Starbucks Shareholder Letter
To Starbucks shareholders:
As we celebrate the 35th anniversary of Starbucks, we are proud to say that the relationships we establish with our customers, partners and farmers continue to flourish and grow stronger every year. From Starbucks’ early days to the present, our goal to run a profitable business while remaining a good neighbor in our communities remains our priority. Our recognition as one of “100 Best Corporate Citizens” by Business Ethics Magazine for the seventh consecutive year is proof that choosing to run our business a little differently creates a better world for all of us.
On behalf of everyone at Starbucks we are pleased to share our company’s 2006 performance and an outlook for the year 2007. Overall in 2006, we continued to demonstrate our commitment to corporate social responsibility, as well as a dedication to the fair trade movement and Coffee and Farmers Equity (CAFE) Practices.
Starbucks has generated $9.4 billion in revenues and reported net earnings of $673 million. Net sales increased 22 percent to a high of $7.8 billion. Comparable store sales growth increased by 5 percent or more – our 15th consecutive year of sales gains. Operating income totaled $894 million, increasing by 14.5 percent since 2005. Net income was $564 million this year, an improvement of 14.1 percent over last year.
In total, 2006 was a good year of performance for our company. Starbucks opened 2,199 stores globally, which is 400 more than the year’s desired target. At a pace of six new stores per day, Starbucks has 12,440 stores in 37 countries. In 2007, we plan to open our first locations in Russia and India. In the upcoming year, we also plan to open 2,400 stores internationally.
In 2006, we came out with a variety of healthy drink and pastry alternatives. Fruit smoothies, iced-teas, low-fat muffins and coffee cakes are some of our delicious but healthy alternatives that kept our customers satisfied and coming back for more. This move helped boost our image as a fine coffee and food company.
In 2007, we are positioned to perform well in the market. Our goal is to have 40,000 stores worldwide in the next couple years. Our revenue growth remains one of our primary targets for improvement. We also hope to achieve an annual increase in earnings-per-share of 20 percent to 25 percent.
Each year we challenge ourselves to offer the best quality coffee, new and innovative products and exceptional services to our customers, partners, farmers and shareholders. Without this wonderful group of people our company would not have come as far as it has today. With your help and support we have become a leader in the coffee industry. By executing our plans and strategies well, we will increase sales, profitability and overall success of our company.
On behalf of all of us at Starbucks, we would like to thank our employees, our business partners and our shareholders for your support. We look forward to reaching new heights and making further improvements to our business that will continue gaining your respect, support and trust.
Howard Schultz Jim Donald
Chairman President & Chief Executive Officer