mlo-starbucks

STARBUCKS CORPORATION
MORGAN OBI
ACG2021-SECTION002

Starbucks Corporation was formed in 1985 and today is the world’s leading
roaster and retailer of specialty coffee. Starbucks purchases and roasts high-quality
whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style
espresso beverages, cold blended beverages, a variety of complementary food items, a
selection of premium teas, and coffee-related accessories and equipment, primarily
through Company-operated retail stores. Starbucks also sells coffee and tea products and
licenses its trademark through other channels such as licensed retail stores and, through
certain of its equity investees and licensees, Starbucks produces and sells a variety of
ready-to-drink beverages. All channels outside the Company-operated retail stores are
collectively known as specialty operations. The Company’s objective is to establish
Starbucks as one of the most recognized and respected brands in the world. To achieve
this goal, the Company plans to continue disciplined expansion of its retail operations, to
grow its specialty operations and to selectively pursue other opportunities by introducing
new products and developing new channels of distribution.
Click here to view Starbucks Corporation's Official Annual Report! (Be sure to click on
11/24/2008)

Starbucks retail stores are typically located in high-traffic, highvisibility
locations. Because the Company can vary the size and format, its
stores are located in or near a variety of settings, including downtown and
suburban retail centers, office buildings and university campuses. All
Starbucks stores offer a choice of regular and decaffeinated coffee
beverages, a broad selection of Italian-style espresso beverages, cold
blended beverages, iced shaken refreshment beverages, a selection of
premium teas and distinctively packaged roasted whole bean coffees.
Starbucks stores also offer a variety of fresh food items, including several
healthy choice selections. Food items include pastries, prepared breakfast
and lunch sandwiches, and salads as well as sodas, juices, and bottled
water.

For the fiscal year ending September 28, 2008
Howard Schultz (pictured left) is the founder of Starbucks
and serves as the Company’s chairman, president, and
chief executive officer.
Location of Home Office:
2401 Utah Avenue South
Seattle, Washington 98134
According to the official Starbucks Annual Report, the United States is the core
geographic market. Their International market (of more than 30 countries)
including Canada, Japan and the UK are also areas of activity.

Starbucks Corporation’s Independent Auditors: Deloitte & Touche LLP
Deloitte & Touche LLP believe that
Starbucks Corporation efficiently
preserved their internal control
over financial reporting during
the fiscal year.

As of February 16, 2009, the most
recent price of Starbucks Corporation
stock is $10.13.
Starbucks has never paid a cash
dividend and presently intends to retain
earnings to help finance the Company's
continued growth.
Due to the current challenging operating and economic environment, I
would sell my stocks in Starbucks. I have read an abundant amount of
information concerning this company and have found that they are not
doing well. They will be closing down over 100 stores and not
repurchasing any of their own stocks.
Click here to view Starbucks Corporation's Twelve Month Trading Range

The Company’s retail goal is to become the leading retailer and brand of
coffee in each of its target markets by selling the finest quality coffee and
related products and by providing each customer a unique experience. After
rigorous evaluation of the US Company-operated store portfolio, Starbucks
created a transformation strategy for expanding its retail business—By
increasing its market share by selectively opening additional stores in
existing markets and opening stores in new markets to support its long term
strategic objectives. In June 2008, the Company committed to close
approximately 600 underperforming Company-operated stores in the US.
The store closures were initiated in the fourth quarter of fiscal 2008 and are
expected to be completed by the end of fiscal 2009.

The format used in Starbucks’ official Annual Report is a
multistep format.
Income Statement Information 2008 2007
(in millions)
Gross Margin 5,737.70 5,412.40
Income from Operating Expenses 503.9 1,053.9
Net Income 315.5 672.6
Since the economy is having troubles, the Gross Margin was
the only increase in 2008 (according to this table). Net Income
and Operating Expenses were larger in 2007.

ASSETS LIABILITIES STOCKHOLDERS' EQUITY
EQUAL PLUS
Fiscal Year (in millions)
2008 5,672.6 = 3,181.7 + 2,490.9
2007 5,343.9 = 3,059.8 + 2,284.1
Assets, liabilities, and stockholders’ equity have all increased
since 2007. At the end of the (2008) fiscal period, the account with the
most change is Assets, with a difference of 328.7 (million). Stockholders’
Equity has an increase of 206.8 (million). Lastly, the account with the
least amount of change was Liabilities, having only a 121.9 (million)
increase.

Cash flows are exceedingly higher than Net Income for the past two years.
As mentioned previously, because of the crisis in the economy, Starbucks is closing
many Company-owned stores.
Therefore, the company experienced a
tremendous loss in Property, Plant and
Equipment during this fiscal year.
Starbucks’ primary source of financing comes
from: proceeds from issuance of commercial papers.
Overall, cash has decreased over the past two years.

Notes to the Financial Statements include the following topics: (1) Summary
of Significant Accounting Policies, (2) Business Acquisitions, (3)
Restructuring changes, (4) Short-term and Long-term Investments, (5)
Derivative Financial Instruments, (6) Inventories, (7) Equities and Cost
Investments, (8) Property, Plant, and Equipment, (9) Other Intangible Assets
and Goodwill, (10) Debt, (11) Other Long-term Liabilities, (12) Leases, (13)
Shareholder’s Equity, (14) Employee Stock and Benefit Plans, (15) Income
taxes, (16) Earnings per share, (17) Commitments and Contingencies, (18)
Segment Reporting, (19) Summarized Quarterly Financial Information.

As of September 28, 2008, the Company’s long-term available-for-sale
securities of $71.4 million included $59.8 million invested in auction rate
securities (“ARS”). As of September 30, 2007, the Company held $75.6
million of ARS, which were all classified as short-term available-for-sale
securities. ARS have long-dated maturities but provide liquidity through a
Dutch auction process that resets the applicable interest rate at predetermined
calendar intervals. Due to the auction failures that began in
mid-February 2008, these securities became illiquid and were classified as
long-term investments. The investment principal associated with the failed
auctions will not be accessible until:
• successful auctions resume;
• an active secondary market for these securities develops;
• the issuers replace these securities with another form of financing; or
• final payments are made according to the contractual maturities of the debt
issues which range from 22 to 37 years.

• The increase in indefinite-lived intangibles was primarily due to the
purchase of distribution rights for Seattle Best Coffee®
• products in Canada as well as the CEC acquisition (see Note 2). The
increase in definite-lived intangibles was primarily due
• to patents acquired in the CEC acquisition. Amortization expense for
definite-lived intangibles was $1.5 million, $1.0 million
• and $1.2 million during fiscal 2008, 2007 and 2006, respectively.

Liquidity Ratios 2008 2007
(in millions)
Working Capital ($441.70) ($459.10)
Current Ratio 0.8 0.79
Receivable Ratio 28.42 29.95
Average days' sales
uncollected 12.84 12.19
Inventory turnover 6.71 5.79
Average days' inventory on
hand 54.4 63.04

Profitability Ratios 2008 2007
(in millions)
Profit Margin 0.07 0.17
Asset Turnover 2.7 2.48
Return on Assets 0.18 0.42
Return on Equity 0.13 0.3

Solvency Ratio 2008 2007
(in millions)
Debt to Equity 1.28 1.34

There is not a dividend yield.
Price/Earnings per share:
2008- 14.9 ($0.43 per share)
2007- 16.39 ($0.87 per share)

As Starbucks moves from fiscal 2008, a year of significant
transition for the company, it is well positioned to deliver in fiscal
2009 with the following foundational planks in place:
• A re-architected cost structure to allow for long-term operating
margin expansion
• A healthier store portfolio achieved through closure of
underperforming stores
• A stronger value and rewards platform - consistent with Starbucks
premium brand
• A renewed emphasis and investment around coffee leadership
• A galvanized company with a common purpose
Click here to see Starbucks Corporation's Investor Webpage (filled with
an abundant amount of question/answers regarding the Company)