new stores per day. There are now 12,440 Starbucks in 37 countries.
We continued to support farmers approved by the Coffee and Farmer Equity (CAFE) Practices, a program that ensures coffee is grown and processed in a sustainable manner.
We offer comprehensive health care packages to all part- and full-time employees.
Our workforce embraces diversity as a vital part in doing business.
Starbucks Entertainment launched its first movie – “Akeelah and the Bee” – and its first book line.
At the same time, we supported important causes and practiced corporate social responsibility. Starbucks is committed to funding its communities and the environment.
In 2006, stores in the United States and Canada began using new hot-beverage cups that are 10 percent post-consumer recycled material. Starbucks also purchased renewable energy certificates to offset 20 percent of its energy used in U.S. and Canada stores. In this way, Starbucks is working to reduce its carbon footprint on the environment.
We are also developing a healthier world around us. Our Ethos Water project has given grants totaling $2.3 million for the development of clean water programs in Ethiopia and Indonesia. And, during fiscal 2006, Starbucks purchased 150 million pounds of coffee from certified CAFE Practices suppliers at premium prices.
In practicing corporate responsibility, we encourage our partners to also act in a responsible manner. Six years ago, we created the Make Your Mark volunteer program, so our partners could share their volunteerism visions with us. In 2006, our partners in the United States and Canada volunteered 383,000 hours in support of local organizations. This is equivalent to 184 people working full-time for a year.
Our philosophy at Starbucks means that we care about more than the bottom line; we care about our environment and our responsibility to the world. We maintain an environmental mission statement that demonstrates our commitment to instill environmental and community quality as a corporate value.
As we look forward to 2007, we see new opportunities for innovation and growth. In the upcoming fiscal year, we plan to open 2,400 more stores around the world, including our first stores in Russia and India. We have targeted total revenue growth of approximately 20 percent and earnings-per-share growth of 20 percent to 25 percent for the next three to five years.
These projections take into account our commitment to purchase coffee from small, independent farmers at premium prices. We pay our coffee suppliers the best price for quality beans, and we pass the value to the consumer. Our ability to reach independent, small-town farmers allows us to be a leader in coffee expertise.
On the product quality side, we plan to offer imaginative new beverages and foods. Our menu will expand to include low-calorie choices. This comes in response to the call in the United States for healthier choices at food places. At Starbucks, we are committed to giving our customers their desired food options. The same fine coffee and food can be bought without guilt.
For last the 35 years, Starbucks has established itself as the leading purveyor of fine coffee. Our company could not come this far without the help of everyone – from the farmers to the store baristas. We believe in providing the most value to the customer. We let profitability flow from our values. By following our corporate philosophy of providing for the environment, our communities and our consumers, we take care of our shareholders as well.
Starbucks has transformed from a single Seattle coffee house to an expansive, worldwide brand leader. In the next 35 years, we will keep our goals ambitious and continue to do business for the benefit of everyone.
Howard Schultz Jim Donald
Chairman President & Chief Executive Officer