SBUX: Initiating Coverage at Neutral: Basic Report

Starbucks Corp.
Mark Kalinowski 212-940-6997

mkalinowski@janney.com SBUX - NEUTRAL
December 20, 2010
Restaurants SBUX: Initiating Coverage at Neutral

Starbucks Corp. INVESTMENT CONCLUSION:
We initiate coverage of Starbucks -- the owner of the world’s largest coffeehouse
(SBUX) - NEUTRAL concept -- with a Neutral rating. We view the potential positives for the company and
Price: $32.78 its stock as relatively balancing the risks. Among the positive factors for the company
Fair Value Estimate: $34.00 and its stock are generally improving U.S. same-store sales trends since the negative
52-Week Range: $33.09-$21.26 numbers of fiscal 2008 and fiscal 2009 and notable opportunities for international unit
Market Cap (MM): $24,942 growth. Risks include rising coffee costs, which may restrain EPS upside potential to
Shr.O/S-Diluted (mm): 760.9 some extent over the next 12 months.
Average Daily Volume: 7,253,600
KEY POINTS:
FYE: Sept 2010A 2011E 2012E
Revenue (M): $10,707A $11,280E $12,100E
• After a tough two-year period in which Starbucks’ U.S. same-store sales declined
(by 5% in fiscal 2008 and by 6% in fiscal 2009), top-line trends appear to be back
Quarterly Revenue (M): on track. There could be some upside potential to our 4% same-store sales forecast
Q1 $2,723A $2,900E -- for the U.S. during fiscal 2011, although we note that year-over-year comparisons
Q2 $2,535A $2,718E -- to be lapped will be more difficult than they were during fiscal 2010.
Q3 $2,612A $2,816E --
Q4 $2,838A $2,846E -- • Starbucks’ international store openings are poised to re-accelerate in fiscal 2011,
and best-case, may show some further acceleration beyond next fiscal year. And in
FYE: Sept 2010A 2011E 2012E general, international markets remain an opportunity for a nice pace of long-term
EPS: $1.28A $1.48E $1.74E unit expansion.
Prior EPS: NC NC
Quarterly EPS: • We believe that what Starbucks does over time with its stated EPS goals for fiscal
Q1 $0.33A $0.39E -- 2011 will play a highly meaningful role in how the stock performs over the next 12
Q2 $0.29A $0.35E -- months. Our existing $1.48 EPS estimate for fiscal 2011 implies we expect at least
Q3 $0.29A $0.36E -- a modest increase to the company’s current stated target of $1.41-$1.47. And, best
Q4 $0.37A $0.38E -- case, there may be further upside beyond that -- particularly if U.S. same-store
sales exceed our 4% forecast for the full fiscal year. All that said, given the current
expectation that commodity costs will -- all else equal -- adversely impact EPS by
$0.08-$0.10, this appears to be $0.08-$0.10 of potential EPS upside surprise that is
off the table to some degree.
• As of December 17, shares of Starbucks traded at 24.7x our calendar 2010 EPS
estimate of $1.33 and 20.9x our calendar 2011 EPS estimate of $1.57. Our $34 fair
value estimate represents a 25.6x multiple applied to our calendar 2010 EPS
estimate. At present, SBUX trades at a modest discount to the average of its
comparables on both a P/E and a P/E-to-Growth basis.
• Our fair value estimate of $34 compares with the December 17 closing price of
$32.78. Our EPS estimates for fiscal 2011 and fiscal 2012 are $1.48 and $1.74,
respectively. (Starbucks’ fiscal year ends in September.) Our EPS estimate for this
fiscal year is one cent below consensus, while our EPS forecast for next fiscal year
currently matches consensus. We forecast long-term annualized EPS growth for
Starbucks of 18%.
Equity Research
Research Analyst Certifications and Important Disclosures
Basic Report are on pages 26 - 28 of this report
OPINION
We initiate coverage of Starbucks – the owner of the world’s largest coffeehouse concept -- with
a NEUTRAL rating. Our fair value estimate of $34 compares with the December 17 closing price of
$32.78. Our EPS estimates for fiscal 2011 and fiscal 2012 are $1.48 and $1.74, respectively. (Please
note that Starbucks’ fiscal year ends in September.) Our EPS estimates for this fiscal year is one cent
below consensus (but one cent above the high end of the company’s stated target range of $1.41-
$1.47), while our EPS forecast for next fiscal year currently matches consensus. We forecast long-
term annualized EPS growth for Starbucks of 18%. At present, our Neutral rating is driven by what we
view as a relatively balanced blend of potential positives and risk factors. We note the following:
BRIEF COMPANY DESCRIPTION

Headquartered in Seattle, Washington, Starbucks is the world’s largest specialty coffeehouse
company. At the end of fiscal 2010, the company consisted of 16,858 stores worldwide. This includes
11,131 U.S. outlets (with 6,707 of these company-operated, and the remaining 4,424 licensed), and
5,727 international locations (2,126 company-owned and 3,601 licensed). During fiscal 2010, the
company’s operating income by segment was as follows: U.S. $1,291.1 million, international $225.2
million, Global CPG (Consumer Packaged Goods) $261.4 million, and Other (including unallocated
corporate expenses) a loss of $358.3 million. Excluding this last piece, this suggests that the mix of
operating income comes 72.6% from the U.S., 12.7% from international, and 14.7% from Global
CPG. The company’s IPO was in 1992, at a time when it had only 165 outlets. The company’s current
format reflects the long-term vision of Chairman and CEO Howard Schultz, who radically realigned
Starbucks’ focus back in the 1970s and early 1980s from selling high-quality coffee beans only (no
beverages) to selling high-quality coffee through multiple formats (most importantly, beverages).
STARBUCKS -- COMPANY-OPERATED STORES BY COUNTRY, END OF FISCAL 2010
Number of Percentage
Market Company-Operated Stores of Total
United States 6,707 75.9%
Canada 799 9.0%
United Kingdom 601 6.8%
China 220 2.5%
Germany 142 1.6%
Thailand 133 1.5%
Singapore 64 0.7%
France 54 0.6%
Chile 30 0.3%
Brazil 23 0.3%
Australia 22 0.2%
Puerto Rico 21 0.2%
Ireland 17 0.2%
Total 8,833 100.0%
Source: Company reports and Janney Capital Markets
-2-
STARBUCKS -- LICENSED STORES BY COUNTRY, END OF FISCAL 2010
Number of Percentage
Market Licensed Stores of Total
United States 4,424 55.1%
Japan 892 11.1%
South Korea 315 3.9%
Mexico 283 3.5%
Canada 274 3.4%
Taiwan 228 2.8%
Mainland China 186 2.3%
Philippines 168 2.1%
Turkey 137 1.7%
Malaysia 117 1.5%
Others (combined) 1,003 12.5%
Total 8,025 100.0%
POTENTIAL POSITIVES
We initiate coverage of Starbucks with a Neutral rating, as we view the potential positives as being
relatively balanced out by the risk factors facing the company and its stock. (For more about the risks,
please review the “CONCERNS/RISKS” section of this initiation note on page nine.) Among the
potential positives for Starbucks are generally improving U.S. same-store sales trends since the
negative numbers of fiscal 2008 and fiscal 2009, notable opportunities for international unit growth,
and opportunities for additional market-share gains within the limited-service beverage segment of the
U.S. restaurant industry. We note the following:
(1) DOMESTIC SAME-STORE SALES APPEAR TO BE BACK ON TRACK; UPSIDE

POSSIBLE DURING FISCAL 2011. After a tough two-year period in which Starbucks’ U.S. same-
store sales declined (by 5% in fiscal 2008 and by 6% in fiscal 2009), top-line trends appear to be back
on track. There could be some upside potential to our 4% same-store sales forecast for the U.S. during
fiscal 2011, although we note that year-over-year comparisons to be lapped will be more difficult than
they were during fiscal 2010.
We believe that a key step toward getting Starbucks “back on track” with regard to its U.S. same-store
sales trends was the January 2008 decision for Howard Schultz to return as CEO (previously, he had
been CEO from 1987 to 2000), and the choice to focus on making existing stores better (from many
perspectives, including that of the customers). The decision for Mr. Schultz to return as CEO was
formally announced on January 7, 2008. At that time, the company knew that its fiscal Q1 2008
(October-December of calendar 2007) U.S. same-store sales had decelerated to the -1% level (the first
time -- to the best of our knowledge -- that any quarter generated negative domestic comps for the
brand), and chose to take decisive action to repair the in-store experience.
Of course, while Starbucks was making changes in an effort to improve its business, the global
financial crisis hit (particularly so in the second half of calendar 2008). We believe this
macroeconomic challenge definitely had a meaningful adverse effect on Starbucks’ comp trends. We
see this in the -5% comp for full fiscal 2008, and the -6% comp for full fiscal 2009. But during much
of this two-year period, we believe that Starbucks was working hard on running its existing store base
better. Some examples quoted word-for-word from Starbucks’ January 7, 2008 press release from the
company give an indication of specifics:
-3-
• Improving the current state of the U.S. business by refocusing on the customer experience in
the stores, new products and store design elements, and new training and tools for the
Company's store partners to help them give customers a superior experience;
• Slowing the Company's pace of U.S. store openings and closing a number of underperforming
U.S. store locations, enabling Starbucks to renew its focus on its store-level unit economics;
• Re-igniting the emotional attachment with customers and restoring the connections customers
have with Starbucks(R) coffee, brand, people and stores;
• Re-aligning Starbucks organization and streamlining the management to better support

customer-focused initiatives and reallocating resources to key value drivers; and
• Accelerating expansion and increasing the profitability of Starbucks outside the U.S.,
including redeploying a portion of the capital originally earmarked for U.S. store growth to
the international business.
To access that press release, please click on the following link:
http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-newsArticle&ID=1092986&highlight
We believe that one result of these large efforts was the return to positive U.S. same-store sales trends
during fiscal Q1 2010 (October-December of calendar 2009 -- notably, a time when many quick-
service restaurant brands were witnessing decelerating U.S. same-store sales trends). And since then,
domestic comps have been enviably high: +7% in fiscal Q2 2010, +9% in fiscal Q3 2010, and +8% in
fiscal Q4 2010. To some degree, these attractive numbers reflect a (modestly) improving economy and
easier year-over-year comparisons. But we notice that the magnitude of the improvement is better than
that attained by most quick-service brands the last few quarters. As a result, we also believe that
Starbucks’ efforts to improve itself are paying off handsomely -- one way (although not the only way)
is with very good U.S. same-store sales numbers. This factor very well could lead Starbucks to
generate fiscal 2011 U.S. comps better than our current forecast of +4%.
STARBUCKS -- U.S. SAME-STORE SALES, FISCAL 2000-2012E
Q1 Q2 Q3 Q4 FY
Fiscal 2012E 4% 4% 4% 4% 4%
Fiscal 2011E 4% 4% 4% 4% 4%
Fiscal 2010A 4% 7% 9% 8% 7%
Fiscal 2009 -10% -8% -6% -1% -6%
Fiscal 2008 -1% -4% -5% -8% -5%
Fiscal 2007 6% 3% 4% 4% 4%
Fiscal 2006 7% 10% 6% 5% 7%
Fiscal 2005 11% 7% 7% 9% 9%
Fiscal 2004 11% 13% 12% 9% 11%
Fiscal 2003 9%
Fiscal 2002 7%
Fiscal 2001 5%
Fiscal 2000 9%
A Actual. E Estimate.
-4-
STARBUCKS U.S. -- AVERAGE UNIT VOLUMES AND STORE PROFIT CONTRIBUTION
PERCENTAGE, FISCAL 2008-10A
Average Store Profit

Fiscal Year Unit Volumes* Contribution %
2010A $1,024 21.2%
2009 $938 14.5%
2008 $972 13.2%
* In thousands of U.S. dollars.
A Actual.
Note: The figures above come from company-operated stores only.
(2) NOTABLE OPPORTUNITIES FOR INTERNATIONAL UNIT GROWTH. Starbucks’

international store openings are poised to re-accelerate in fiscal 2011, and best-case, may show some
further acceleration beyond next fiscal year. And in general, international markets remain an
opportunity for a nice pace of long-term unit expansion.
As recently as fiscal 2008, Starbucks’ rate of international unit expansion was into the double digits.
That fiscal year, the company opened 786 net international outlets (company-owned and licensed
combined), an impressive growth rate of 18.2%. However, the global financial meltdown of that
calendar year cut into Starbucks’ expansion rate, as it did many foodservice retailers. For fiscal 2009
and fiscal 2010, Starbucks’ rate of international unit expansion was 7.7% and 4.0%, respectively.
For fiscal 2011, we look for the pace of non-U.S. openings to re-accelerate. We forecast 400 unit
openings in international markets for fiscal 2011, in line with the company’s recently-stated goals.
This 400 number would represent growth of about 7.0%, to 6,127 stores. Best-case, it is possible that
Starbucks could somewhat exceed this target over the course of the next few quarters -- and, it is also
possible that the growth rate could further accelerate in fiscal 2012.
STARBUCKS -- STORE COUNT, FISCAL 2010A-11E
Fiscal 2011E Q1E Q2E Q3E Q4E

United States
Company-Operated 6,712 6,722 6,732 6,732
Licensed Stores 4,434 4,454 4,484 4,499
International
Company 2,026 2,051 2,091 2,111
Licensed Stores 3,761 3,836 3,956 4,016
Total 16,933 17,063 17,263 17,358
Fiscal 2010A Q1A Q2A Q3A Q4A

United States
Licensed Stores 4,412 4,385 4,404 4,424
International
Company 1,989 1,984 1,990 2,011
Licensed Stores 3,536 3,559 3,616 3,716
Total 16,706 16,664 16,737 16,858
-5-
STARBUCKS -- STORE COUNT, FISCAL 2006-09
Fiscal 2009 Q1 Q2 Q3 Q4
United States
Licensed Stores 4,399 4,411 4,395 4,364
International
Company 2,006 2,027 2,019 2,026
Licensed Stores 3,332 3,389 3,444 3,481
Total 16,875 16,862 16,729 16,635
United States
Licensed Stores 4,081 4,177 4,195 4,329
International
Company 1,796 1,867 1,932 1,937
Licensed Stores 2,792 2,925 3,046 3,176
Total 15,756 16,226 16,548 16,680
United States
Licensed Stores 3,391 3,533 3,729 3,891
International
Company 1,511 1,553 1,613 1,712
Licensed Stores 2,256 2,361 2,488 2,615
Total 13,168 13,728 14,396 15,011
United States
Licensed Stores 2,633 2,765 2,952 3,168
International
Company 1,188 1,310 1,357 1,434
Licensed Stores 1,952 1,965 2,082 2,170
Total 10,801 11,225 11,784 12,440
Starbucks’ track record with regard to some countries is better than others. For example, Starbucks has
generally succeeded in places such as Japan (892 licensed stores as of fiscal year-end 2010) and
Canada (799 company-owned stores and 274 licensed stores).
STARBUCKS CANADA -- AVERAGE UNIT VOLUMES AND STORE PROFIT

CONTRIBUTION PERCENTAGE, FISCAL 2008-10A

2010A $1,034 18%
2009 $954 14%
2008 $1,022 15%
* In thousands of U.S. dollars. A Actual.
-6-
While Starbucks has reached 601 company-owned outlets in the United Kingdom, based on data and
commentary from NPD Group we believe that its market share is below that of coffeehouse chains
such as Costa Coffee and Caffe Nero. For more about the U.K. coffee market, please click on the
following link:
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8016918/McDonalds-now-
biggest-seller-of-coffee-in-UK.html
STARBUCKS WESTERN EUROPE -- AVERAGE UNIT VOLUMES AND STORE PROFIT


2010A $994 9.3%
2009 $920 4.9%
2008 $946 7.4%
A Actual.
China remains a sizable long-term opportunity, as it has only 220 company-owned units today (and
another 186 licensed stores for mainland China). In fact, Starbucks is one of the top foodservice
retailers of any product type in China. Starbucks’ stated goal is to have at least 1,500 stores in
operation in mainland China by the end of 2015.
STARBUCKS CHINA -- AVERAGE UNIT VOLUMES AND STORE PROFIT


2010A $603 22%
2009 $494 18%
2008 $476 10%
A Actual.
On the other hand, France has been a more challenging market for Starbucks, perhaps in part due to
the large number of cafes already in existence in that country. As of end-of-fiscal 2009, France
contained only 56 Starbucks stores (54 of them company-owned, and two licensed).
All in all, for the overall international unit growth rate to accelerate again in fiscal 2012, markets such
as Japan, Canada, the United Kingdom, and China must cooperate in terms of how the consumers in
those places continue to view and receive the Starbucks concept. Some good news in this regard is
that Starbucks’ international same-store sales are likely to generate meaningfully positive same-store
sales during fiscal 2011 (+4% estimated), as they did during fiscal 2010 (+6%). Solid same-store sales
gains remain a key indicator of the health of a brand. As such, Starbucks robust comp growth during
fiscal 2010 in international markets -- if continued in fiscal 2011 -- may lend itself to a greater pace of
international unit openings during fiscal 2012, all else equal.
-7-
STARBUCKS -- INTERNATIONAL SAME-STORE SALES, FISCAL 2000-12E
Q1 Q2 Q3 Q4 FY
Fiscal 2012E 4% 4% 4% 4% 4%
Fiscal 2011E 4% 4% 4% 4% 4%
Fiscal 2010A 4% 7% 6% 7% 6%
Fiscal 2009 -3% -3% -2% 0% -2%
Fiscal 2008 5% 3% 2% 0% 2%
Fiscal 2007 8% 7% 7% 6% 7%
Fiscal 2006 8% 9% 7% 8% 8%
Fiscal 2005 7% 5% 7% 6% 6%
Fiscal 2004 7% 6% 7% 5% 6%
Fiscal 2003 7%
Fiscal 2002 1%
Fiscal 2001 3%
Fiscal 2000 12%
(3) STARBUCKS SHOULD CONTINUE TO GAIN MARKET SHARE WITHIN THE

LIMITED-SERVICE BEVERAGE SEGMENT. As defined by Technomic, the limited-service
beverage segment of the U.S. restaurant industry is -- and in our view, should continue to be --
dominated by Starbucks. For calendar 2009, Technomic estimates that Starbucks accounted for 54.9%
of this sector’s sales -- that’s over half the segment. No other concept comes close -- second-place
Jamba Juice (JMBA $2.26; Not Rated) generates a mere 2.9% of the sector’s domestic sales.
Coffeehouse competitors Caribou Coffee (CBOU $10.35; Not Rated) and Peet’s Coffee (PEET
$42.00; Neutral, analyst Mitch Pinheiro) account for less than 2% of this sector each. Starbucks has
gained market share within the limited-service beverage sector in each year since 2003 (and perhaps
for many years in a row before then, as well -- the data we have from Technomic only goes back to
2003).
One might reason that quick-service concepts such as McDonald’s (MCD $76.81; Buy) and
privately-held Dunkin’ Donuts are more meaningful rivals to Starbucks than Jamba Juice, Caribou
Coffee, and Peet’s Coffee. This may very well be true -- but it doesn’t necessarily imply that if
McDonald’s and/or Dunkin do well, it’s at the expense of Starbucks (or vice-versa). In fact, U.S.
same-store sales trends for McDonald’s and for Starbucks tend to act somewhat similarly. Going back
the last 28 quarters (calendar Q4 2003 through calendar Q3 2010), we find that Starbucks’ U.S.
quarterly same-store sales and McDonald’s U.S. quarterly same-store sales correlate at 48.9%. This
gives some indication of the magnitude to which these two stalwarts’ domestic same-store sales tend
to trend similarly with one another.
LIMITED-SERVICE BEVERAGE SEGMENT -- U.S. MARKET SHARE, 2003-09
Jamba Caribou Peet's Smoothie

Year Starbucks Juice Coffee Coffee King Others
2009 54.9% 2.9% 1.9% 1.3% 1.0% 38.0%
2008 54.3% 3.0% 1.7% 1.2% 0.9% 38.9%
2007 53.3% 3.0% 1.7% 1.2% 0.9% 39.9%
2006 53.0% 2.9% 1.9% 1.1% 0.9% 40.2%
2005 51.4% 2.8% 2.0% 1.0% 1.0% 41.8%
2004 49.0% 2.9% 1.7% 0.5% 1.0% 44.9%
2003 46.0% 2.9% 1.6% NA 1.1% 48.4%
NA Not available. Source: Technomic and Janney Capital Markets
-8-
CONCERNS/RISKS
Investors seeking to purchase shares of Starbucks should be mindful of the following risk factors:
(1) RISING COFFEE COSTS MAY LIMIT SOME EPS UPSIDE POTENTIAL. While we do
not expect rising coffee costs to cause the company to fall short of its stated EPS goals for fiscal 2011,
this factor may restrain EPS upside surprises to some degree. If this proves to be the case over time,
upside potential for the stock may similarly be limited.
Coffee costs are equivalent to approximately 7% of Starbucks’ total net revenues, according to the
company. This is similar to the company’s food costs, and less than what Starbucks spends on
occupancy costs (we estimate 10.0%-10.5%) and “Other,” which consists of items such as packaging,
bar supplies, packaged food and tea, and other miscellaneous costs; we estimate this also equates to
about 10.0%-10.5% of total net revenues. FYI, we estimate that freight/distribution costs equate to
roughly 4%-5% of total net revenues; and we estimate that dairy costs eat up about 3% of total net
revenues.
In Starbucks’ fiscal Q4 earnings release (dated November 4, 2010), the company raised its full-fiscal
2011 EPS goal from $1.36-$1.41 to $1.41-$1.47. But, the company also noted that “Commodity costs
are now expected to have an unfavorable impact on EPS of approximately $0.08 to $0.10, attributable
primarily to higher coffee costs. The company’s EPS expectation noted above reflects the impact of
higher commodity costs.” We note that in the fiscal Q3 earnings release (dated July 21, 2010),
Starbucks had been saying that at that time, it thought commodity costs would restrain fiscal 2011
EPS by $0.04.
In other words, Starbucks increased its EPS goal for fiscal 2011 despite simultaneously commenting
that commodity costs likely would have an even more adverse impact on EPS than expected back in
mid-to-late July. We have no issues with this in and of itself -- in fact, our fiscal 2011 EPS estimate of
$1.48 lies one cent above the company’s stated target range of $1.41-$1.47. Nevertheless, it seems to
us that the expected $0.08-$0.10 EPS hit due to commodities (built into both our forecast and
Starbucks’ goals) may nevertheless restrain some EPS upside potential.
Like a lot of stocks, SBUX tends to respond well to EPS upside surprises. On July 21, 2009, the
company introduced a goal for fiscal 2010 of non-GAAP EPS growth of 13% to 18%. At that time,
the company’s stated target for fiscal 2009 non-GAAP EPS was $0.74-$0.75. As such, the 13%-18%
range implied a fiscal 2010 non-GAAP EPS target of approximately $0.84-$0.89. Over time, as
quarterly results (e.g., same-store sales and operating margins) started coming in better than these
expectations, Starbucks kept raising its stated goal for non-GAAP fiscal 2010 EPS:
• On November 5, 2009, the company’s goal was upped to “15% to 20% from FY09 non-
GAAP EPS of $0.80” -- which to us implied an EPS goal of $0.92-$0.96.
• On January 20, 2010, Starbucks commented that it “now expects non-GAAP EPS in the range
of $1.05-$1.08” for fiscal 2010.
• On April 21, 2010, Starbucks again raised its fiscal 2010 non-GAAP EPS goal, this time to
“the range of $1.19 to $1.22.”
• On July 21, 2010, the company increased its fiscal 2010 non-GAAP EPS target range to
“$1.22 to $1.23.”
• Finally, on November 4, 2010, Starbucks released its fiscal fourth-quarter earnings, and as
part of this, announced that fiscal 2010 non-GAAP EPS reached $1.28.
-9-
We have therefore recapped that Starbucks tended to raise its stated EPS goals for fiscal 2010 on a
regular basis, after having introduced its initial target on July 21, 2009. How did the stock do over July
21, 2009 to November 5, 2010? Perhaps somewhat unsurprisingly given the steadily increasing EPS
goals over that time, SBUX rose from $14.69 on 7/21/09 to $30.87 on 11/5/10. This was a share price
increase of 110.1%. Not too shabby!
Given this dynamic, we believe that what Starbucks does over time with its stated EPS goals for fiscal
2011 will play a highly meaningful role in how the stock performs over the next 12 months. Of
course, our existing $1.48 EPS estimate for fiscal 2011 implies we expect at least a modest increase to
the company’s current stated target of $1.41-$1.47. And, best case, there may be further upside
beyond that -- particularly if U.S. same-store sales exceed our 4% forecast for the full fiscal year.
All that said, given the current expectation that commodity costs will -- all else equal -- adversely
impact EPS by $0.08-$0.10, this appears to be $0.08-$0.10 of potential EPS upside surprise that is off
the table to some degree.
COFFEE -- COST PER POUND (IN U.S. CENTS)
2006 2007 2008 2009 2010

January 101.2 105.8 122.3 108.4 126.9
February 97.4 104.2 138.8 107.6 123.4
March 92.8 100.1 136.2 105.9 125.3
April 94.2 99.3 126.6 111.6 126.9
May 90.0 100.1 126.8 123.1 128.1
June 86.0 107.0 130.5 119.1 142.2
July 88.6 106.2 132.8 112.9 153.4
August 95.8 108.0 131.1 117.5 157.5
September 96.0 113.2 126.7 116.4 163.6
October 95.5 115.7 108.3 121.1 161.6
November 103.5 114.4 107.9 119.7 173.9
December 108.0 118.2 103.1 125.0
Average 95.8 107.7 124.3 115.7 143.9
Note: The composite prices cited above incorporate prices for Columbian mild arabicas, other mild arabicas, Brazilian
natural arabicas, and robustas. Starbucks does not buy/use robusta coffee, which tends to be the least costly on a per-
pound basis of these four coffee categories.
Source: International Coffee Organization Composite Prices (www.ico.org/coffee_prices.asp) and Janney Capital
Markets
(2) ACQUISITION RISK. During Starbucks’ analyst meeting in New York City this past December
1st, management commented that it would consider acquisitions “small and large.” When pressed for
some specifics, management was reluctant to say much more (for example, management refrained
from quantifying the term “large”). However, management did note that anything it would do would
not be dilutive to earnings. Management also remarked that “we won’t do anything stupid.” Although
our view of Starbucks’ management has been and remains positive, even exceedingly good managers
can make mistakes. As such, the possibility that Starbucks could make a mediocre (or worse)
acquisition can’t be ignored.
To put some of our thoughts in context…
- 10 -
One of the very best acquisitions of all time in the restaurant industry was Wendy’s International’s
purchase -- technically, it was termed a merger -- of Tim Hortons (THI $40.56; Not Rated) back in
1995. The purchase price was about $400 million. In 2006, Wendy’s International spun off Tim
Hortons, with the IPO occurring on March 24, 2006 (FYI, the spinoff of the rest of the shares took
place on September 24, 2006). The shares closed on their first day of trading at $27.10 -- implying a
market value for the full Tim Hortons business of over $5 billion.
But, one of the very worst acquisitions of all time in the restaurant industry was also made by
Wendy’s International. In May 2002, Wendy’s International announced that it would buy the fast-
casual concept Baja Fresh for about $275 million. At the time, Baja Fresh consisted of 169 restaurants,
and Wendy’s International publicly expressed hopes that it would grow to be a 700-unit chain in five
years’ time. That didn’t happen. After the purchase settled, Baja Fresh found itself beset by numerous
issues, not the least of which was competitive pressure from Chipotle Mexican Grill (CMG $238.02;
Buy). Same-store sales over 2003-06 were unimpressive, and in 2006, Wendy’s International sold the
Baja Fresh chain to a consortium of investors for only $31 million. (By the way, Wendy’s
International itself was subsequently rolled up into what is now known as Wendy’s/Arby’s Group
[WEN $4.72; Not Rated] in 2008.)
We point out all this in order to make a point: even the folks who made one of the most highly
successful acquisitions in the restaurant industry’s history (in 1995) made one of the very worst
acquisitions in the industry’s history not too long thereafter (in 2002). Acquisition activity can be an
extremely tricky business -- as Starbucks well knows, given that during its fiscal Q4 2000 it wrote
down $58.792 million worth of Internet-related investments. Although Starbucks may very well make
some wise acquisitions in the near-to-medium term future, investors should be mindful that this is not
a given.
OTHER TABLES
Some other tables regarding Starbucks for your consideration:
STARBUCKS -- WORLDWIDE SAME-STORE SALES, FISCAL 1995-2012E
Q1 Q2 Q3 Q4 FY
Fiscal 2012E 4% 4% 4% 4% 4%
Fiscal 2011E 4% 4% 4% 4% 4%
Fiscal 2010A 4% 7% 9% 8% 7%
Fiscal 2009 -9% -8% -5% -1% -6%
Fiscal 2008 1% -3% -4% -7% -3%
Fiscal 2007 6% 4% 4% 4% 5%
Fiscal 2006 7% 10% 6% 5% 7%
Fiscal 2005 10% 7% 7% 8% 8%
Fiscal 2004 10% 12% 11% 9% 10%
Fiscal 2003 9% 7% 8% 9% 8%
Fiscal 2002 2% 7% 8% 8% 6%
Fiscal 2001 10% 6% 3% 2% 5%
Fiscal 2000 7% 10% 10% 10% 9%
Fiscal 1999 3% 6% 6% 8% 6%
Fiscal 1998 5% 7% 7% 3% 5%
Fiscal 1997 3% 5% 6% 5% 5%
Fiscal 1996 4% 8% 7% 9% 7%
Fiscal 1995 10% 7% 11% 11% 9%
- 11 -
QUICK-SERVICE CONCEPTS -- AMERICAN CUSTOMER SATISFACTION INDEX
SCORES, 2003-10
Concept 2003 2005 2006 2007 2008 2009 2010

Papa John’s 76 78 79 77 76 75 80
Starbucks NA NA 77 78 77 76 78
Little Caesars 75 74 77 75 75 75 78
Pizza Hut 75 71 76 72 76 74 78
Domino’s Pizza 75 71 75 75 75 77 77
Wendy’s 74 75 76 78 73 76 77
KFC 71 69 70 71 70 69 75
Burger King 68 71 70 69 71 69 74
Taco Bell 68 72 70 69 70 73 74
McDonald’s 64 62 63 64 69 70 67
All Others 75 78 80 79 80 83 76
Overall 74 76 77 77 78 78 75
NA Not available.
Note: Data for 2004 is unavailable.
Source: University of Michigan and Janney Capital Markets
STARBUCKS -- REVENUES AND OPERATING PROFITS BY SEGMENT, FISCAL 2011E
Q1E Q2E Q3E Q4E

United States:
Revenues:
Company-Operated Retail $1,844,171 $1,743,569 $1,797,103 $1,917,392
Specialty: Licensing $159,500 $151,800 $149,050 $139,629
Specialty: Foodservice/Other $1,760 $2,310 $880 $102
Total Net Revenue $2,005,431 $1,897,679 $1,947,033 $2,057,124
Operating Income $350,950 $341,582 $350,466 $359,997
Note: Operating Margin 17.5% 18.0% 18.0% 17.5%
International:
Revenues:
Company-Operated Retail $582,583 $528,495 $550,756 $435,611
Specialty: Foodservice/Other $16,280 $13,750 $14,410 $13,176
Total Net Revenue $677,623 $622,325 $650,966 $538,877
Global CPG:
Revenues $196,480 $178,440 $197,690 $205,614
Unallocated Corporate/Other:
Revenues $20,000 $20,000 $20,000 $44,739
Operating Income -$55,654 -$63,261 -$61,536 -$102,310
Note: Operating Margin -278.3% -316.3% -307.7% -228.7%
E Estimate.
Note: $ in thousands.
Source: Janney Capital Markets
- 12 -
STARBUCKS -- REVENUES AND OPERATING PROFITS BY SEGMENT, FISCAL 2010A
Q1A Q2A Q3A Q4A

United States:
Revenues:
Company-Operated Retail $1,788,300 $1,680,000 $1,726,700 $1,836,800
Specialty: Foodservice/Other $1,600 $2,100 $800 $100
Total Net Revenue $1,934,900 $1,820,100 $1,863,000 $1,973,600
International:
Revenues:
Company-Operated Retail $504,600 $448,900 $460,000 $518,200
Specialty: Foodservice/Other $14,800 $12,500 $13,100 $12,900
Total Net Revenue $591,000 $534,200 $551,100 $619,300
Global CPG:
Revenues $196,800 $180,400 $197,900 $201,300
Unallocated Corporate/Other:
Revenues $0 $0 $0 $43,800
Operating Income -$74,600 -$90,800 -$80,000 -$107,900
Note: Operating Margin NM NM NM -246.3%
A Actual.
VALUATION
As of December 17, shares of Starbucks traded at 24.7x our calendar 2010 EPS estimate of $1.33 and
20.9x our calendar 2011 EPS estimate of $1.57. Our $34 fair value estimate represents a 25.6x
multiple applied to our calendar 2010 EPS estimate.
For comparables, we have selected five restaurant stocks with anticipated long-term annualized EPS
growth rates in the 15%-20% range. Our long-term annualized EPS growth forecast for Starbucks is
18%, near the midpoint of this range.
Starbucks’ P/E for calendar 2010 and calendar 2011 – at 24.7x and 20.9x, respectively – are below
that of the average comparable, by 6% and 4%, respectively.
- 13 -
SELECTED RESTAURANT STOCKS -- CALENDAR 2010E P/E AND CALENDAR 2011E
P/E
12/17/2010 Calendar Calendar

Company Ticker Stock 2010 EPS 2011 EPS 2010E 2011E
Name Symbol Price Estimate Estimate P/E P/E
Bravo Brio Rest. Group BBRG $18.33 $0.75 $0.80 24.4 22.9
Caribou Coffee CBOU $10.35 $0.46 $0.61 22.5 17.0
Panera Bread PNRA $105.75 $3.58 $4.37 29.5 24.2
Peet’s Coffee & Tea PEET $42.00 $1.32 $1.59 31.6 26.6
Texas Roadhouse TXRH $17.70 $0.82 $0.92 21.6 19.2
Comparables’ Average 26.3 21.7
Starbucks SBUX $32.78 $1.33 $1.57 24.5 21.3
E Estimate.
Note: First Call consensus EPS estimates used for BBRG, CBOU, PNRA, and WEN. Janney Capital Markets EPS estimates used for
PEET and SBUX.
Source: First Call and Janney Capital Markets
On a P/E-to-Growth basis, SBUX trades at a 2% discount to that of the average comparable for
calendar 2010E, and a 2% discount for calendar 2011E. These discounts are noted as a positive factor
for the stock at present, but at the current time are not quite enough to dissuade us from initiating
coverage with a Neutral rating on the shares.
SELECTED QUICK-SERVICE RESTAURANT STOCKS -- CALENDAR 2010E P/E-TO-

GROWTH AND CALENDAR 2011E P/E-TO-GROWTH
12/17/2010 Median 2010E 2011E

Company Ticker Stock Long-Term EPS P/E-to- P/E-to-
Name Symbol Price Growth Rate Growth Growth
Bravo Brio Rest. Group BBRG $18.33 18% 1.36 1.27
Caribou Coffee CBOU $10.35 20% 1.13 0.85
Panera Bread PNRA $105.75 17% 1.74 1.42
Peet’s Coffee & Tea PEET $42.00 20% 1.58 1.33
Texas Roadhouse TXRH $17.70 18% 1.20 1.07
Comparables’ Average 19% 1.40 1.19
Starbucks SBUX $32.78 18% 1.37 1.16
E Estimate.
Source: First Call and Janney Capital Markets
BRIEF FINANCIAL REVIEW

Our EPS estimates for fiscal 2011 and fiscal 2012 are $1.48 and $1.74, respectively. Our fiscal 2011
EPS estimate is one cent short of consensus (although above the high end of the company’s stated
target range of $1.41-$1.47). Our fiscal 2012 EPS estimate matches consensus. We forecast long-term
annualized EPS growth for Starbucks of 18%.
Looking at the balance sheet, Starbucks ended fiscal 2010 with $4.82 in book value per share. As
such, given the December 17 closing price of $32.78, SBUX traded at a price/book ratio of 5.3x. We
forecast that the company’s book value per share will continue to expand, to $5.05 at year-end fiscal
2011 and to $5.56 at year-end fiscal 2012.
We project that Starbucks’ pre-tax ROA will generally rise, from 24.9% in fiscal 2010 to 26.3% in
fiscal 2011 and 29.2% in fiscal 2012. After-tax ROE should generally expand as well. Fiscal 2010
- 14 -
after-tax ROE was 29.1%. We estimate that this measure will get to 29.9% this fiscal year and 32.9%
next fiscal year.
MANAGEMENT
The following information – retrieved on December 14, 2010 – comes directly from Starbucks’
website:
• Howard Schultz, Chairman, President, and CEO. Mr. Schultz first walked into Starbucks
in Seattle’s Pike Place Market in 1981. Mr. Schultz was drawn into conversation with these
connoisseurs who took great care in not only finding and roasting the highest quality coffee,
but also sharing their passion with others. Drawn to Seattle and its extraordinary coffee
culture, Mr. Schultz moved from his native New York and joined Starbucks in 1982 as
director of operations and marketing when Starbucks had four stores.
• Cliff Burrows, President, Starbucks Coffee U.S. Mr. Burrows is responsible for all of
Starbucks U.S. operations and is committed to ensuring that the Starbucks Experience is
delivered to customers and partners (employees), combining a passion for the best quality
coffee, served in a superb in-store environment. Mr. Burrows is known for his demonstrated
track record of strong leadership and a commitment to Starbucks Guiding Principles.
• John Culver, President, Starbucks Coffee International. In this role Mr. Culver leads
teams responsible for the overall management, business development and operations of
Starbucks in all markets outside the U.S. Mr. Culver’s experience and success leading the
Asia Pacific region, his deep coffee industry knowledge and his strong leadership skills
combine to make him the ideal leader for Starbucks Coffee International.
• Arthur Rubenfeld, President, Global Development. Mr. Rubenfeld returned to Starbucks

in the newly created role of president, Global Development in February, 2008. Mr. Rubenfeld
and his team are responsible for strategic site selection, design and creative concepting for
Starbucks stores globally.
• Jeff Hansberry, President, Global Consumer Products, Foodservice. Mr. Hansberry

joined Starbucks in June 2010 as president, Global Consumer Products and Foodservice. In
this role, Mr. Hansberry leads Starbucks efforts to accelerate growth in the company’s
consumer products business with the introduction of new brands and products to more
markets around the world. This includes packaged coffee, ready-to-drink coffee, ice cream,
chocolate and Tazo® teas and drinks. In essence, this means he is responsible for extending
the Starbucks Experience and taking care of the customer interactions outside of our stores.
• Michelle Gass, President, Seattle’s Best Coffee. Ms. Gass was named president, Seattle’s
Best Coffee in September 2009 further highlighting the importance of the brand within
Starbucks Corporation. As the president and leader of this business, Ms. Gass has
responsibility for transforming a beloved 40-year-old brand into a billion-dollar brand.
Challenged to innovate and bring a fresh approach to Seattle’s Best Coffee, Ms. Gass is now
directing substantial change intended to build the company’s relationship with current and
future customers. Ms. Gass leads all aspects of the Seattle’s Best Coffee business, including
the global brand strategy, multi-channel growth plans, and existing and future businesses. The
business today includes the portfolio of more than 550 specialty coffee cafes across the U.S.,
the packaged coffee and ready-to-drink business in grocery and other retail channels, and the
Seattle’s Best Coffee foodservice business, which includes relationships with brands like
Alaska Airlines, Royal Caribbean Cruise Lines, Subway Restaurants, Burger King
Restaurants, and AMC Theatres. Ms. Gass also oversees the company’s growing franchising
program.
- 15 -
• Troy Alstead, Executive Vice President, CFO, and CAO. Mr. Alstead was named
executive vice president, chief financial officer and chief administrative officer in November
2008. In his position, Mr. Alstead is focused on the business and financial strategies,
decisions, and execution that will deliver on Starbucks short and long term strategies.
TOP TEN INSTITUTIONAL SHAREHOLDERS

The following table shows selected the top ten institutional shareholders for Starbucks:
STARBUCKS – TOP TEN INSTITUTIONAL SHAREHOLDERS
Institution Shares % Outstanding

FMR LLC 49,766,781 6.7%
T. Rowe Price 48,799,201 6.5%
Capital World Investors 30,934,694 4.1%
Vanguard 27,704,569 3.7%
State Street 25,562,985 3.4%
BlackRock Institutional Trust Company, N.A. 22,907,345 3.1%
Jennison 19,529,504 2.6%
Invesco Ltd. 19,071,182 2.6%
Bank of New York Mellon Corporation 15,787,542 2.1%
Sands Capital Management 12,047,023 1.6%
Source: Thomson One and Janney Capital Markets
THE BOTTOM LINE

We initiate coverage of Starbucks – the owner of the world’s largest coffee chain concept -- with a
Neutral rating. Our fair value estimate of $34 compares with the December 17 closing price of $32.78.
Our EPS estimates for fiscal 2011 and fiscal 2012 are $1.48 and $1.74, respectively. (Please note that
Starbucks’ fiscal year ends in September.) Our EPS estimates for this fiscal year is one cent below
consensus (but one cent above the high end of the company’s stated target range of $1.41-$1.47),
while our EPS forecast for next fiscal year currently matches consensus. We forecast long-term
annualized EPS growth for Starbucks of 18%. At present, our Neutral rating is driven by what we
view as a relatively balanced blend of potential positives and risk factors.
A FINAL NOTE
Institutional investors that would like to be added to our e-mail distribution list, and/or our voice-mail
distribution list, should contact either their Janney Capital Markets sales representative or Mark
Kalinowski. Mr. Kalinowski can be reached at (212) 940-6997 or at mkalinowski@janney.com.
- 16 -
STARBUCKS -- CORPORATE LOGO
Source: Company reports
STARBUCKS -- FRAPPUCCINO BLENDED BEVERAGE
- 17 -
STARBUCKS -- STARBUCKS CARD FROM ENGLAND (THIS PARTICULAR DESIGN
WAS RELEASED IN 2007)
STARBUCKS -- VIA READY-BREW COFFEE
- 18 -
STARBUCKS -- STORE IN SHANGHAI, CHINA
- 19 -
STARBUCKS -- ROY STREET COFFEE & TEA (SEATTLE, WASHINGTON)
STARBUCKS -- 15TH AVENUE COFFEE & TEA (SEATTLE, WASHINGTON)
Note: To learn more about the Starbucks-owned Roy Street Coffee & Tea and 15th Avenue Coffee &
Tea stores, please refer to the following websites:
http://www.roystreetcoffee.com
http://www.starbucks.com/coffeehouse/store-design/roy-street-coffee-and-tea
http://www.streetlevelcoffee.com
http://www.starbucks.com/coffeehouse/store-design/15th-ave-coffee-and-tea
- 20 -
STARBUCKS -- ANNUAL INCOME STATEMENT, FISCAL 2009-12E
2009 2010A 2011E 2012E

Company-Operated Retail Sales $8,180,200 $8,963,500 $9,399,679 $10,068,936
Specialty Sales $1,594,400 $1,743,900 $1,880,340 $2,030,767
Total Net Revenues $9,774,600 $10,707,400 $11,280,019 $12,099,703
Cost of Sales Including Occupancy Costs $4,324,900 $4,458,600 $4,638,819 $4,900,380
Store Operating Expenses $3,425,100 $3,551,400 $3,678,019 $3,876,540
Other Operating Expenses $264,400 $293,200 $302,058 $314,592
Depreciation and Amortization Expenses $534,700 $510,400 $532,624 $556,586
General and Administrative Expenses $453,000 $569,500 $594,746 $629,185
Total Operating Expenses $9,002,100 $9,383,100 $9,746,266 $10,277,283
Income from Equity Investees $121,900 $148,100 $157,761 $169,396
Operating Income $894,400 $1,472,400 $1,691,514 $1,991,816
Interest Income and Other, Net $36,300 $50,300 $51,488 $60,499
Interest Expense -$39,100 -$32,700 -$33,840 -$36,299
Earnings Before Income Taxes $891,600 $1,490,000 $1,709,162 $2,016,015
Income Taxes $292,700 $509,600 $585,066 $689,477
Note: Tax Rate 32.8% 34.2% 34.2% 34.2%
Net Earnings Including Noncontrolling $598,900 $980,400 $1,124,096 $1,326,538
Net Earnings Attributable to Noncontrolling $700 $2,740 $2,852 $3,025
Net Earnings $598,900 $980,400 $1,124,096 $1,326,538
Diluted EPS $0.80 $1.28 $1.48 $1.74
Diluted Shares Outstanding 745,900 764,350 760,900 760,900
Fiscal Year End 9/27/2009 10/4/2010 10/3/2011 10/2/2012
Weeks in Fiscal Year 52 53 52 52
Same-Store Sales -6% 7% 4% 4%
Dividends Per Share $0.00 $0.36 $0.52 $0.52
Note: $ in thousands, except for per-share amounts.
- 21 -
STARBUCKS -- QUARTERLY INCOME STATEMENT, FISCAL 2011E
Q1E Q2E Q3E Q4E

Specialty Sales $472,780 $446,380 $467,830 $493,350
Store Operating Expenses $946,434 $874,744 $927,404 $929,436
Interest Income and Other, Net $26,096 $5,437 -$2,816 $22,771
Earnings Before Income Taxes $448,242 $405,642 $421,311 $433,967
Income Taxes $151,954 $142,380 $145,352 $145,379
Note: Tax Rate 33.9% 35.1% 34.5% 33.5%
Net Earnings Including Noncontrolling $296,288 $263,262 $275,959 $288,588
Net Earnings Attributable to Noncontrolling $2,030 $544 $563 -$285
Net Earnings $294,258 $262,718 $275,395 $288,873
Diluted EPS $0.39 $0.35 $0.36 $0.38
Fiscal Year End 13 13 13 13
Weeks in Fiscal Year 1/3/11 4/3/11 7/3/11 10/3/11
Same-Store Sales 4% 4% 4% 4%
E Estimate.
Source: Janney Capital Markets
- 22 -
STARBUCKS -- QUARTERLY INCOME STATEMENT, FISCAL 2010A
Q1A Q2A Q3A Q4A

Specialty Sales $429,800 $405,800 $425,300 $483,000
Store Operating Expenses $896,100 $828,000 $888,900 $938,400
Interest Income and Other, Net $25,100 $4,700 -$1,400 $21,900
Earnings Before Income Taxes $387,800 $344,400 $338,800 $419,000
Income Taxes $131,500 $120,800 $116,800 $140,500
Note: Tax Rate 33.9% 35.1% 34.5% 33.5%
Net Earnings Including Noncontrolling $256,300 $223,600 $222,000 $278,500
Net Earnings Attributable to Noncontrolling $2,000 $500 $640 -$400
Net Earnings $254,300 $223,100 $221,360 $278,900
Diluted EPS $0.33 $0.29 $0.29 $0.37
Fiscal Year End 13 13 13 14
Weeks in Fiscal Year 12/27/09 3/28/10 6/27/10 10/4/10
Same-Store Sales 4% 7% 9% 8%
A Actual.
- 23 -
STARBUCKS -- BALANCE SHEET, FISCAL 2009-12E
2009 2010A 2011E 2012E

Assets:
Current Assets:
Cash and Cash Equivalents $599,800 $1,164,000 $1,124,096 $1,326,538
Short-Term Investments -- Available-for-Sale $21,500 $236,500 $249,148 $267,253
Short-Term Investments -- Trading Securities $44,800 $49,200 $51,189 $54,075
Accounts Receivable, Net $271,000 $302,700 $322,445 $346,226
Inventories $664,900 $543,300 $562,670 $593,041
Prepaid Expenses and Other Current Assets $147,200 $156,500 $161,228 $167,918
Deferred Income Taxes, Net $286,600 $304,200 $317,445 $331,727
Total Current Assets $2,035,800 $2,756,400 $2,788,222 $3,086,778
Long-Term Investments -- Available-for-Sale $71,200 $191,800 $202,057 $216,740
Equity and Other Investments $352,300 $341,500 $355,304 $375,337
Property, Plant, and Equipment, Net $2,536,400 $2,416,500 $2,574,131 $2,763,977
Deposits,/Other Assets/Other Intangible Assets $322,000 $417,300 $432,178 $455,505
Goodwill $259,100 $262,400 $270,328 $281,545
Total Assets $5,576,800 $6,385,900 $6,622,219 $7,179,883
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts Payable $267,100 $282,600 $297,713 $319,347
Accrued Compensation and Related Costs $307,500 $400,000 $426,092 $457,517
Accrued Occupancy Costs $188,100 $173,200 $179,375 $189,057
Accrued Taxes $127,800 $100,200 $104,563 $109,267
Insurance Reserves $154,300 $146,200 $104,642 $110,618
Other Accrued Expenses $147,300 $262,800 $270,740 $281,974
Deferred Revenue $388,700 $414,100 $475,724 $560,181
Current Portion of Long-Term Debt $200 $0 $0 $0
Total Current Liabilities $1,581,000 $1,779,100 $1,858,849 $2,027,962
Long-Term Debt $549,300 $549,400 $549,400 $549,400
Other Long-Term Liabilities $400,800 $375,100 $375,100 $375,100
Total Liabilities $2,531,100 $2,703,600 $2,783,349 $2,952,462
Shareholders' Equity $3,045,700 $3,682,300 $3,838,870 $4,227,422
Total Liabilities and Shareholders' Equity $5,576,800 $6,385,900 $6,622,219 $7,179,883
- 24 -
STARBUCKS -- CASH FLOW STATEMENT, FISCAL 2009-12E
2009 2010A 2011E 2012E

Cash Flows Provided by Operating Activities:
Net Earnings $391,500 $948,300 $1,124,096 $1,326,538
Adjustments to Reconcile Net Earnings:
Depreciation and Amortization $563,300 $540,800 $532,624 $556,586
Provision for Impairments and Asset Disposals $224,400 $67,700 $67,700 $67,700
Deferred Income Taxes -$69,600 -$42,000 -$42,000 -$42,000
Equity in Income of Investees -$78,400 -$108,600 -$108,600 -$108,600
Distributions of Income from Equity Investees $53,000 $91,400 $91,400 $91,400
Stock-Based Compensation $83,200 $113,600 $113,600 $113,600
Tax Benefit from Exercise of Stock Options $2,000 $13,500 $13,500 $13,500
Excess Tax Benefit from Exercise of Options -$15,900 -$36,900 -$36,900 -$36,900
Other $5,400 -$15,300 -$15,300 -$15,300
Changes in Assets and Liabilities:
Inventories $28,500 $123,200 $19,370 $30,370
Accounts Payable -$53,000 -$3,600 $15,113 $21,634
Accrued Taxes $57,200 -$12,900 $4,363 $4,704
Deferred Revenue $16,300 $24,200 $61,624 $84,457
Other Accrued Expenses $0 $0 $7,940 $11,235
Net Purchases of Trading Securities $0 $0 $1,989 $2,886
Accounts Receivable $0 $0 $19,745 $23,781
Prepaid Expenses and Other Current Assets $0 $0 $4,728 $6,690
Accrued Compensation and Related Costs $0 $0 $26,092 $31,425
Accrued Occupancy Costs $0 $0 $6,175 $9,682
Other Operating Assets $120,500 -$16,100 $0 $0
Other Operating Liabilities $60,600 $17,600 $0 $0
Net Cash Provided by Operating Activities $1,389,000 $1,704,900 $1,907,260 $2,193,389
Cash Flows Used by Investing Activities:
Purchases of Available-for-Sale Securities -$129,200 -$549,000 -$125,000 -$125,000
Maturity and Calls of Available-for-Sale Securities $111,000 $209,900 $100,000 $100,000
Sale of Available-for-Sale Securities $5,000 $1,100 $25,000 $25,000
Acquisitions, Net of Cash Acquired $0 -$12,000 $0 $0
Net Purchases of Equity and Other Investments/Assets -$4,800 $1,200 -$5,000 -$5,000
Additions to Property, Plant, and Equipment -$445,600 -$440,700 -$575,000 -$575,000
Proceeds from Sale of Property, Plant, and Equipment $42,500 $0 $25,000 $25,000
Net Cash Used by Investing Activities -$421,100 -$789,500 -$555,000 -$555,000
Cash Flows Provided by Financing Activities
Proceeds from Issuance of Commercial Paper $20,965,400 $0 $19,500,000 $19,500,000
Repayments of Commercial Paper -$21,378,500 $0 -$20,000,000 -$20,000,000
Purchase of Noncontrolling Interest $0 -$45,800 -$45,800 -$45,800
Proceeds from Issuance of Common Stock $57,300 $127,900 $50,000 $50,000
Excess Tax Benefit from Exercise of Stock Options $15,900 $36,900 $15,000 $15,000
Principal Payments on Long-Term Debt -$700 -$6,600 -$700 -$700
Borrowings Under Revolving Credit Facility -$300,000 $0 -$300,000 -$300,000
Cash Dividends Paid $0 -$171,000 -$200,000 -$200,000
Repurchase of Common Stock $0 -$285,600 $0 $0
Other -$1,600 -$1,800 -$25,000 -$25,000
Net Cash Provided by Financing Activities -$642,200 -$346,000 -$1,006,500 -$1,006,500
Effects of Exchange Rate Changes on Cash $4,300 -$5,200 $0 $0
Net (Decrease)/Increase in Cash $330,000 $564,200 $345,760 $631,889
Cash/Cash Equivalents -- Start of Year $269,761 $599,761 $1,163,961 $1,509,721
Cash/Cash Equivalents -- End of Year $599,761 $1,163,961 $1,509,721 $2,141,609
- 25 -
IMPORTANT DISCLOSURES
Research Analyst Certification
I, Mark Kalinowski, the Primarily Responsible Analyst for this research report, hereby certify that all of the views expressed in
this research report accurately reflect my personal views about any and all of the subject securities or issuers. No part of my
compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views I expressed in this
research report.
Janney Montgomery Scott LLC ("JMS") Equity Research Disclosure Legend
Janney Montgomery Scott is a market maker in the securities of SBUX, and may at any time hold a long or short position in this
security.
Janney Montgomery Scott may seek compensation for investment banking services from the subject company (ies) SBUX
security in the next 3 months.
The research analyst is compensated based on, in part, Janney Montgomery Scott's profitability, which includes its investment
banking revenues.
Definition of Ratings
BUY: Janney expects that the subject company will appreciate in value. Additionally, we expect that the subject company will
outperform comparable companies within its sector.
NEUTRAL: Janney believes that the subject company is fairly valued and will perform in line with comparable companies
within its sector. Investors may add to current positions on short-term weakness and sell on strength as the valuations or
fundamentals become more or less attractive.
SELL: Janney expects that the subject company will likely decline in value and will underperform comparable companies
within its sector.
Price Charts
Janney Montgomery Scott Ratings Distribution as of 09/30/2010

IB Serv./Past 12 Mos.
Rating Count Percent Count Percent
BUY [B] 195 54 20 10
NEUTRAL [N] 157 43 10 6
SELL [S] 10 3 1 10
*Percentages of each rating category where Janney has performed Investment Banking services over the
past 12 months.
Other Disclosures
Investment opinions are based on each stock's 6-12 month return potential. Our ratings are not based on formal price targets,
however our analysts will discuss fair value and/or target price ranges in research reports. Decisions to buy or sell a stock should
be based on the investor's investment objectives and risk tolerance and should not rely solely on the rating. Investors should read
carefully the entire research report, which provides a more complete discussion of the analyst's views.
This research report is provided for informational purposes only and shall in no event be construed as an offer to sell or a
solicitation of an offer to buy any securities. The information described herein is taken from sources which we believe to be
reliable, but the accuracy and completeness of such information is not guaranteed by us. The opinions expressed herein may be
given only such weight as opinions warrant. This Firm, its officers, directors, employees, or members of their families may have
- 26 -
positions in the securities mentioned and may make purchases or sales of such securities from time to time in the open market or
otherwise and may sell to or buy from customers such securities on a principal basis.Supporting information related to the
recommendation, if any, made in the research report is available upon request.
- 27 -
RESEARCH
DEPARTMENT
Janney Montgomery Scott
Gary R. Schatz, Managing Director

Director of Research (215) 665-6234
TECHNOLOGY, MEDIA and TELECOM FINANCIALS

Financial Technology Banks / Thrifts
Thomas C. McCrohan – Managing Director (215) 665-6293 Rick Weiss - Director (215) 665-6224
Leonard A. DeProspo, CFA –Associate (215) 665-4559 Stephen M. Moss – Vice President (215) 665-4595
David C. Peppard - Associate (215) 665-6457
Entertainment / Digital Media
Tony Wible, CFA – Director (215) 665-6529 BDCs
Randolph Lee – Associate (215) 665-4572 John T. G. Rogers, CFA - Vice President (202) 955-4316
Internet and Interactive Entertainment Insurance

Shawn C. Milne – Managing Director (415) 981-9539 Robert Glasspiegel, CFA – Managing Director (860) 724-1203
Cara Petonic – Associate (215) 665-4574 Larry Greenberg, CFA – Managing Director (860) 724-1203
Steven Labbe, CFA - Managing Director (860) 724-1203
IT Outsourcing / BPO / Consulting
Joseph D. Foresi – Director (617) 557-2972 REITs
Jeffrey Rossetti - Associate (617) 557-2989 Andrew DiZio, CFA - Vice President (215) 665-6439
Daniel Donlan - Vice President (215) 665-6476
PC & Enterprise Hardware
Bill Fearnley – Managing Director (617) 367-3268 Trust Banks
Chad Wood - Associate (617) 557-3291 Thomas C. McCrohan – Managing Director (215) 665-6293
Leonard A. DeProspo, CFA – Associate (215) 665-4559
Semiconductors
Nicholas Aberle – Director (415) 229-7012
INFRASTRUCTURE
Industrials
CONSUMER and RETAIL James C. Lucas – Managing Director (215) 665-6196
Casino Gaming and Lodging Michael J. Wherley - Associate (215) 665-4476
Brian T. McGill - Managing Director (215) 665-6485 Kaitlin Lunny – Associate (215) 665-6213
Brian Mullan, CFA - Associate (646) 840-4604
Industrials / Special Situations
Food / Beverage / Tobacco Liam D. Burke - Director (202) 955-4305
Jonathan Feeney, CFA – Managing Director (215) 665-6679
Mark Williams – Associate (215) 665-6358 Infrastructure/Water
Ryan M. Connors - Director (215) 665-1359
Mitchell B. Pinheiro, CFA –Managing Director(215) 665-6280 Christopher J. Purtill – Associate (215) 665-6601
Brian Holland - Associate (215) 665-4478
Household & Personal Care TECHNICAL ANALYSIS

John San Marco - Vice President (646) 840-4607 Technical Strategy
Dan Wantrobski, CMT - Director (215) 665-4446
Restaurants
Mark Kalinowski – Director (212) 940-6997
Ned Grace - Associate (212) 940-6985 SUPERVISORY ANALYSTS
Richard Jacobs - Director (215) 665-6290
Hardline Retailers
Irene H. Buhalo – Vice President (215) 665-6510
David Strasser – Managing Director (646) 840-4609
Suzanne M. Hannigan, CFA - Vice President (215) 665-4475
Sarang Vora - Associate (646) 840-4605
Softline Retail – Specialty Apparel

Adrienne Tennant – Managing Director (703) 448-7807
Simeon Siegel – Associate (646) 840-4606

SBUX: Initiating Coverage at Neutral: Basic Report

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

SBUX: Initiating Coverage at Neutral: Basic Report

Uploaded by

Copyright:

Available Formats

Starbucks Corp.

Mark Kalinowski 212-940-6997

December 20, 2010

Restaurants SBUX: Initiating Coverage at Neutral

BRIEF COMPANY DESCRIPTION

STARBUCKS -- COMPANY-OPERATED STORES BY COUNTRY, END OF FISCAL 2010

(1) DOMESTIC SAME-STORE SALES APPEAR TO BE BACK ON TRACK; UPSIDE

• Re-aligning Starbucks organization and streamlining the management to better support

To access that press release, please click on the following link:

STARBUCKS -- U.S. SAME-STORE SALES, FISCAL 2000-2012E

Average Store Profit

(2) NOTABLE OPPORTUNITIES FOR INTERNATIONAL UNIT GROWTH. Starbucks’

STARBUCKS -- STORE COUNT, FISCAL 2010A-11E

Fiscal 2011E Q1E Q2E Q3E Q4E

Fiscal 2010A Q1A Q2A Q3A Q4A

STARBUCKS CANADA -- AVERAGE UNIT VOLUMES AND STORE PROFIT

Average Store Profit

STARBUCKS WESTERN EUROPE -- AVERAGE UNIT VOLUMES AND STORE PROFIT

Average Store Profit

STARBUCKS CHINA -- AVERAGE UNIT VOLUMES AND STORE PROFIT

Average Store Profit

(3) STARBUCKS SHOULD CONTINUE TO GAIN MARKET SHARE WITHIN THE

LIMITED-SERVICE BEVERAGE SEGMENT -- U.S. MARKET SHARE, 2003-09

Jamba Caribou Peet's Smoothie

COFFEE -- COST PER POUND (IN U.S. CENTS)

2006 2007 2008 2009 2010

To put some of our thoughts in context…

STARBUCKS -- WORLDWIDE SAME-STORE SALES, FISCAL 1995-2012E

Concept 2003 2005 2006 2007 2008 2009 2010

STARBUCKS -- REVENUES AND OPERATING PROFITS BY SEGMENT, FISCAL 2011E

Q1E Q2E Q3E Q4E

Q1A Q2A Q3A Q4A

12/17/2010 Calendar Calendar

SELECTED QUICK-SERVICE RESTAURANT STOCKS -- CALENDAR 2010E P/E-TO-

12/17/2010 Median 2010E 2011E

BRIEF FINANCIAL REVIEW

• Arthur Rubenfeld, President, Global Development. Mr. Rubenfeld returned to Starbucks

• Jeff Hansberry, President, Global Consumer Products, Foodservice. Mr. Hansberry

TOP TEN INSTITUTIONAL SHAREHOLDERS

STARBUCKS – TOP TEN INSTITUTIONAL SHAREHOLDERS

Institution Shares % Outstanding

THE BOTTOM LINE

Source: Company reports

STARBUCKS -- FRAPPUCCINO BLENDED BEVERAGE

Source: Company reports

Source: Company reports

STARBUCKS -- VIA READY-BREW COFFEE

Source: Company reports

Source: Company reports

Source: Company reports

STARBUCKS -- 15TH AVENUE COFFEE & TEA (SEATTLE, WASHINGTON)

Source: Company reports

2009 2010A 2011E 2012E

Q1E Q2E Q3E Q4E

Q1A Q2A Q3A Q4A

2009 2010A 2011E 2012E

2009 2010A 2011E 2012E

Janney Montgomery Scott Ratings Distribution as of 09/30/2010

Rating Count Percent Count Percent

BUY [B] 195 54 20 10

NEUTRAL [N] 157 43 10 6

Gary R. Schatz, Managing Director