Starbucks 2010 Annual Report Download - page 3

Dear Shareholders,
Perhaps more than any other time in Starbucks history, I write to you feeling extremely proud of what Starbucks has
accomplished not just in these past 12 months but also in the past three years.
We began our transformation journey in 2008 when I returned as ceo. In 2009, the seeds of that transformation took
root. Fiscal 2010 marked the transformation’s defi ning year as we delivered record fi nancial results.
During this past fi scal year, revenues increased to a record $10.7 billion. Operating income increased by $857 million
from fi scal 2009 to $1.4 billion. Our full-year operating margin of 13.3 percent represented the highest full-year
consolidated operating margin in our history. We ended 2010 with the highest full-year comparable store sales growth
that we have seen in the recent past, while our earnings per share also grew signifi cantly from fi scal 2009, more than
double on a comparable 52-week basis. I am thrilled that we were able to further share our success with a fi rst-ever
dividend for shareholders and, for our partners, maintaining health care coverage while renewing our focus on
elevating the partner experience through recent enhancements to our broad-based equity plan and our 401(k)
program. We were also able to offer a special cash award to eligible partners in recognition of their contribution to
Starbucks strong performance in 2010.
For these reasons and more, we begin 2011 healthier than we have ever been and with the capabilities, talent,
resources and passion to continue our momentum. The internal obstacles we overcame, while simultaneously
navigating the ongoing economic challenges and staying true to our values, have made us a stronger company.
Today our operational foundation—coupled with a heightened level of innovation and customer relevance—presents
us with an opportunity not just to grow but also to build a different kind of organization. Not a new Starbucks, but one
that will leverage and extend our core strengths both inside and outside our stores.
A Strong Foundation
Momentous positive changes inside the organization drove our success this past year. In fi scal 2010, we built upon the
nearly $600 million of cost savings in fi scal 2009 while driving many of our key fi nancial metrics to record levels. We
have improved the effi ciency and effectiveness of our supply chain toward world-class levels. In our U.S. business,
revenues and operating income are growing again, with our store partners working passionately to elevate the
Starbucks Experience. We had broad-based revenue growth in our Global Consumer Products Group (CPG) and we
are also well on our way to building a world-class sales organization and back-of-the house infrastructure to support
profi table CPG growth, which will enable us to present one brand voice for Starbucks entire portfolio.
Internationally, the foundation of our brand remains strong, and the work we did in 2010 brought more discipline,
ideas and leadership to local markets and helped deliver record fi nancial performance in fi scal 2010, setting the
International business up to be a profi table growth engine going forward. Specifi cally, after a decade in China,
Starbucks is being embraced by customers as a welcome third place between home and work in major, secondary and
even tertiary cities. We continue to stay true to our brand while fi nding fresh ways to be locally relevant in a market
that we expect to be Starbucks second largest after North America.
In customer-facing initiatives, we are enriching our connections on many fronts. The My Starbucks Rewards loyalty
program continues to have signifi cant traction, driving incremental transactions to our stores. Using social and digital
media, we are further expanding how we engage our customers. Our more than 27 million fans around the world have
made us a top brand on Facebook. And with the October unveiling of the Starbucks Digital Network, we tapped into the
value of our vast Wi-Fi network to bring customers in our stores free premium content, from daily news in The Wall Street
Journal to music downloads from Apple’s iTunes.
® During the fi rst two months after its launch, the Starbucks Digital
Network received nearly 8 million visitors and overwhelmingly positive customer feedback.
Innovation remains a cornerstone of our growth. With the launch of Starbucks VIA® Ready Brew and its current
platform of products—Iced, Flavored, Christmas Blend—we have already created a business with system-wide sales
of approximately $180 million in fi scal 2010 with more than 50,000 points of distribution, bringing new customers and
new occasions to the marketplace as well as growing Starbucks share of the premium single-cup coffee category. In
addition, based in part on the positive response to Starbucks VIA® and its early success in Canada, the United
Kingdom, Japan and the Philippines, we continue to believe that the global opportunity for Starbucks VIA® is
signifi cant and yet to be fully tapped. Stay tuned for more Starbucks VIA® developments in the comingyear.
Also in our stores, the adoption of new technology platforms and Lean principles are helping to improve the partner and
customer experience. Customer satisfaction scores for partner friendliness, speed of service and taste of beverage
continue to increase.
The one-on-one connections that we make with the more than 50 million visitors around the world who come into our
stores each week defi ne our heritage, and are critical to creating the future we envision.