Starbucks CEO Comments on China Trip (SBUX)

Includes: CDCAQ, SBUX
by: SA Editors

Starbucks (ticker: SBUX) reported Q1 2006 earnings results yesterday. President and CEO James L. Donald had the following to say during management's conference call with analysts:

Turning to China, I just recently returned from a 5-day city trip and was accompanied by Michael and 5 other senior Starbucks leaders. The trip provided a wonderful occasion for us to meet with partners and our company operators and license doors and observed first hand the opportunities that await us in this important market. Our retail presence continues to grow nicely as we opened over 50 stores in China market over the last 12 months including more than doubling our store count, in new company operator markets to 26 stores to-date.

In total, we entered the quarter with 221 stores in China and our business there is performing well. We’re seeing continued growth in market level comparable store sales and profitability in our older licensed markets such as Shanghai and Beijing and we are experiencing an enthusiastic reception in newer China markets without exception. Personally, this is my first trip to China and now I am even more confident in Starbucks future there strengthened by the gathering momentum of the lively coffee culture.

So our interaction with the local partners, it was apparent that the Starbucks culture and passion, it was as powerful as what we experienced among our partners in our US and other established markets. My insight has been reinforced by these first hand observations that the Starbucks experience clearly travels. Let me just share a quick story. We opened our store in Chongqing, a couple from a neighboring province was working on a development project nearby and heard about the Starbucks store opening, they postponed their return flight by a day to personally experience the opening Chongqing’s first Starbucks location. What is special about this story is that they told us that they were already planning a trip back the following week to visit our store again which demonstrates the relevancy of the Starbucks brand and the connection we are making in the communities worldwide.

And finally, I’m pleased to announce that Starbucks has been recognized in China as one of the top 10 employers in 2005. We were awarded this recognition by CCTV, China’s National Television Network. These accolades are very meaningful as it takes the collective effort of each and every partner to ensure that Starbucks is a great place to work.

Note: Full Starbucks conference call transcript here.