strategic-management

134 SHARYNN TOMLIN
For the second quarter of fiscal 2009, U.S. total net revenues were $1.8 billion,
a decline of $131.5 million, or 6.8 percent, due to decreased revenues from companyoperated
retail stores. U.S. comparable store sales declined 8 percent, due to a 5 percent
decline in the number of transactions and a 3 percent decrease in the average value per
transaction. Specialty revenues declined 3.9 percent to $202.6 million, driven by softer
foodservice revenues. The U.S. segment produced operating income of $90.6 million,
compared with $193.9 million for the same period a year ago. Operating margin was
5.0 percent of related revenues for the second quarter fiscal 2009 compared with
10.0 percent in the corresponding period of fiscal 2008. This decrease was driven by
restructuring charges of $106.8 million recorded in the period. 3
INTERNATIONAL Starbucks’ International operations represent the remaining 20 percent
of company-operated retail revenues and 21 percent of total specialty revenues as well
as 20 percent of total net revenues for fiscal year 2008. International operations sell
coffee and other beverages, complementary food, whole bean coffees, and coffee
brewing equipment and merchandise through company-operated retail stores in the
United Kingdom, Canada, and nine other markets. Specialty operations in International
primarily include retail store licensing operations in nearly 40 countries and foodservice
accounts, primarily in Canada and Japan. Many of Starbucks’ International
operations are in early stages of development that require a more extensive support
organization relative to the current levels of revenue and operating income in the
United States. 4
Company-operated retail revenues increased due to the opening of 236 new
company-operated retail stores in the last 12 months, favorable foreign currency
exchange rates, primarily on the Canadian dollar, and comparable store sales growth of
2 percent for fiscal 2008. In the fourth quarter of fiscal 2008, company-operated retail
revenues grew at a slower rate year-over-year of 12 percent, and comparable store sales
were flat compared to the same quarter in fiscal 2007, both driven by slowdowns in the
United Kingdom and Canada, due to the weakening global economy. Specialty revenues
increased primarily due to higher product sales and royalty revenues from opening 550
new licensed retail stores in the last 12 months. 5
International total net revenues were $433.7 million for the 13 weeks ended
March 29, 2009, down $59.7 million, or 12.1 percent, compared with the same period
last year, primarily due to the impact of a stronger U.S. dollar relative to the British
pound and Canadian dollar. Also contributing to the decrease in International revenues
was a 3 percent decline in comparable store sales, due to a 2 percent decline in the number
of transactions and a 1 percent decrease in the average value per transaction. The
UK and Canadian markets reported negative comparable store sales for the quarter.
International operating income decreased to $6.0 million for the second quarter of fiscal
2009 versus $17.8 million for the same period a year ago. 6
GLOBAL CONSUMER PRODUCTS (CPG) As indicated in Exhibit 4, Starbucks’ CPG
segment represents 24 percent of total specialty revenues and 4 percent of total net revenues
for fiscal year 2008. CPG operations sell a selection of whole bean and ground coffees
as well as a selection of premium Tazo teas through licensing arrangements in U.S.
and international markets. CPG operations also produce and sell ready-to-drink beverages
that include, among others, bottled Frappuccino beverages, Starbucks’ DoubleShot
espresso drinks, and Discoveries chilled cup coffee, as well as Starbucks’ super-premium
ice creams and Starbucks’ Coffee and Cream Liqueurs, through its joint ventures and marketing
and distribution agreements. 7
Global Consumer Products Group total net revenues decreased by 2 percent to
$94.8 million for the second quarter of fiscal 2009, due primarily to lower margin
on sales of packaged coffee as a result of discounting, as well as lower volume to
the trade. 8