Starbucks Corporation 10-K Summary
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended September 28, 1997. Starbucks Corporation is a vertically integrated company that purchases, roasts, and distributes high-quality whole bean coffees and coffee beverages. The company operates primarily through Company-operated retail stores, supplemented by specialty sales, direct response channels, and joint ventures for bottled drinks and ice cream.
Key Financial Metrics
Note: Specific revenue, profit, cash flow, and margin figures are incorporated by reference to the 1997 Annual Report to Shareholders and are not explicitly stated in the provided text.
- Revenue Mix (Fiscal 1997): Company-operated retail stores accounted for approximately 86% of net revenues. Specialty sales accounted for 12%, and direct response sales accounted for 2%.
- Product Mix (Retail): Coffee beverages (63%), whole bean coffees (14%), food items (16%), and equipment/accessories (7%).
- Market Capitalization: As of December 1, 1997, the aggregate market value of voting stock held by non-affiliates was approximately $3.13 billion.
- Outstanding Shares: 86,263,599 shares of Common Stock as of December 1, 1997.
- Debt and Liquidity: The filing text does not provide specific values for total debt, cash flow, or liquidity ratios. The company intends to finance growth using cash flow from operations, supplemented by debt or equity if necessary.
- Commitments: As of September 28, 1997, the company had approximately $54 million in fixed-price purchase commitments for green coffee.
Material Changes and Operational Highlights
- Store Expansion: The company entered 18 new markets in continental North America during fiscal 1997, including Phoenix, Detroit, and Miami. Total Company-operated stores reached 1,270 as of September 28, 1997.
- International Growth: Operations expanded to Japan (10 stores), Hawaii (4 stores), and Singapore (3 stores). New agreements were signed to enter the Philippines, Taiwan, and the Republic of Korea.
- Joint Ventures: The partnership with PepsiCo expanded the distribution of Frappuccino drinks to the Midwest and Northeast. The partnership with Dreyer's expanded the ice cream line to eight flavors and two novelty products.
- Supermarket Test: A major test of whole bean and ground coffees was initiated in the Chicago area, encompassing approximately 500 grocery stores.
- Facilities: The company operates three roasting and distribution facilities (two in the Seattle area, one in York County, Pennsylvania). The Boston roasting plant was sublet as it is no longer needed.
Guidance, Outlook, and Risks
- Expansion Goals: The company plans to open 350 new stores in continental North America during fiscal 1998 and aims to reach 2,000 locations by the year 2000.
- Seasonality: Significant portions of net revenues and profits are realized in the first fiscal quarter due to the December holiday season.
- Key Risks:
- Commodity Prices: Coffee supply and prices are subject to significant volatility due to weather, political conditions, and international agreements.
- Competition: Intense competition exists from supermarkets, regional specialty stores, and restaurants. Supermarkets pose a significant challenge due to convenience.
- Real Estate and Labor: Risks include securing adequate sites at acceptable rent levels and attracting qualified personnel.
- Legal Proceedings: The company is not currently a party to any legal proceedings believed to have a material adverse effect.
Investor Verification Checklist
- Verify the specific revenue, net income, and cash flow figures in the 1997 Annual Report to Shareholders, as they are incorporated by reference and not detailed in this text.
- Confirm the execution of the 350 new store openings planned for fiscal 1998 and the associated capital expenditures.
- Monitor the results of the Chicago supermarket test to assess potential cannibalization of retail store sales versus new revenue streams.
- Review the $54 million fixed-price coffee commitments against prevailing market prices to evaluate exposure to commodity price fluctuations.
- Assess the progress of international expansion in the Philippines, Taiwan, and Korea, and the performance of the Frappuccino joint venture in new regions.