Starbucks sets sights on 10,000 stores

The company, which is on track to meet and possibly beat its sales expectations for the current fiscal year, outlined its plans for growth at its annual shareholder meeting yesterday, saying it is still on track to open 10,000 stores worldwide by the end of fiscal 2005.


		Phil H. Webber / P-I
	Starbucks Chairman Howard Schultz addresses shareholders at yesterday’s annual meeting at Benaroya Hall.

"These are the early days," said Schultz, the chairman and chief global strategist. "And that may be hard to believe."

In Washington, where there are already 280 stores, including Starbucks' first, expansion continues this year with the opening of 26 stores, some of which will be drive-through locations.

The market could ultimately boast as many as 350 stores, said Orin Smith, president and chief executive officer.

Although some in the industry have said Starbucks eventually will oversaturate the U.S. market, Smith insisted that right now there is more than enough room to grow.

Starbucks operates at least 250 stores each in Washington, Texas, Illinois and New York.

California has the most in the country, with more than 500. It has none in South Dakota.

"The rest of the world is not like Manhattan," Smith said, noting the company's strong presence in that area. "What they don't know is that we're not done with Manhattan."

Starbucks, which operates more than 6,100 locations worldwide, plans to open 1,200 stores during the current fiscal year, which ends in September.

The company opened more than 300 locations during the first quarter.

Much of the company's continued expansion, though, will occur internationally.

Starbucks says it ultimately expects to open 25,000 locations worldwide, with 15,000 of those outside North America.

It entered nine new international markets in fiscal 2002: Austria, Greece, Germany, Indonesia, Mexico, Oman, Puerto Rico, southern China and Spain.

The company plans to open stores in more new global markets this year, Schultz said, but declined to be specific.

It also expects to introduce its ready-to-drink products in Asia this year.

Starbucks reiterated yesterday that it expects total revenue for fiscal 2003 to increase about 20 percent.

In the first five months of the fiscal year, the company is "running way ahead of that target," Smith said.

The company reported sales of $3.3 billion and earnings of $215.1 million in fiscal 2002. And it posted its first quarterly revenue of more than $1 billion earlier this year.

Starbucks, which announced last month that it would offer its own Visa card, will be combining the functions of the Visa card and the Starbucks Card, Anne Saunders, vice president of Starbucks Interactive, said yesterday.

The Starbucks Card is a prepaid debit card that can be used to pay for purchases at stores.

With the new combined card, customers can earn money through their Visa purchases to pay for lattes.

The company has seen a boost in sales from the use of its Starbucks Card. In fiscal 2002, when it introduced the card, customers used it in about 6 percent of the company's transactions.

Now customers are using it in about 11 percent of transactions, Saunders said.

During the formal segment of yesterday's meeting, shareholders voted down two shareholder proposals.

The first, to identify food sold in Starbucks stores that may contain genetically modified ingredients, received less than 6 percent of the vote.

The second proposal, to expense costs of future stock options, received less than 43 percent of the vote.

Starbucks, which has become known for its elaborate entertainment at shareholder meetings, presented a program that highlighted the company's new presence in Spain -- complete with a flamenco dancer.

The company also showed a short movie that featured the running of the bulls -- and Schultz, superimposed on the film.

As he "ran" with the bulls, the animals nearly missed him. "Holy Frappuccino," he shouted.

P-I reporter Christine Frey can be reached at 206-448-8142 or christinefrey@seattlepi.com

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