STARBUCKS CORP (Form: 10-Q, Received: 05/08/2008 06:02:15)

# of Months

Primary Measure

operating income

operating income

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 30, 2008


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 0-20322

STARBUCKS CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Washington		91-1325671
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

2401 Utah Avenue South, Seattle, Washington 98134
(Address of principal executive offices)

(206) 447-1575
(Registrant’s Telephone Number, including Area Code)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Title		Shares Outstanding as of May 5, 2008
Common Stock, par value $0.001 per share		728.0 million

STARBUCKS CORPORATION

FORM 10-Q

For the Quarterly Period Ended March 30, 2008

Table of Contents


	Page
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited):
Condensed Consolidated Statements of Earnings		3
Condensed Consolidated Balance Sheets		4
Condensed Consolidated Statements of Cash Flows		5
Notes to Condensed Consolidated Financial Statements		6
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3 Quantitative and Qualitative Disclosures About Market Risk		23
Item 4 Controls and Procedures		24
PART II. OTHER INFORMATION
Item 1 Legal Proceedings		25
Item 1A Risk Factors		25
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 4 Submission of Matters to a Vote of Security Holders		26
Item 6 Exhibits		27
Signatures		28
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STARBUCKS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except earnings per share)

(unaudited)


	13 Weeks Ended						26 Weeks Ended
	March 30,			April 1,			March 30,			April 1,
	2008			2007			2008			2007
Net revenues:
Company-operated retail	$	2,142.9		$	1,922.7		$	4,494.4		$	3,929.5
Specialty:
Licensing		274.4			234.8			579.2			488.7
Foodservice and other		108.7			98.1			220.0			193.1

Total specialty		383.1			332.9			799.2			681.8

Total net revenues		2,526.0			2,255.6			5,293.6			4,611.3

Cost of sales including occupancy costs		1,106.7			944.7			2,292.7			1,929.5
Store operating expenses		927.1			781.0			1,854.4			1,553.0
Other operating expenses		82.8			74.0			168.5			144.9
Depreciation and amortization expenses		138.1			113.4			271.3			223.6
General and administrative expenses		117.6			127.8			243.5			244.6

Total operating expenses		2,372.3			2,040.9			4,830.4			4,095.6

Income from equity investees		24.5			26.3			48.1			45.0

Operating income		178.2			241.0			511.3			560.7

Interest income and other, net		0.2			6.0			10.9			19.5
Interest expense		(11.2	)		(6.7	)		(28.3	)		(13.7	)

Earnings before income taxes		167.2			240.3			493.9			566.5

Income taxes		58.5			89.5			177.1			210.7

Net earnings	$	108.7		$	150.8		$	316.8		$	355.8


Net earnings per common share — basic	$	0.15		$	0.20		$	0.43		$	0.47
Net earnings per common share — diluted	$	0.15		$	0.19		$	0.43		$	0.46
Weighted average shares outstanding:
Basic		728.7			752.5			730.1			755.3
Diluted		739.3			774.1			742.2			778.5

See Notes to Condensed Consolidated Financial Statements.

STARBUCKS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)

(unaudited)


	March 30,		September 30,
	2008		2007
ASSETS
Current assets:
Cash and cash equivalents	$	303.4	$	281.3
Short-term investments – available-for-sale securities		—		83.8
Short-term investments – trading securities		68.1		73.6
Accounts receivable, net		300.3		287.9
Inventories		607.3		691.7
Prepaid expenses and other current assets		145.8		148.8
Deferred income taxes, net		154.3		129.4

Total current assets		1,579.2		1,696.5

Long-term investments – available-for-sale securities		70.5		21.0
Equity and other investments		305.6		258.9
Property, plant and equipment, net		3,052.3		2,890.4
Other assets		245.0		219.4
Other intangible assets		58.1		42.1
Goodwill		223.4		215.6

TOTAL ASSETS	$	5,534.1	$	5,343.9


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Commercial paper and short-term borrowings	$	701.8	$	710.3
Accounts payable		313.4		390.8
Accrued compensation and related costs		329.2		332.3
Accrued occupancy costs		82.4		74.6
Accrued taxes		8.9		92.5
Other accrued expenses		266.7		257.4
Deferred revenue		376.3		296.9
Current portion of long-term debt		0.7		0.8

Total current liabilities		2,079.4		2,155.6

Long-term debt		549.9		550.1
Other long-term liabilities		464.0		354.1

Total liabilities		3,093.3		3,059.8

Shareholders’ equity:
Common stock ($0.001 par value) – authorized, 1,200.0 shares; issued and outstanding, 730.7 and 738.3 shares, respectively (includes 3.4 common stock units in both periods)		0.7		0.7
Other additional paid-in-capital		39.4		39.4
Retained earnings		2,315.6		2,189.4
Accumulated other comprehensive income		85.1		54.6

Total shareholders’ equity		2,440.8		2,284.1

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,534.1	$	5,343.9

See Notes to Condensed Consolidated Financial Statements.

STARBUCKS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions and unaudited)


	26 Weeks Ended
	March 30,			April 1,
	2008			2007
OPERATING ACTIVITIES:
Net earnings	$	316.8		$	355.8
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		286.3			235.5
Provision for impairments and asset disposals		42.4			13.5
Deferred income taxes, net		(15.7	)		(37.2	)
Equity in income of investees		(22.9	)		(24.9	)
Distributions of income from equity investees		17.3			32.4
Stock-based compensation		39.3			52.2
Tax benefit from exercise of stock options		2.8			5.0
Excess tax benefit from exercise of stock options		(7.7	)		(46.3	)
Net amortization of (discount)/premium on securities		(0.2	)		0.4
Cash provided/(used) by changes in operating assets and liabilities:
Inventories		87.8			60.6
Accounts payable		(70.0	)		(60.5	)
Accrued taxes		(53.4	)		27.2
Deferred revenue		79.8			68.8
Other operating assets and liabilities		62.5			55.3

Net cash provided by operating activities		765.1			737.8
INVESTING ACTIVITIES:
Purchase of available-for-sale securities		(56.6	)		(177.3	)
Maturity of available-for-sale securities		15.3			134.7
Sale of available-for-sale securities		75.9			36.9
Acquisitions, net of cash acquired		—			(47.3	)
Net purchases of equity, other investments and other assets		(26.9	)		(31.1	)
Net additions to property, plant and equipment		(505.1	)		(507.2	)

Net cash used by investing activities		(497.4	)		(591.3	)
FINANCING ACTIVITIES:
Repayments of commercial paper		(44,798.7	)		—
Proceeds from issuance of commercial paper		44,789.1			—
Repayments of short-term borrowings		—			(429.0	)
Proceeds from short-term borrowings		1.1			576.0
Proceeds from issuance of common stock		59.3			108.2
Excess tax benefit from exercise of stock options		7.7			46.3
Principal payments on long term debt		(0.3	)		(0.4	)
Repurchase of common stock		(311.4	)		(563.1	)
Other		(0.7	)		—

Net cash used by financing activities		(253.9	)		(262.0	)
Effect of exchange rate changes on cash and cash equivalents		8.3			3.1

Net increase/(decrease) in cash and cash equivalents		22.1			(112.4	)
CASH AND CASH EQUIVALENTS:
Beginning of period		281.3			312.6

End of period	$	303.4		$	200.2

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of capitalized interest	$	27.8		$	14.9
Income taxes	$	231.0		$	223.6

See Notes to Condensed Consolidated Financial Statements.

STARBUCKS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the 13 Weeks and 26 Weeks Ended March 30, 2008 and April 1, 2007

(unaudited)

Note 1: Summary of Significant Accounting Policies

Financial Statement Preparation

The unaudited condensed consolidated financial statements as of March 30, 2008, and for the 13-week and 26-week periods ended March 30, 2008 and April 1, 2007, have been prepared by Starbucks Corporation (“Starbucks” or the “Company”) under the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the financial information for the 13-week and 26-week periods ended March 30, 2008 and April 1, 2007 reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods.

The financial information as of September 30, 2007 is derived from the Company’s audited consolidated financial statements and notes for the fiscal year ended September 30, 2007 (“fiscal 2007”), included in Item 8 in the Fiscal 2007 Annual Report on Form 10-K (the “10-K”). The information included in this Form 10-Q should be read in conjunction with management’s discussion and analysis and notes to the financial statements in the 10-K.

The results of operations for the 13-week and 26-week periods ended March 30, 2008 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending September 28, 2008 (“fiscal 2008”).

Certain reclassifications of prior year’s balances have been made to conform to the current format, including reclassifications from “Other operating expenses” to “General and administrative expenses” on the consolidated statements of earnings.

Investments

As of March 30, 2008, the Company had $70.5 million invested in available-for-sale securities, consisting entirely of auction rate securities. Auction rate securities are generally long-term debt instruments that provide liquidity through a Dutch auction process that resets the applicable interest rate at pre-determined calendar intervals. The $70.5 million invested in auction rate securities is collateralized by portfolios of student loans, substantially all of which are guaranteed by the United States Department of Education. As of March 30, 2008, each auction rate security held by the Company had a triple-A rating from two or more of the following major rating agencies: Moody’s, Standard & Poor’s and Fitch Ratings. During the second fiscal quarter of 2008, auctions for the securities were not successful, resulting in the issuers paying interest at the maximum contractual rate. While these failures in the auction process have affected the liquidity of the securities in the near term, the Company believes the credit quality of its auction rate securities remains high due to government guarantees backing substantially all of the underlying pools of loans, continued timely receipts of all interest due, and the expectation of continued collection of these interest payments in the future. In addition, the Company has the ability and intent to hold these investments until their liquidity has been restored, which may include holding them to their respective maturity dates. Accordingly, these securities have been classified as long-term as of March 30, 2008.

Income Taxes

On October 1, 2007, the first day of the Company’s first fiscal quarter of 2008, Starbucks adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income tax positions recognized in the financial statements in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 109. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on measurement, classification, interest and penalties associated with tax positions, and income tax disclosures.

The cumulative effects of applying FIN 48 have been recorded as a decrease of $1.7 million and $1.6 million, respectively, to the Company’s fiscal 2008 opening retained earnings and additional paid-in capital. The Company also recorded an increase of $28.5

million to current income tax assets, an increase of $12.2 million to long-term income tax assets, a decrease of $24.6 million to current tax liabilities and an increase of $68.6 million to long-term tax liabilities. As of October 1, 2007, the Company had $69.9 million of gross unrecognized tax benefits of which $27.6 million, if recognized, would affect the effective tax rate. The Company recognizes interest and penalties related to income tax matters in income tax expense. Accrued interest expense upon adoption was $11.4 million, before benefit of federal tax deduction.

Starbucks is currently under routine audit by the IRS for fiscal year 2005 and by various state taxing jurisdictions for fiscal years 2003 through 2006. The Company is no longer subject to U.S. federal or state examination for years before fiscal year 2004, with the exception of nine states. The Company is subject to income tax in many jurisdictions outside the United States, none of which are individually material to the consolidated financial statements.

There is a reasonable possibility that the unrecognized tax benefits will change within the next 12 months, but the Company does not expect this change to be material to the consolidated financial statements.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. For financial assets and liabilities, SFAS 157 will be effective for Starbucks first fiscal quarter of 2009. As permitted by FSP-FAS 157-2, SFAS 157 is effective for nonfinancial assets and liabilities for Starbucks first fiscal quarter of 2010. Early adoption of all aspects of SFAS 157 is permitted. Starbucks has not yet determined the effect on the Company’s consolidated financial statements, if any, upon adoption of SFAS 157, or if it will adopt the requirements prior to the required adoption dates.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value. SFAS 159 will be effective for Starbucks first fiscal quarter of 2009. Early adoption is permitted. Starbucks has not yet determined if it will elect to apply any of the provisions of SFAS 159 or what the effect of adoption of the statement would have, if any, on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), which replaces SFAS No. 141. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any resulting goodwill, and any noncontrolling interest in the acquiree. SFAS 141 also provides for disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R will be effective for Starbucks first fiscal quarter of 2010 and must be applied prospectively to business combinations completed on or after that date. The Company will evaluate how the new requirements could impact the accounting for any acquisitions completed beginning in fiscal 2010 and beyond, and the potential impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51” (“SFAS 160”), which establishes accounting and reporting standards for noncontrolling interests (“minority interests”) in subsidiaries. SFAS 160 clarifies that a noncontrolling interest in a subsidiary should be accounted for as a component of equity separate from the parent’s equity. SFAS 160 will be effective for Starbucks first fiscal quarter of 2010 and must be applied prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. The Company is currently evaluating the potential impact of the adoption of SFAS 160 on the Company’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“SFAS 161”), which requires enhanced disclosures about an entity’s derivative and hedging activities. Starbucks must provide these new disclosures no later than its second fiscal quarter of 2009. Early adoption is permitted. Starbucks has not yet determined the effect on the Company’s disclosures, if any, upon adoption of SFAS 161, or if it will adopt the requirements prior to the second fiscal quarter of 2009.

Note 2: Acquisitions

In the second quarter of fiscal 2008, the Company purchased the remaining 10% equity ownership in its operations in Beijing, China. Starbucks has applied the consolidation method of accounting since the first quarter of fiscal 2007, when it acquired 90% of these previously-licensed operations.

Note 3: Derivative Financial Instruments

Cash Flow Hedges

The Company and certain subsidiaries enter into cash flow derivative instruments to hedge portions of anticipated revenue streams and inventory purchases in currencies other than the entity’s functional currency. From time to time, the Company also uses futures contracts to hedge the variable price component for a small portion of its price-to-be fixed green coffee purchase contracts.

In addition, during fiscal 2007 the Company entered into, dedesignated and settled forward interest rate contracts to hedge movements in interest rates prior to issuance of its 6.25% Senior Notes. The resulting net losses from these contracts will be reclassified to “Interest expense” on the consolidated statement of earnings over the life of the Senior Notes due in 2017.

Including the interest rate contracts, the Company had accumulated net derivative losses of $12.2 million, net of taxes, in other comprehensive income as of March 30, 2008, related to cash flow hedges. Of this amount, $6.0 million of net derivative losses pertain to hedging instruments that will be dedesignated within 12 months and will also continue to experience fair value changes before affecting earnings. There was no significant ineffectiveness for cash flow hedges recognized during the 13-week and 26-week periods ended March 30, 2008 or April 1, 2007. Outstanding contracts will expire within 30 months.

Net Investment Hedges

Net investment derivative instruments are used to hedge the Company’s equity method investment in Starbucks Coffee Japan, Ltd. (“Starbucks Japan”), as well as the Company’s net investments in its Canadian, United Kingdom and Chinese subsidiaries, to minimize foreign currency exposure.

The Company had accumulated net derivative losses of $17.5 million, net of taxes, in other comprehensive income as of March 30, 2008, related to net investment derivative hedges. Outstanding contracts expire within 23 months.

Other Comprehensive Income – Cash Flow and Net Investment Hedges

The following table presents the net gains and losses reclassified from other comprehensive income into the consolidated statements of earnings during the periods indicated for cash flow and net investment hedges ( in millions ):


	13 Weeks Ended						26 Weeks Ended
	Mar 30,			Apr 1,			Mar 30,			Apr 1,
	2008			2007			2008			2007
Cash flow hedges:
Reclassified gains/(losses) into total net revenues	$	(0.9	)	$	0.7		$	(1.5	)	$	1.0
Reclassified losses into cost of sales		(2.3	)		(0.1	)		(4.6	)		(1.1	)
Reclassified losses into interest expense		(0.1	)		—			(0.3	)		—

Net reclassified gains/(losses) — cash flow hedges		(3.3	)		0.6			(6.4	)		(0.1	)
Net investment hedges:
Reclassified gains into interest income and other, net		2.2			1.3			3.4			2.6

Total	$	(1.1	)	$	1.9		$	(3.0	)	$	2.5

Other Derivatives

Starbucks entered into foreign currency forward contracts that are not designated as hedging instruments for accounting purposes to mitigate the translation risk of certain balance sheet items. For the 13-week and 26-week periods ended March 30, 2008, these forward contracts resulted in net losses of $4.5 million and $3.3 million, respectively. These losses were largely offset by the financial impact of

translating foreign currency denominated payables and receivables, which is also recognized in “Interest income and other, net.” Similar contracts entered into during the second quarter of fiscal 2007 resulted in net losses of $2.3 million for the 13-week and 26-week periods ended April 1, 2007.

Note 4: Inventories

Inventories consist of the following ( in millions ):


	Mar 30,		Sept 30,		Apr 1,
	2008		2007		2007
Coffee:
Unroasted	$	318.5	$	339.5	$	288.7
Roasted		70.0		88.6		77.9
Other merchandise held for sale		122.2		175.5		130.7
Packaging and other supplies		96.6		88.1		81.6

Total	$	607.3	$	691.7	$	578.9

As of March 30, 2008, the Company had committed to purchasing green coffee totaling $440 million under fixed-price contracts and an estimated $50 million under price-to-be-fixed contracts. The Company believes, based on relationships established with its suppliers in the past, the risk of non-delivery on such purchase commitments is remote.

Note 5: Property, Plant and Equipment

Property, plant and equipment are recorded at cost and consist of the following ( in millions ):


	Mar 30,			Sept 30,
	2008			2007
Land	$	58.6		$	56.2
Buildings		190.3			161.7
Leasehold improvements		3,350.3			3,103.1
Store equipment		1,064.0			1,002.3
Roasting equipment		219.3			208.8
Furniture, fixtures and other		602.9			559.1

		5,485.4			5,091.2
Less: accumulated depreciation and amortization		(2,654.2	)		(2,416.1	)

		2,831.2			2,675.1
Work in progress		221.1			215.3

Property, plant and equipment, net	$	3,052.3		$	2,890.4

Note 6: Debt

The Company’s debt consists of the following (in millions) :


	Mar 30,		Sept 30,
	2008		2007
Commercial paper program (weighted average interest rate of 3.0% and 5.4%, respectively)	$	700.7	$	710.3
Other short-term borrowings		1.1		—
Current portion of long-term debt		0.7		0.8

Short-term debt		702.5		711.1

6.25% Senior Notes (due Aug 2017)		549.1		549.0
Other long-term debt		0.8		1.1

Long-term debt		549.9		550.1

Total debt	$	1,252.4	$	1,261.2

Note 7: Other Long-term Liabilities

The Company’s other long-term liabilities consist of the following (in millions) :


	Mar 30,		Sept 30,
	2008		2007
Deferred rent	$	301.1	$	271.7
Unrecognized tax benefits		74.9		—
Asset retirement obligations		47.6		43.7
Minority interest		18.0		17.3
Other		22.4		21.4

Total	$	464.0	$	354.1

Unrecognized tax benefits represent the estimated long-term portion of the Company’s gross unrecognized tax benefits including interest upon the adoption of FIN 48. See Note 1 for additional information. As required under FIN 48, the cumulative impact of adopting the new accounting requirements was recorded as an adjustment to the opening balance of retained earnings and additional paid-in capital. The related balance sheet impacts to assets and liabilities were recorded on a prospective basis only.

Note 8: Shareholders’ Equity

The Company has authorized 7.5 million shares of preferred stock, none of which was outstanding at March 30, 2008.

Share repurchase activity was as follows ( in millions, except for average price data ):


	26 Weeks Ended
	Mar 30,		Apr 1,
	2008		2007
Number of shares acquired		12.2		17.9
Average price per share of acquired shares	$	24.12	$	33.22
Total accrual-based cost of acquired shares	$	295.3	$	594.5
Total cash-based cost of acquired shares	$	311.4	$	563.1

The difference between the accrual-based and cash-based cost of acquired shares represents the effect of the net change in unsettled trades from the prior fiscal year-end.

Comprehensive Income

Comprehensive income, net of related tax effects, is as follows (in millions) :


	13 Weeks Ended						26 Weeks Ended
	Mar 30,			Apr 1,			Mar 30,			Apr 1,
	2008			2007			2008			2007
Net earnings	$	108.7		$	150.8		$	316.8		$	355.8
Unrealized holding gains on available-for-sale securities		—			0.1			—			0.2
Unrealized holding gains/(losses) on cash flow hedging instruments		1.3			(1.5	)		0.4			4.0
Unrealized holding losses on net investment hedging instruments		(4.8	)		(1.0	)		(5.4	)		(1.1	)
Reclassification adjustment for net losses realized in net earnings for cash flow hedges		1.3			0.3			2.4			1.1

Net unrealized gains/(losses)		(2.2	)		(2.1	)		(2.6	)		4.2
Translation adjustment		22.7			3.7			33.1			8.9

Total comprehensive income	$	129.2		$	152.4		$	347.3		$	368.9

The components of accumulated other comprehensive income, net of tax, as presented on the consolidated balance sheets were as follows (in millions) :


	Mar 30,			Sept 30,
	2008			2007
Net unrealized holding losses on hedging instruments	$	(29.7	)	$	(27.1	)
Translation adjustment		114.8			81.7

Accumulated other comprehensive income	$	85.1		$	54.6

As of March 30, 2008, the translation adjustment of $114.8 million was net of tax provisions of $5.8 million. As of September 30, 2007, the translation adjustment of $81.7 million was net of tax provisions of $7.3 million.

Note 9: Stock-Based Compensation

The Company maintains several equity incentive plans under which it may grant non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), or stock appreciation rights to employees, non-employee directors and consultants. As of March 30, 2008, there were 47.1 million shares of common stock available for issuance pursuant to future equity-based compensation awards. The Company also has employee stock purchase plans (“ESPP”).

The following table represents total stock based compensation expense recognized in the consolidated statements of earnings ( in millions ):


	13 Weeks Ended				26 Weeks Ended
	Mar 30, 2008		Apr 1, 2007		Mar 30, 2008		Apr 1, 2007
Stock option expense	$	10.8	$	25.0	$	31.9	$	46.5
RSU expense		1.0		—		1.0		—
ESPP expense		3.2		2.8		6.4		5.7

Total stock-based compensation expense	$	15.0	$	27.8	$	39.3	$	52.2

The decrease in stock option expense for fiscal 2008 was due to a higher level of forfeitures in the second quarter.

Options

The following table presents the weighted average assumptions used to value stock options, along with the related weighted average grant price for the 13-week and 26-week periods ended March 30, 2008 and April 1, 2007:


	Employee Stock Options Granted During the Period
	13 Weeks Ended						26 Weeks Ended
	Mar 30, 2008			Apr 1, 2007			Mar 30, 2008			Apr 1, 2007
Expected term (in years)		4.5			4.5			4.8			4.7
Expected stock price volatility		34.7	%		26.9	%		29.3	%		29.0	%
Risk-free interest rate		2.0	%		4.6	%		3.4	%		4.6	%
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%

Weighted average grant price	$	18.10		$	33.43		$	22.59		$	36.65

Estimated fair value per option granted	$	5.69		$	10.22		$	7.01		$	11.97

The assumptions used to calculate the fair value of stock awards granted are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience.

The following table summarizes all stock option transactions from September 30, 2007 through March 30, 2008 ( in millions, except per share and contractual life amounts):


				Weighted		Weighted
				Average		Average
	Shares			Exercise		Remaining		Aggregate
	Subject to			Price		Contractual		Intrinsic
	Options			per Share		Life (Years)		Value
Outstanding, September 30, 2007		65.5		$	20.97		6.2	$	507.5
Granted		14.2			22.59
Exercised		(3.3	)		11.43
Forfeited/Cancelled		(4.4	)		28.71

Outstanding, March 30, 2008		72.0			21.23		6.1		189.2

Exercisable, March 30, 2008		46.9			17.76		4.6		189.2
Vested and expected to vest, March 30, 2008		67.7			20.85		5.9		189.2

The closing market value of the Company’s stock on March 28, 2008 was $17.05. As of March 30, 2008, total unrecognized stock-based compensation expense related to nonvested stock options was approximately $106 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 3.0 years.

RSUs

RSUs are awarded to eligible employees and entitle the grantee to receive shares of common stock at the end of a vesting period, subject to the employee’s continuing employment. The fair value of these service based RSUs are based on the fair value of Starbucks common stock on the award date. The following table summarizes all RSU transactions from September 30, 2007 through March 30, 2008 ( in millions, except per share and contractual life amounts) :


			Weighted		Weighted
			Average		Average
	Number		Grant		Remaining		Aggregate
	of		Date		Contractual		Intrinsic
	Shares		Fair Value		Life (Years)		Value
Nonvested, September 30, 2007		0.2	$	27.83		3.0	$	4.7
Granted		1.0		17.39
Vested		—		—
Forfeited/Cancelled		—		—

Nonvested, March 30, 2008		1.2		18.94		2.5		20.6

Total unrecognized stock-based compensation expense related to nonvested RSUs was approximately $21.5 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 3.5 years.

Note 10: Earnings Per Share

The following table presents the calculation of net earnings per common share (“EPS”) – basic and diluted ( in millions, except EPS ):


	13 Weeks Ended				26 Weeks Ended
	Mar 30,		April 1,		Mar 30,		April 1,
	2008		2007		2008		2007
Net earnings	$	108.7	$	150.8	$	316.8	$	355.8
Weighted average common shares and common stock units outstanding (for basic calculation)		728.7		752.5		730.1		755.3
Dilutive effect of outstanding common stock options		10.6		21.6		12.1		23.2

Weighted average common and common equivalent shares outstanding (for diluted calculation)		739.3		774.1		742.2		778.5

EPS — basic	$	0.15	$	0.20	$	0.43	$	0.47
EPS — diluted	$	0.15	$	0.19	$	0.43	$	0.46

The number of antidilutive options and RSUs totaled 43.7 million and 11.8 million for the 13-week periods ended March 30, 2008 and April 1, 2007, respectively. The number of antidilutive options and RSUs totaled 40.8 million and 8.5 million for the 26-week periods ended March 30, 2008 and April 1, 2007, respectively.

Note 11: Commitments and Contingencies

Guarantees

The following table presents information on unconditional guarantees as of March 30, 2008 ( in millions ):


					Fair value estimate
	Maximum		Year Guarantee		recorded on
	Exposure		Expires in		Balance Sheet
Japanese yen-denominated bank loans (Starbucks Japan – an unconsolidated equity investee)	$	5.6		2014	$	—	⁽¹⁾
Borrowings of other unconsolidated equity investees	$	16.4		2008 to 2012	$	3.5


⁽¹⁾		Since there has been no modification of these loan guarantees subsequent to the Company’s adoption of FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” Starbucks has applied the disclosure provisions only and has not recorded the guarantees on its consolidated balance sheets.

Legal Proceedings

On June 3, 2004, two then-current employees of the Company filed a lawsuit, entitled Sean Pendlebury and Laurel Overton v. Starbucks Coffee Company, in the U.S. District Court for the Southern District of Florida claiming the Company violated requirements of the Fair Labor Standards Act (“FLSA”). The suit alleges that the Company misclassified its retail store managers as exempt from the overtime provisions of the FLSA, and that each manager therefore is entitled to overtime compensation for any week in which he or she worked more than 40 hours during the three years before joining the suit as a plaintiff, and for as long as they remain a manager thereafter. Plaintiffs seek to represent themselves and all similarly situated U.S. current and former store managers of the Company. Plaintiffs seek reimbursement for an unspecified amount of unpaid overtime compensation, liquidated damages, attorneys’ fees and costs. Plaintiffs also filed on June 3, 2004 a motion for conditional collective action treatment and court-supervised notice to additional putative class members under the opt-in procedures in section 16(b) of the FLSA. On January 3, 2005, the district court entered an order authorizing nationwide notice of the lawsuit to all current and former store managers employed by the Company during the three years before the suit was filed. The Company’s initial motion for summary judgment was denied without prejudice. The Company has filed another motion for summary judgment with the court. Starbucks believes that the plaintiffs are properly classified as exempt under the federal wage laws. The Company cannot estimate the possible loss to the Company, if any, and believes that a loss in this case is unlikely. There is currently no trial date. The Company intends to vigorously defend the lawsuit.

On October 8, 2004, a former hourly employee of the Company filed a lawsuit in San Diego County Superior Court entitled Jou Chau v. Starbucks Coffee Company . The lawsuit alleges that the Company violated the California Labor Code by allowing shift supervisors to receive tips. More specifically, the lawsuit alleges that since shift supervisors direct the work of baristas, they qualify as “agents” of the Company and are therefore excluded from receiving tips under California Labor Code Section 351, which prohibits employers and their agents from collecting or receiving tips left by patrons for other employees. The lawsuit further alleges that because the tipping practices violate the Labor Code, they also are unfair practices under the California Unfair Competition Law. In addition to recovery of an unspecified amount of tips distributed to shift supervisors, the lawsuit seeks penalties under California Labor Code Section 203 for willful failure to pay wages due. Plaintiff also seeks attorneys’ fees and costs. On February 28, 2008, the court ruled against the Company in the liability phase of the trial and on March 20, 2008 the court ordered the Company to pay approximately $87 million in restitution, plus interest. The Company plans to vigorously appeal the trial court’s rulings. Starbucks believes that while the adverse ruling by the trial judge in this case makes the possibility of loss somewhat more likely, the Company is only at the very beginning of the appellate process. Starbucks believes that the likelihood that the Company will ultimately incur a loss in connection with this litigation is reasonably possible rather than probable. The Company has not accrued any loss related to this litigation.

As previously disclosed in the Company’s Form 10-Q for the 13 weeks ended December 30, 2007, a former employee of the Company filed a lawsuit, entitled James Falcon v. Starbucks Corporation and Does 1 through 100 , in the U.S. District Court for the Southern District of Texas claiming that the Company violated requirements of the FLSA. In February 2008, the Company and the plaintiffs agreed upon terms of a settlement which was approved by the court on March 4, 2008.

On June 30, 2005, three individuals, Erik Lords, Hon Yeung, and Donald Brown filed a lawsuit in Orange County Superior Court, California. The lawsuit alleges that the Company violated the California Labor Code section 432.8 by asking job applicants to disclose at the time of application convictions for marijuana related offenses more than two years old. Plaintiffs also seek attorneys’ fees and costs. On November 1, 2007, the Court issued an order certifying the case as a class action, with the plaintiffs representing a class of all persons who have applied for employment with Starbucks Coffee Company in California since June 23, 2004 who cannot claim damages in excess of $200. On November 15, 2007, the court denied the Company’s motion for summary judgment. Starbucks has appealed the denial of its motion for summary judgment and the California Court of Appeals has agreed to hear the Company’s appeal. The Company cannot estimate the possible loss to the Company, if any. No trial date has been set. The Company believes its employment application complies with California law, and the Company intends to vigorously defend the lawsuit.

The Company is party to various other legal proceedings arising in the ordinary course of its business, but it is not currently a party to any legal proceeding that management believes would have a material adverse effect on the consolidated financial position or results of operations of the Company.

Note 12: Segment Reporting

Segment information is prepared on the basis that the Company’s management reviews financial information for operational decision making purposes. The tables below present information by operating segment ( in millions ):


	United							Unallocated
13 Weeks Ended	States			International		Global CPG		Corporate ⁽¹⁾			Total
March 30, 2008
Company-operated retail revenues	$	1,725.5		$	417.4	$	—	$	—		$	2,142.9
Licensing revenues		115.1			63.0		96.3		—			274.4
Foodservice and other revenues		95.7			13.0		—		—			108.7
Total net revenues		1,936.3			493.4		96.3		—			2,526.0
Operating income/(loss)		193.9			17.8		42.7		(76.2	)		178.2
Earnings/(loss) before income taxes		194.3			22.6		42.7		(92.4	)		167.2
Depreciation and amortization		102.2			26.5		—		9.4			138.1
Income/(loss) from equity investees		(0.7	)		15.2		10.0		—			24.5
Net impairment and disposition losses		27.8			9.6		—		0.1			37.5

April 1, 2007
Company-operated retail revenues	$	1,595.3		$	327.4	$	—	$	—		$	1,922.7
Licensing revenues		104.8			51.1		78.9		—			234.8
Foodservice and other revenues		89.3			8.8		—		—			98.1
Total net revenues		1,789.4			387.3		78.9		—			2,255.6
Operating income/(loss)		267.6			21.1		37.7		(85.4	)		241.0
Earnings/(loss) before income taxes		269.9			22.3		37.7		(89.6	)		240.3
Depreciation and amortization		84.4			20.7		—		8.3			113.4
Income from equity investees		—			13.0		13.3		—			26.3
Net impairment and disposition losses		2.8			6.2		—		1.0			10.0


	United						Unallocated
26 Weeks Ended	States		International		Global CPG		Corporate (1)		Total
March 30, 2008
Company-operated retail revenues	$	3,615.8	$	878.6	$	—	$	—	$	4,494.4
Licensing revenues		253.0		129.3		196.9		—		579.2
Foodservice and other revenues		193.7		26.3		—		—		220.0


	United							Unallocated
26 Weeks Ended	States			International		Global CPG		Corporate (1)			Total
Total net revenues		4,062.5			1,034.2		196.9		—			5,293.6
Operating income/(loss)		504.8			71.9		93.3		(158.7	)		511.3
Earnings/(loss) before income taxes		512.2			80.8		93.3		(192.4	)		493.9
Depreciation and amortization		200.6			52.2		—		18.5			271.3
Income/(loss) from equity investees		(0.3	)		27.3		21.1		—			48.1
Net impairment and disposition losses		31.5			10.8		—		0.1			42.4

April 1, 2007
Company-operated retail revenues	$	3,255.6		$	673.9	$	—	$	—		$	3,929.5
Licensing revenues		218.1			101.0		169.6		—			488.7
Foodservice and other revenues		175.6			17.5		—		—			193.1
Total net revenues		3,649.3			792.4		169.6		—			4,611.3
Operating income/(loss)		592.7			54.2		79.3		(165.5	)		560.7
Earnings/(loss) before income taxes		596.7			55.8		79.3		(165.3	)		566.5
Depreciation and amortization		165.8			41.2		—		16.6			223.6
Income from equity investees		—			21.0		24.0		—			45.0
Net impairment and disposition losses		5.3			7.2		—		1.0			13.5


⁽¹⁾		Unallocated Corporate includes expenses pertaining to corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments. These unallocated corporate expenses include certain general and administrative expenses, related depreciation and amortization expenses and amounts included in “Interest income and other, net” and “Interest expense” on the consolidated statements of earnings.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements herein, including anticipated store openings, trends in or expectations regarding Starbucks Corporation’s initiatives and plans, earnings per share, cash flow requirements, revenue growth, free cash flow, operating margins, expense control, capital expenditures and guidance and targets all constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, coffee, dairy and other raw materials prices and availability, successful implementation of the Company’s transformation agenda and other initiatives, successful execution of internal performance and expansion plans, fluctuations in United States and international economies and currencies, ramifications from the war on terrorism, or other international events or developments, the impact of competitors’ initiatives, the effect of legal proceedings, and other risks detailed herein, including those described in Part II Item 1A. “Risk Factors” in this Form 10-Q , and in Starbucks Corporation’s other filings with the SEC, including the Item 1A. “Risks Factors” section of the 10-K.

A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Users should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. The Company is under no obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

This information should be read in conjunction with the condensed consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the 10-K.

General

Starbucks Corporation’s fiscal year ends on the Sunday closest to September 30. All references to store counts, including data for new store openings, are reported net of store closures.

Management Overview

Fiscal 2008 – Second Quarter in Review and Full Year Outlook

Starbucks is experiencing a substantial down-turn in traffic in its U.S. stores, reflected in the reduced frequency of customer visits. The Company believes that this is caused by a number of factors in the U.S. economy that have sharply reduced the amount consumers have to spend on discretionary purchases. These factors include the higher cost of such basic consumer staples as gas and food, a dramatic drop in consumer confidence, and sharply falling home values in certain areas of the country (California and Florida) where Starbucks has a high concentration of Company-operated stores.

Starbucks business is highly sensitive to increases and decreases in customer traffic. Increased customer visits mean that expenses can be spread across a greater revenue base, thereby improving operating margins, but the reverse is also true.

Since the start of the Company’s second fiscal quarter, Starbucks has taken many steps to address the deterioration in the U.S. retail environment, including announcement and initial implementation of the Company’s transformation agenda, which is a comprehensive set of initiatives to reinvigorate the Starbucks Experience for the Company’s customers and to increase customer traffic in its U.S. stores.

As a result of the weakening U.S. economy and decreased customer traffic, as well as the costs associated with the implementation of the Company’s rationalization of its store portfolio and the transformation agenda, the Company’s second quarter results were negatively impacted in the following ways:

	•		Consolidated operating income decreased 26% to $178.2 million in the second fiscal quarter of 2008, and operating margin contracted to 7.1% from 10.7% in the prior year. The decline was heavily influenced by weakness in the U.S. segment, due to softness in existing store sales, charges related to the rationalization of the store portfolio, and costs associated with the implementation of the Company’s transformation agenda.

	•		EPS for the quarter was $0.15, down 21% from the $0.19 per share earned in the prior year. The charges related to the rationalization of its store portfolio and costs associated with the implementation of the Company’s transformation agenda negatively impacted EPS by approximately $0.03 per share.

Fiscal 2008 – Full Year Outlook

Fiscal 2008 will be a transition year for Starbucks, as the Company executes on the initiatives generated by its transformation agenda. Consolidated revenue growth of approximately 13-14% is expected for the full fiscal year. EPS for the year is expected to be somewhat lower than the $0.87 reported for fiscal 2007. Capital expenditures of approximately $1.1 billion are expected for the full fiscal year. The Company lowered its U.S. store opening target to 1,020 net new stores; its International target remains at 975 net new stores.

Recent Developments

During the second quarter of fiscal 2008, the Company announced its agenda to transform and reinvigorate the U.S. business. Key points of the transformation agenda include:

	•		Slowing the pace of U.S. store openings;

	•		Taking decisive actions to enhance the Starbucks Experience , including espresso excellence training in February 2008 for all employees in U.S. Company-operated stores;

	•		Launching in April 2008 a new, everyday brewed coffee, Pike Place Roast ^TM , which returned the Company to the practice of grinding whole beans in stores and brewing every 30 minutes to provide customers with the freshest coffee possible;

	•		Enhancing the preparation and quality of coffee offerings by introducing a new espresso machine — the Mastrena ^TM ; and

	•		Introducing the Starbucks Card Rewards loyalty program.

Initiatives underway for fiscal 2008 include:

	•		Focusing on the core beverage business and introducing three new beverage platforms designed to invigorate the Company’s beverage offerings: energy beverage, health and wellness, and a new cold beverage category;

	•		Introducing new breakfast food offerings and new bakery and chilled foods; and

•

Refining the Company’s entertainment strategy and restructuring the entertainment business to focus on digital and core content with music and books.

Management has reviewed all aspects of the Company’s operations to ensure it is best utilizing its resources and is working to reduce expenses in non-critical areas. Management believes that as the Company continues to execute on the initiatives generated by the transformation agenda, the Company will reinvigorate the Starbucks Experience for customers, and in doing so, deliver increased value to shareholders.

In April 2008, Starbucks disclosed quantifiable, longer-term financial metrics. These metrics will measure progress the Company is making on its transformation agenda as the Company continues to take advantage of growth opportunities globally, with a renewed focus on creating long term shareholder value. The principles management used in establishing the targets for the Company include:

	•		A renewed focus on the use of capital and generation of free cash flow;

	•		Investing in the growth opportunities in the International operating segment, by continuing to expand with license partners globally, while delivering significant operating margin improvement; and

	•		Being more disciplined on expense management.

The financial metrics for 2009 through 2011 include:

	•		Investment in Stores - Starbucks plans to open fewer new stores in the U.S. over the 2009 to 2011 period. Less than 400 stores per year are projected to be opened and approximately 250 will be Company-operated stores in each of the three years. At the same time, the Company plans to continue to accelerate its International unit expansion, targeting net new store openings as follows: approximately 1,050 in 2009, 1,150 in 2010, and 1,300 in 2011.

	•		Use of Capital - The Company expects capital expenditures of approximately $800 million per year beginning in fiscal 2009, which includes incremental capital costs for its transformation initiatives.

	•		Revenue Growth - Starbucks is targeting International revenue growth at a compound annual growth rate of 20% over the three-year period, driven by new store openings and continued growth in existing stores. CPG is expected to grow 15% per year, through product and channel expansion. The U.S. segment is expected to continue to grow, but at a slower pace than in previous years, in line with the slowing of new store openings, and more conservative expectations of same store sales growth that assumes a continued difficult consumer economic environment. For the U.S. segment, Starbucks is expecting a three-year compound annual growth rate of just over 6%. Total Company revenues are expected to grow at a 10% three-year compound annual rate.

	•		EPS Expansion - For fiscal 2009, the Company is targeting an EPS range of $0.90 to $1.00. For fiscal 2010, Starbucks anticipates EPS in the range of $1.10 to $1.20. In fiscal 2011, EPS is expected to be in the range of $1.35 to $1.50.

	•		Operating Margin Targets - Starbucks expects International operating margins to improve to approximately 12% in 2011. CPG operating margin is expected to remain flat with fiscal 2007 at 50% each year over the 2009 to 2011 period. Operating margin for the U.S. segment is expected to stabilize after 2008, at an average of approximately 11.5% from 2009 to 2011. Consolidated operating margin is expected to improve over the three-year period from 2008 level, but will remain below 2007 operating margin of 11.2%, driven by the erosion in the U.S. business.

	•		Corporate G&A Leverage - The Company expects to gain leverage of approximately one percent of revenues from unallocated corporate general and administrative expenses, with improvement over the four-year period due to the Company’s cost saving initiatives.

	•		Free Cash Flow Generation ⁽¹⁾ — In line with the targets referenced above, the Company expects to generate over $4.4 billion in cash from operating activities and have $2.4 billion in capital expenditures, leading to $2 billion in cumulative free cash flow from 2009 through 2011. Starbucks defines free cash flow as cash from operations less capital expenditures. The Company intends to use this excess cash to return value to shareholders through share repurchases or drive increased value through investment in new opportunities with attractive expected returns on capital.

(1) Free cash flow is a non-GAAP financial measure and may not be comparable to similar measures used by other companies. Free cash flow is used in addition to and in conjunction with results presented in accordance with GAAP and free cash flow should not be relied upon to the exclusion of GAAP financial measures. The disclosure of free cash flow is intended to supplement investors’ understanding of the Company’s operating performance.

Results of Operations for the 13 Weeks and 26 Weeks Ended March 30, 2008 and April 1, 2007

Revenues – Consolidated


	13 Weeks Ended							26 Weeks Ended
	Mar 30,		Apr 1,		%			Mar 30,		Apr 1,		%
(in millions)	2008		2007		Change			2008		2007		Change
Net revenues:
Company-operated retail	$	2,142.9	$	1,922.7		11.5	%	$	4,494.4	$	3,929.5		14.4	%

Specialty: Licensing		274.4		234.8		16.9			579.2		488.7		18.5
Foodservice and other		108.7		98.1		10.8			220.0		193.1		13.9

Total specialty		383.1		332.9		15.1			799.2		681.8		17.2


Total net revenues	$	2,526.0	$	2,255.6		12.0	%	$	5,293.6	$	4,611.3		14.8	%

Net revenues for the 13 weeks and 26 weeks ended March 30, 2008, increased compared to the corresponding periods of fiscal 2007, driven by increases in both Company-operated retail and specialty operations.

Starbucks derived 85% of total net revenues from its Company-operated retail stores during the 13 weeks and 26 weeks ended March 30, 2008. The U.S. segment contributed approximately 81% of total retail revenues. Company-operated retail revenues increased compared to the same period in fiscal 2007 primarily due to the opening of 1,290 new Company-operated retail stores in the last 12 months. Also contributing were favorable foreign currency exchange rates, primarily on the Canadian dollar. The slower growth rate of retail revenues in the second quarter of fiscal 2008 was due to a mid-single-digit decline in U.S. comparable store sales, resulting from decreased traffic.

The Company derived the remaining 15% of total net revenues from licensing and foodservice channels outside the Company-operated retail stores, collectively known as specialty operations.

Licensing revenues, which are derived from retail store licensing arrangements as well as grocery, warehouse club and certain other branded-product operations, increased for the 13 weeks and 26 weeks ended March 30, 2008 compared to the corresponding period of fiscal 2007. The increase was primarily due to higher product sales and royalty revenues in the U.S. and International segments from the opening of 1,208 new licensed retail stores in the last 12 months, and an increase in CPG revenues resulting from increased sales of packaged coffee and tea in the U.S.

Foodservice and other revenues for the 13 weeks and 26 weeks ended March 30, 2008, increased compared to the corresponding periods of fiscal 2007 primarily due to growth in new and existing foodservice accounts in both U.S. and International markets.

Operating expenses – Consolidated


	13 Weeks Ended									26 Weeks Ended
	Mar 30,			Apr 1,			%			Mar 30,			Apr 1,			%
(in millions)	2008			2007			Change			2008			2007			Change
Cost of sales including occupancy costs	$	1,106.7		$	944.7			17.1	%	$	2,292.7		$	1,929.5			18.8	%
As a % of total net revenues		43.8	%		41.9	%	1.9		ppt		43.3	%		41.8	%	1.5		ppt

Store operating expenses	$	927.1		$	781.0			18.7	%	$	1,854.4		$	1,553.0			19.4	%
As a % of related net revenues		43.3	%		40.6	%	2.7		ppt		41.3	%		39.5	%	1.8		ppt

Other operating expenses	$	82.8		$	74.0			11.9	%	$	168.5		$	144.9			16.3	%
As a % of related net revenues		21.6	%		22.2	%	(0.6		) ppt		21.1	%		21.3	%	(0.2		) ppt


	13 Weeks Ended									26 Weeks Ended
	Mar 30,			Apr 1,			%			Mar 30,			Apr 1,			%
(in millions)	2008			2007			Change			2008			2007			Change
Depreciation and amortization expenses	$	138.1		$	113.4			21.8	%	$	271.3		$	223.6			21.3	%
As a % of total net revenues		5.5	%		5.0	%	0.5		ppt		5.1	%		4.8	%	0.3		ppt

General and administrative expenses	$	117.6		$	127.8			(8.0	)%	$	243.5		$	244.6			(0.4	)%
As a % of total net revenues		4.7	%		5.7	%	(1.0		) ppt		4.6	%		5.3	%	(0.7		) ppt

Operating income	$	178.2		$	241.0			(26.1	)%	$	511.3		$	560.7			(8.8	)%
As a % of. total net revenues		7.1	%		10.7	%	(3.6		) ppt		9.7	%		12.2	%	(2.5		) ppt

Cost of sales including occupancy costs for the 13 weeks and 26 weeks ended March 30, 2008 increased compared to the prior year periods, primarily due to higher occupancy costs and higher dairy costs as a percentage of revenues.

Store operating expenses as a percentage of related company-operated retail revenues for the 13 weeks and 26 weeks ended March 30, 2008 increased compared to the prior year periods. The increases were caused by a combination of slower growth of revenues, charges associated with the rationalization of the Company’s store portfolio and costs related to the transformation agenda initiatives.

General and administrative expenses as a percentage of total net revenues improved for the 13 weeks and 26 weeks ended March 30, 2008, primarily due to lower payroll-related expenses.

Operating income for the 13 weeks and 26 weeks ended March 30, 2008 decreased and operating margin contracted compared to the prior year. The contraction in operating margin for the 13 weeks ended March 30, 2008 was primarily driven by softer sales in the U.S. business, although both the International and CPG businesses experienced margin pressure as well. Contributing to both the U.S. and International margin erosion was the second quarter negative impact of the charges related to the rationalization of the store portfolio and costs associated with the implementation of the transformation agenda initiatives.

Income taxes — Consolidated


	13 Weeks Ended									26 Weeks Ended
	Mar 30,			Apr 1,			%			Mar 30,			Apr 1,			%
(in millions)	2008			2007			Change			2008			2007			Change
Income taxes	$	58.5		$	89.5			(34.6	)%	$	177.1		$	210.7			(15.9	)%
Effective tax rate		35.0	%		37.2	%	(2.2		) ppt		35.9	%		37.2	%	(1.3		) ppt

The effective tax rate for the 13 weeks and 26 weeks ended March 30, 2008 improved primarily due to the relatively larger contribution from International earnings in the second quarter of fiscal 2008.

SEGMENT RESULTS

Segment information is prepared on the basis that the Company’s management performs its reviews of financial information for operational decision-making purposes. The following tables summarize the Company’s results of operations by segment (in millions):

United States


	13 Weeks Ended									26 Weeks Ended
	Mar 30,			Apr 1,			%			Mar 30,			Apr 1,			%
(in millions)	2008			2007			Change			2008			2007			Change
Total net revenues	$	1,936.3		$	1,789.4			8.2	%	$	4,062.5		$	3,649.3			11.3	%

Total operating expenses	$	1,741.7		$	1,521.8			14.4	%	$	3,557.4		$	3,056.6			16.4	%
As a % of U.S. total net revenues		89.9	%		85.0	%	4.9		ppt		87.6	%		83.8	%	3.8		ppt

Income from equity investees	$	(0.7	)		—		nm			$	(0.3	)		—		nm
As a % of U.S. total net revenues		—			—			—			—			—			—

Operating income	$	193.9		$	267.6			(27.5	)%	$	504.8		$	592.7			(14.8	)%
As a % of U.S. total net revenues		10.0	%		15.0	%	(5.0		) ppt		12.4	%		16.2	%	(3.8		) ppt

Total U.S. net revenues for the 13 weeks and 26 weeks ended March 30, 2008 increased primarily due to higher Company-operated retail revenues, which comprise 89% of total U.S. net revenues. U.S. Company-operated retail revenues increased due to the opening of 976 new Company-operated retail stores in the last 12 months, offset by a mid-single-digit decline in U.S. comparable store sales for the second quarter of fiscal 2008. Starbucks believes a significant driver of the comparable store sales decline is the current difficult economic environment, which results in less frequent customer visits to the stores.

Operating margin contracted substantially for the 13 weeks and 26 weeks ended March 30, 2008 due to the decline in store traffic, higher store operating expenses and higher cost of sales including occupancy costs as a percentage of total net revenues. Higher store operating expenses were due to costs associated with terminating future store site commitments, along with the write-off of certain store assets. Higher cost of sales including occupancy costs was driven by increased dairy costs and higher rent expenses. Higher rent expense as a percentage of revenues was caused by lost sales leverage, as well as increased average rent per store.

International


	13 Weeks Ended									26 Weeks Ended
	Mar 30,			Apr 1,			%			Mar 30,			Apr 1,			%
(in millions)	2008			2007			Change			2008			2007			Change
Total net revenues	$	493.4		$	387.3			27.4	%	$	1,034.2		$	792.4			30.5	%

Total operating expenses	$	490.8		$	379.2			29.4	%	$	989.6		$	759.2			30.3	%
As a % of International total net revenues		99.5	%		97.9	%	1.6		ppt		95.7	%		95.8	%	(0.1		) ppt

Income from equity investees	$	15.2		$	13.0			16.9	%	$	27.3		$	21.0			30.0	%
As a % of International total net revenues		3.1	%		3.4	%	(0.3		) ppt		2.6	%		2.7	%	(0.1		) ppt

Operating income	$	17.8		$	21.1			(15.6	)%	$	71.9		$	54.2			32.7	%
As a % of International total net revenues		3.6	%		5.4	%	(1.8		) ppt		7.0	%		6.8	%	0.2		ppt

Total International net revenues increased for the 13 weeks and 26 weeks ended March 30, 2008 primarily due to an increase in International Company-operated retail revenues, which comprise 85% of total International net revenues. The increase in retail revenues was due to the opening of 314 net new International Company-operated retail stores in the last 12 months and favorable foreign currency exchange rates, primarily on the Canadian dollar. Also contributing to the increased total International net revenues was increased International specialty revenues due to higher product sales and royalty revenues from opening 564 new International licensed retail stores in the last 12 months.

Operating margin decreased for the 13 weeks ended March 30, 2008 primarily due to costs associated with rationalization of the store portfolio and higher cost of sales including occupancy costs as a percentage of sales.

Global Consumer Products Group


	13 Weeks Ended									26 Weeks Ended
	Mar 30,			Apr 1,			%			Mar 30,			Apr 1,			%
(in millions)	2008			2007			Change			2008			2007			Change
Total specialty revenues	$	96.3		$	78.9			22.1	%	$	196.9		$	169.6			16.1	%

Total operating expenses	$	63.6		$	54.5			16.7	%	$	124.7		$	114.3			9.1	%
As a % of CPG total net revenues		66.0	%		69.1	%	(3.1		) ppt		63.3	%		67.4	%	(4.1		) ppt

Income from equity investees	$	10.0		$	13.3			(24.8	)%	$	21.1		$	24.0			(12.1	)%
As a % of CPG total net revenues		10.4	%		16.9	%	(6.5		) ppt		10.7	%		14.2	%	(3.5		) ppt

Operating income	$	42.7		$	37.7			13.3	%	$	93.3		$	79.3			17.7	%
As a % of CPG total net revenues		44.3	%		47.8	%	(3.5		) ppt		47.4	%		46.8	%	0.6		ppt

Total CPG net revenues increased for the 13 weeks and 26 weeks ended March 30, 2008 due to higher sales of packaged coffee and tea in the U.S. market as well as increased product sales and royalties in the International ready-to-drink business.

Operating margin compressed substantially for the 13 weeks ended March 30, 2008 driven by lower income from equity investees as a result of product write-offs within The North American Coffee Partnership joint venture.

Unallocated Corporate


	13 Weeks Ended									26 Weeks Ended
	Mar 30,			Apr 1,			%			Mar 30,			Apr 1,			%
(in millions)	2008			2007			Change			2008			2007			Change
Operating loss	$	76.2		$	85.4			(10.8	)%	$	158.7		$	165.5			(4.1	)%
As a % of total net revenues		3.0	%		3.8	%	(0.8		) ppt		3.0	%		3.6	%	(0.6		) ppt

Total unallocated corporate expenses as a percentage of total net revenues decreased primarily as a result of lower payroll-related expenses.

Financial Condition and Liquidity

The Company’s existing cash and liquid investments were $371.5 million and $459.7 million as of March 30, 2008 and September 30, 2007, respectively. The decrease in liquid investments reflects that auction rate securities, most of which are held within the Company’s wholly owned captive insurance company, are not currently considered liquid and have been reclassified to long-term investments as of March 30, 2008. Included in the cash and liquid investment balances are the following:

	•		A portfolio of unrestricted trading securities, designed to hedge the Company’s liability under its Management Deferred Compensation Plan (“MDCP”). The value of this portfolio was $68.1 million and $73.6 million as of March 30, 2008 and September 30, 2007, respectively.

	•		Unrestricted cash and liquid securities, held within the Company’s wholly owned captive insurance company, to fund claim payouts. The value of these unrestricted cash and liquid securities was approximately $50.3 million and $98.1 million as of March 30, 2008 and September 30, 2007, respectively.

The Company manages the balance of its cash and liquid investments in order to internally fund operating needs and make scheduled interest and principal payments on its borrowings.

Credit rating agencies currently rate the Company’s borrowings as follows:


	Commercial paper	Long-term debt
Moody’s	P-2	Baa1
Standard & Poor’s	A-2	BBB+

The Company intends to use its cash and liquid investments, including any borrowings under its revolving credit facility, commercial paper program and proceeds from the issuance of long term debt securities, to invest in its core businesses and new beverage innovations as well as other new business opportunities related to its core businesses. The Company may use its available cash resources to make proportionate capital contributions to its equity method and cost method investees, as well as purchase larger ownership interests in selected equity method investees and licensed operations, particularly in international markets. Depending on market conditions and other factors, Starbucks may repurchase shares of its common stock under its authorized share repurchase program. Management believes that cash flow generated from operations, existing cash and liquid investments, as well as borrowing capacity under the revolving credit facility and commercial paper program, should be sufficient to finance capital requirements for its core businesses for the foreseeable future. Significant new joint ventures, acquisitions and/or other new business opportunities may require additional outside funding.

Other than normal operating expenses, cash requirements for fiscal 2008 are expected to consist primarily of capital expenditures for new Company-operated retail stores and remodeling and refurbishment of existing Company-operated retail stores, as well as capital costs for the transformation initiatives and construction of a new roasting and distribution facility. Potential increased investments in International licensees may require additional cash expenditures.

Cash provided by operating activities increased by $27 million to $765.1 million for the 26 weeks ended March 30, 2008 compared to the corresponding period of fiscal 2007. The modest increase was primarily due to revenue growth offset by a decrease in cash provided by changes in operating assets and liabilities.

Cash used by investing activities for the 26 weeks ended March 30, 2008 totaled $497.4 million. Net capital additions to property, plant and equipment used $505.1 million, primarily from opening 619 new Company-operated retail stores and remodeling certain existing stores during the 26-week period. In addition, the sale and maturity of available-for-sale securities provided $75.9 million and $15.3 million, respectively, for the 26 weeks ended March 30, 2008, consisting primarily of auction rate securities that were sold through the normal auction process.

Cash used by financing activities for the 26 weeks ended March 30, 2008 totaled $253.9 million. Cash used to repurchase shares of the Company’s common stock totaled $311.4 million, all in the first quarter of fiscal 2008. This amount includes the effect of the net change in unsettled trades from September 30, 2007 of $16.0 million. Net repayments of commercial paper were $9.6 million for the 26 weeks ended March 30, 2008. As of March 30, 2008, a total of $700.7 million in borrowings were outstanding under the commercial paper program and $14.1 million in letters of credit were outstanding under the credit facility, leaving $284.5 million of capacity available under the $1 billion combined commercial paper program and revolving credit facility. Partially offsetting cash used for share repurchases were proceeds of $59.3 million from the exercise of employee stock options and the sale of the Company’s common stock from employee stock purchase plans. As options granted are exercised, Starbucks will continue to receive proceeds and a tax deduction, but the amount and the timing of these cash flows cannot be reliably predicted as option holders’ decisions to exercise options will be largely driven by movements in the Company’s stock price.

The Company’s credit facility contains provisions requiring Starbucks to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio which measures the Company’s ability to cover financing expenses. As of March 30, 2008 and September 30, 2007, the Company was in compliance with each of these covenants. The $550 million of 6.25% Senior Notes, issued in the fourth quarter of fiscal 2007, also require Starbucks to maintain compliance with certain covenants that limit future liens and sale and leaseback transactions on certain material properties. As of March 30, 2008 and September 30, 2007, the Company was in compliance with each of these covenants.

As described in more detail in Note 1 to the Consolidated Financial Statements, as of March 30, 2008, the Company had $70.5 million invested in available-for-sale securities, consisting entirely of auction rate securities. During the second fiscal quarter of 2008, auctions for these securities were not successful. While the recent auction failures will limit the liquidity of these investments for some period of time, the Company does not believe the auction failures will materially impact its ability to fund its working capital needs, capital expenditures or other business requirements.

Store Data

The following table summarizes the Company’s retail store information:


	Net stores opened during the period								Stores open as of
	13 weeks ended				26 weeks ended
	Mar 30,		Apr 1,		Mar 30,		Apr 1,		Mar 30,		Apr 1,
	2008		2007		2008		2007		2008		2007
United States:
Company-operated stores		170		271		464		553		7,257		6,281
Licensed stores		96		142		286		365		4,177		3,533

		266		413		750		918		11,434		9,814


International:
Company-operated stores		71		42		155		118		1,867		1,553
Licensed stores		133		105		310		252		2,925		2,361

		204		147		465		370		4,792		3,914

Total		470		560		1,215		1,288		16,226		13,728

Contractual Obligations

There have been no material changes during the period covered by this report, outside of the ordinary course of the Company’s business, to the contractual obligations specified in the table of contractual obligations included in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 10-K.

Off-Balance Sheet Arrangements

The Company’s off-balance sheet arrangements relate to guarantees and are detailed in Note 11 to the Consolidated Financial Statements in this Form 10-Q.

Commodity Prices, Availability and General Risk Conditions

Commodity price risk represents the Company’s primary market risk, generated by its purchases of green coffee and dairy products. The Company purchases, roasts and sells high quality whole bean arabica coffee and related products and risk arises from the price volatility of green coffee. In addition to coffee, the Company also purchases significant amounts of dairy products to support the needs of its Company-operated retail stores. The price and availability of these commodities directly impacts the Company’s results of operations and can be expected to impact its future results of operations. For additional details see “Product Supply” in Item 1, as well as “Risk Factors” in Item 1A of the 10-K.

Seasonality and Quarterly Results

The Company’s business is subject to seasonal fluctuations, including fluctuations resulting from the holiday season. The Company’s cash flows from operations are considerably higher in the first fiscal quarter than the remainder of the year. This is largely driven by cash received as Starbucks Cards are purchased and loaded during the holiday season. Since revenues from the Starbucks Card are recognized upon redemption and not when purchased, seasonal fluctuations on the consolidated statements of earnings are much less pronounced. Quarterly results are affected by the timing of the opening of new stores, and the Company’s growth may conceal the impact of other seasonal influences. For these reasons, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 to the Consolidated Financial Statements in this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk related to changes in commodity prices, foreign currency exchange rates, equity security prices and interest rates.

Foreign Currency Exchange Risk

As discussed in Note 3 to the Consolidated Financial Statements to the 10-K, Starbucks enters into certain hedging transactions to help mitigate its exposure to foreign currency denominated revenues, purchases, assets and liabilities.

The following table summarizes the potential impact to the Company’s future net earnings and other comprehensive income (“OCI”) from changes in the fair value of these derivative financial instruments due in turn to a change in the value of the U.S. dollar as compared to the level of foreign exchange rates. The information provided below relates only to the hedging instruments and does not represent the corresponding changes in the underlying hedged items ( in millions ):

March 30, 2008


	Increase/(Decrease) to Net Earnings					Increase/(Decrease) to OCI
	10% Increase in		10% Decrease in			10% Increase in		10% Decrease in
	Underlying Rate		Underlying Rate			Underlying Rate		Underlying Rate
Foreign currency hedges	$	40	$	(44	)	$	19	$	(23	)

Interest Rate Risk, Commodity Price risk and Equity Security Price Risk

There has been no material change in the commodity price risk, equity security price risk, or interest rate risk discussed in Item 7A of the 10-K.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that material information required to be disclosed in the Company’s periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Starbucks disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

During the quarter the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and operation of the disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective, as of the end of the period covered by this report (March 30, 2008).

During the second quarter of fiscal 2008, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that materially affected or are reasonably likely to materially affect internal control over financial reporting.

The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits 31.1 and 31.2, respectively, to this Quarterly Report on Form 10-Q.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

See discussion of Legal Proceedings in Note 11 to the consolidated financial statements included in Item 1 of Part I of this Report.

Item 1A. Risk Factors

Except as set forth below, there have been no material changes to the risk factors disclosed under Item 1A. “Risk Factors” in the 10-K. The information below updates, and should be read in conjunction with, the risk factors and information disclosed under Item 1A. “Risk Factors” in the 10-K.

The following new risk factor has been added to the risk factors disclosed under Item 1A. “Risk Factors” in the 10-K.

New Risk Factor

•

The Company may not be successful in implementing important new strategic initiatives, or even if successfully implemented such initiatives may not achieve the Company’s intended results, either of which may have a material adverse impact on its business and financial results.

On January 7, 2008, the Company announced that its chairman Howard Schultz would take on the additional role of president and chief executive officer, replacing Jim Donald who left the Company. The Company subsequently undertook the development and implementation of several important strategic initiatives as part of a transformation agenda designed to drive long-term shareholder value and improve Starbucks results of operations, including:

	•		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 ^® 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 redeployment of a portion of the capital originally earmarked for U.S. store growth to the International business.

There can be no assurance that the Company will be able to successfully implement its new strategic initiatives or that its transformation agenda will result in improved results of operations. If the Company does not successfully implement its new strategic initiatives, or if its transformation agenda does not achieve its intended results, the Company may experience a material adverse impact on its business and financial results.

Additionally, the following four risk factors, which were previously disclosed under Item 1A. “Risk Factors” in the 10-K, have been updated and revised and are replaced in their entirety by the risk factors set forth below.

	•		*Failing to meet market expectations for Starbucks financial performance could cause the market price of Starbucks stock to drop rapidly and sharply*

	•		*Starbucks is highly dependent on the financial performance of its United States operating segment*

	•		*The China market is important to the Company’s long-term growth prospects — doing business there and in other developing countries can be challenging*

	•		*Effectively managing the Company’s rapid growth is challenging*

Updated and Revised Risk Factors

•

Failure to meet market expectations for Starbucks financial performance will likely adversely affect the market price of Starbucks stock.

The Company’s failure to meet market expectations going forward, particularly with respect to comparable store sales, net revenues, operating margins, and earnings per share, will likely result in a further drop in the market price of Starbucks stock.

•

Starbucks is highly dependent on the financial performance of its United States operating segment.

The Company’s financial performance is highly dependent on its United States operating segment, which comprised 78% of consolidated total net revenues in fiscal 2007. The Company has experienced a substantial down-turn in traffic in its U.S. stores in fiscal 2008, which has adversely affected the operating results of the U.S. segment and the Company as a whole. If the U.S. segment is unable to improve its financial performance, the Company’s business and financial results will continue to be adversely affected.

•

Developing country markets are important to the Company’s long-term growth prospects, however, doing business in these markets can be challenging.

Many of the risks and uncertainties of doing business in developing countries are largely within the control of the governments of such countries. These governments can regulate the business conducted by Starbucks by restricting the scope of the Company’s foreign investments and the food and beverage, retail, wholesale and distribution business conducted within such countries. Although management believes it has structured the Company’s operations to comply with local laws, there can be substantial uncertainties regarding the interpretation and application of laws and regulations and the enforceability of intellectual property and contract rights in these developing countries. If governmental authorities in these developing countries conclude that Starbucks has not complied with one or more existing or future laws or regulations, or if their interpretations of those laws or regulations were to change over time, the Company’s affiliates could be subject to fines and other financial penalties, prohibited from opening new stores or forced to cease operations entirely. Moreover, any inability of the Company to enforce its intellectual property and contract rights in the courts of these countries could adversely affect the Company’s business.

•

Effectively managing the Company’s growth can be challenging.

The Company expects to have a total of approximately 21,500 Starbucks stores by the end of fiscal 2011. Effectively managing growth can be challenging, particularly as Starbucks expands into new markets internationally, where it must balance the need for flexibility and a degree of autonomy for local management with consistency with the Company’s goals, philosophy and standards. Significant growth can make it increasingly difficult to ensure a consistent supply of high quality raw materials, to locate and hire sufficient numbers of key employees to meet the Company’s growth targets, to maintain an effective system of internal controls for a globally dispersed enterprise and to train employees worldwide to deliver a consistently high quality product and customer experience.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company did not repurchase any shares during the second quarter of fiscal 2008. As of the end of the quarter, the maximum number of shares that may yet be purchased under publicly announced stock repurchase plans was 6,272,128 shares. This number includes the additional 5 million shares authorized by the Starbucks Board of Directors on January 29, 2008.

Item 4. Submission of Matters to a Vote of Security Holders

At the Annual Meeting of Shareholders of the Company held on March 19, 2008, the shareholders elected the directors to serve for terms of one year and until their successors are elected and qualified. In addition, shareholders ratified the Audit and Compliance Committee selection of Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for fiscal 2008.

The table below shows the results of the shareholders’ voting:


	Votes in						Broker Non-
	Favor		Votes Against		Abstentions		Votes
Election of Directors:
Howard Schultz		623,312,994		6,307,865		7,158,309		N/A
Barbara Bass		621,818,132		7,111,846		7,849,190		N/A
William W. Bradley		623,572,196		5,214,233		7,990,701		N/A
Mellody Hobson		623,146,646		5,584,206		8,092,754		N/A
Olden Lee		623,552,467		5,243,967		7,987,623		N/A
James G. Shennan, Jr.		621,476,265		7,288,173		8,023,712		N/A
Javier G. Teruel		623,540,742		5,234,643		8,004,255		N/A
Myron E. Ullman, III		620,999,229		7,639,808		8,146,505		N/A
Craig E.Weatherup		623,628,013		5,155,283		8,001,929		N/A

Ratification of independent registered public accounting firm		624,963,475		4,520,709		7,247,242		92,180

Item 6. Exhibits


			Incorporated by Reference
Exhibit							Date of		Exhibit		Filed
No.		Exhibit Description	Form		File No.		First Filing		Number		Herewith

	10.1	Letter Agreement dated February 19, 2008 between Starbucks Corporation and Arthur Rubinfeld*		—		—		—		—		X

	10.2	Letter Agreement dated January 10, 2008 between Starbucks Corporation and Chet Kuchinad*		—		—		—		—		X

	10.3	Letter Agreement dated February 21, 2008 between Starbucks Corporation and Clifford Burrows*		—		—		—		—		X

	10.4	Separation Agreement and Release dated January 7, 2008 between Starbucks Corporation and James L. Donald*		—		—		—		—		X

	10.5	Separation Agreement and Release dated March 3, 2008 between Starbucks Corporation and Launi Skinner*		—		—		—		—		X

	31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes — Oxley Act of 2002		—		—		—		—		X

	31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes — Oxley Act of 2002		—		—		—		—		X

	32	Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		—		—		—		—		X


*		Denotes a compensatory plan, contract or arrangement, in which the Company’s directors or executive officers may participate.

		Pike Place is a trademark of the Pike Place Market PDA, used under license.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	STARBUCKS CORPORATION
May 7, 2008	By:	/s/ Peter Bocian
		Peter Bocian
		executive vice president, chief financial officer and chief administrative officer Signing on behalf of the registrant and as principal financial officer

Exhibit 10.1


		Starbucks Coffee Company Po. Box 34110 Seattle, WA 98124-1110 206/318-1575 Howard Schultz chairman

February 19, 2008

Mr. Arthur Rubinfeld
[Address]
[Address]

Dear Arthur:

I am pleased to offer you the position of president, global development reporting to me at Starbucks Coffee Company. As a new partner, you have the opportunity to help create a legacy through your valuable contributions and you will soon be participating in various classes and immersion activities that will provide you information about Starbucks history, coffee, and culture. I value your passion for the organization and look forward to you joining the team on February 25, 2008.

Here are the specifics of your offer:

You will be paid bi-weekly at a base salary that annualizes to $450,000.

Sign-on Bonus

You are guaranteed a one-time sign-on bonus of $200,000 less payroll taxes paid in full 30 days after your start date. Please note, should you voluntarily leave Starbucks during your first year of employment, you will be responsible for reimbursing Starbucks for a pro-rata gross share (n/12 based on number of months worked) of the one-time sign-on bonus you received. Your sign-on bonus is not eligible pay for purposes of making contributions into Starbucks savings plans.

Annual Bonus

For the fiscal year 2008, your bonus will be guaranteed at a minimum target payout of $292,500 (65% of base salary). This bonus will be paid to you no later than December 31, 2008.

Beginning fiscal year 2009, you will be eligible to participate in the Executive Management Bonus Plan. Your incentive target will be 65% of your eligible base salary. Payout will be based on achievement of Company and individual objectives. For more information about the EMBP, please talk with Chet Kuchinad, executive vice president, Partner Resources. Starbucks reserves the right to review, change, amend, or cancel incentive plans at any time.

Arthur Rubinfeld
February 19, 2008
Page 2

Stock Options

You will be granted 145,000 stock options to purchase shares of Starbucks common stock under the Key Employee Sub-Plan to the 2005 Long-Term Equity Incentive Plan, subject to approval by the Compensation and Management Development Committee of the Board of Directors or its designee. The exercise price of the options will be the regular trading session closing price of a share of Starbucks stock on the date of grant. The grant date of your options will be after you assume your new position and otherwise effective in accordance with the Company’s stock option grant policy. The options will be non-qualified and will vest in equal installments over a period of four (4) years, beginning on the first anniversary date of the grant, subject to your continued employment.

As a senior executive the company’s executive stock ownership guidelines will apply to you. The guidelines require covered executives to achieve a minimum investment in Starbucks stock within five years. A copy of the guidelines will be provided to you as part of your immersion.

Insider Trading

As an executive access to sensitive business and financial information about the Company, you will be prohibited from trading Starbucks securities (or, in some circumstances, the securities of companies doing business with Starbucks) from time to time in accordance with the Company’s Insider Trading Policy and Blackout Procedures. A copy of the policy will be provided to you your first day and you will be required to sign a certificate indicating that you have read and understood the policy.

Management Deferred Compensation Plan

You may be eligible to participate in the Management Deferred Compensation Plan (MDCP) if you are on our U.S. payroll and meet the eligibility criteria. The MDCP provides eligible partners with the opportunity to save on a tax-deferred basis. If you are eligible, you will receive general information and enrollment materials at your home address as soon as administratively possible after your start date on U.S. payroll. If you have questions about the MDCP, please contact the Starbucks Savings Team at savings@starbucks.com . You may also obtain more information about the MDCP on the Savings link at http://LifeAt.sbux.com.

COBRA

Should you elect COBRA (continuation of health coverage) from your previous employer, Starbucks will reimburse you for your COBRA premiums less applicable taxes until you become eligible for Starbucks benefits after the mandatory waiting period. After your first day of employment at Starbucks, submit proof of payment(s) to your Partner Resources contact for processing. The reimbursement is classified as income by the federal

Arthur Rubinfeld
February 19, 2008
Page 3

government and is subject to all applicable payroll taxes and deductions. You must submit your request for reimbursement by September 30, 2008.

Executive Life Insurance

As an executive, you and your family have a greater exposure to financial loss resulting from your death. Starbucks recognizes this exposure and has provided for coverage greater than outlined in Your Special Blend. You will receive partner life coverage equal to 3 times your annualized base pay, paid for by Starbucks. You may purchase up to an additional 2 times your annualized base pay (for a total of 5 times pay) to a maximum life insurance benefit of $2,000,000.

Coffee Hedging

As an officer of the Company, a member of the Coffee Management Group, or a partner involved in coffee procurement and trading on behalf of the Company, you are prohibited from trading in coffee commodity futures for your own account. If you have further questions, please contact your Partner Resources generalist.

Executive Physical Exam

You are eligible to participate in Starbucks executive physical program. Information about the program and our program provider will be emailed to you (new participants are notified at the beginning of each calendar quarter). The program provider will contact you shortly thereafter to establish an appointment. If you have questions about this physical, please contact Kelley Hardin at 206-318-7756.

Additional Information

Attached to this letter is Your Special Blend, an overview of Starbucks benefits, savings and stock programs. If you have questions regarding these programs or eligibility, please call Dave Hill at 206-318-7162. Please note that although it is Starbucks intent to continue these plans, they may be amended or terminated at any time without notice.

You will receive a Partner Information & New Hire Paperwork booklet that includes an I-9 form and your new hire paperwork. To complete the I-9 form, please bring appropriate identification as described on the enclosed Lists of Acceptable Documents with you on your first day. Please remember that this offer is contingent upon you providing proof of your eligibility to work in the United States. This offer is also contingent on the satisfactory completion and review of your background inquiry.

Additionally, on your first day, you will receive, and are required to sign an Insider Trading, Confidentiality Policy and Procedures document, and a Confidentiality and Invention Agreement as a condition of employment.

Arthur Rubinfeld
February 19, 2008
Page 4

Your position also requires you sign a Non-Competition Agreement. Enclosed are two copies. Please review and sign both copies of the Non-Competition Agreement, this letter and the Acknowledgement form, and return one copy of each document to Chet Kuchinad.

Your employment with Starbucks Corporation is ‘at will,’ meaning that either you or your employer can end the employment relationship at any time, for any reason not prohibited by law.

On behalf of the entire team, I am excited to welcome you as a partner and look forward to working with you. If you have any questions, please call me at 206-318-4010.


Warm regards

/s/ Howard Schultz Howard Schultz
chairman, president & chief executive officer


cc:		partner file
		Stock Administration (S-HR3)
		Chet Kuchinad

Enc.		Non-Competition Agreement

I accept employment with Starbucks Corporation, and its wholly owned subsidiaries, according to the terms set forth above.


/s/ Arthur Rubinfeld		3/22/08
Arthur Rubinfeld		Date

Exhibit 10.2


		Starbucks Coffee Company PO. Box 34110 Seattle, WA 98124-1110 206/318-1575 Howard Schultz chairman

January 10, 2008

Mr. Chet Kuchinad
[Address]
[Address]

Dear Chet:

Thank you for your contributions to the Company’s success and congratulations on your promotion to executive vice president, Partner Resources reporting to me at Starbucks Coffee Company. I value your passion for the organization and look forward to you beginning your new role on January 14, 2008.

Here are the specifics of your offer:

You will be paid bi-weekly at a base salary that annualizes to $400,000.

Executive Management Bonus Plan

You will become eligible to participate in the Executive Management Bonus Plan (EMBP) beginning the effective date of your promotion. Your new incentive target is 50% of your eligible base salary. For the first three months of this fiscal year, you will continue to participate in the General Management Incentive Plan (GMIP) at an incentive target of 40% of your eligible base salary. Your bonus will be based on the achievement of company, business unit/department and individual goals. Starbucks reserves the right to review, change, amend, or cancel incentive plans at any time.

For the current fiscal year, you will have:

Stock Options

You will be granted stock options to purchase shares of Starbucks common stock with an economic value of $400,000 (USD) under the Key Employee Sub-PIan to the 2005 Long-Term Equity Incentive Plan, subject to approval by the Compensation and Management Development Committee of the Board of Directors or its designee. The exercise price of the options will be the regular trading session closing price of a share of Starbucks stock on the date of grant. The grant date of your options will be after you assume your new position and otherwise effective in accordance with the Company’s stock option grant policy. The options will be non-qualified and will vest

Chet Kuchinad
January 10, 2008
Page 2

in equal installments over a period of four (4) years, beginning on the first anniversary date of the grant, subject to your continued employment.

Insider Trading

As a senior vice president, executive vice president of the Company, or a member of a department with access to sensitive business and financial information about the Company, you will be prohibited from trading Starbucks securities (or, in some circumstances, the securities of companies doing business with Starbucks) from time to time in accordance with the Company’s Insider Trading Policy and Blackout Procedures. A copy of the policy will be provided to you your first day and you will be required to sign a certificate indicating that you have read and understood the policy.

Management Deferred Compensation Plan

You will continue to be eligible to participate in the Management Deferred Compensation Plan (MDCP) if you are on our U.S. payroll and meet the eligibility criteria. The MDCP provides eligible partners with the opportunity to save on a tax-deferred basis. If you have questions about the MDCP, please contact the Starbucks Savings Team at savings@starbucks.com . You may also obtain more information about the MDCP on the Savings link at http://LifeAt.sbux.com.

Executive Life Insurance

As an executive, you and your family have a greater exposure to financial loss resulting from your death. Starbucks recognizes this exposure and has provided for coverage greater than outlined in Your Special Blend . You will continue to receive partner life coverage equal to 3 times your annualized base pay, paid for by Starbucks. You may purchase up to an additional 2 times your annualized base pay (for a total of 5 times pay) to a maximum life insurance benefit of $2,000,000.

Coffee Hedging

As an officer of the Company, a member of the Coffee Management Group, or a partner involved in coffee procurement and trading on behalf of the Company, you are prohibited fiom trading in coffee commodity futures for your own account. If you have further questions, please contact your Partner Resources generalist.

Executive Physical Exam

You will continue to be eligible to participate in Starbucks executive physical program. Information about the program and our program provider will be emailed to you. The program provider will contact you shortly thereafter to establish an appointment. If you have questions about this physical, please contact Kelley Hardin at 206-318-7756.

Chet Kuchinad
January 10, 2008
Page 3

Benefits

To understand how this change may affect your benefits, please contact the Starbucks Partner Contact Center at 1-866-504-7368 or your Partner Resources generalist. Please note that although it is Starbucks intent to continue these plans, they may be amended or terminated at any time without notice

As a condition of being promoted and in consideration for the increase in your base compensation, you are asked sign a Non-Competition Agreement. Enclosed are two copies. Please review and sign both copies of the Non-Competition Agreement and this letter, and return one copy of each document to me.

In your position, you will remain employed ‘at will,’ meaning that either you or your employer can end the employment relationship at any time, for any reason not prohibited by law.

On behalf of the entire team, I wish you the best in your new role and look forward to your continued success. If you have any questions, please call me at 206-318-4010.


Warm regards,

/s/ Howard Schultz Howard Schultz
chairman, president & chief executive officer


cc:		partner file
		Stock Administration (S-HR3)

Enc.		Non-Competition Agreement

I accept employment with Starbucks Coffee Company, or its wholly owned subsidiaries, according to the terms set forth above.


/s/ Chet Kuchinad		1/10/08
Chet Kuchinad		Date of Acceptance

Exhibit 10.3


		Starbucks Coffee Company P. O. Box 34110 Seattle WA 98124-1110 Martin Coles chief operating officer

February 21, 2008

Mr. Clifford Burrows
[Address]
[Address]

Dear Cliff:

Thank you for your contributions to the Company’s success and congratulations on your promotion to president, Starbucks Coffee U.S. reporting to me at Starbucks Coffee Company. I value your passion for the organization and look forward to you beginning your new role on or around March 10, 2008.

Here are the specifics of your offer:

You will be paid bi-weekly at a base salary that annualizes to $595,000 (USD).

Annual Bonus

You will become eligible to participate in the Executive Management Bonus Plan (EMBP) beginning the effective date of your promotion. Your new incentive target is 65% of your eligible base salary. For the first five months of this fiscal year, you will continue to participate in the General Management Incentive Plan (GMIP) at an incentive target of 40% of your eligible base salary. Your bonus will be based on the achievement of company, business unit and individual goals. Starbucks reserves the right to review, change, amend, or cancel incentive plans at any time.

For the current fiscal year, you will have:


# of Months	Target %		Plan	Primary Measure
5		40	GMIP	Profit Contribution — EMEA
7		65	EMBP	Profit Contribution — U.S.

Stock Options

You will be granted stock options to purchase shares of Starbucks common stock with an economic value of $250,000 (USD) under the Key Employee Sub-Plan to the 2005 Long-Term Equity Incentive Plan, subject to approval by the Compensation and Management Development Committee of the Board of Directors. The exercise price of the options will be the regular trading session closing price of a share of Starbucks stock on the date of grant. The grant date of your options will be after you assume your new position and otherwise effective in accordance with the Company’s option grant policy. The options will

be non-qualified and will vest in equal installments over a period of four (4) years, beginning on the first anniversary date of the grant, subject to your continued employment.

Insider Trading

As an executive access to sensitive business and financial information about the Company, you will be prohibited from trading Starbucks securities (or, in some circumstances, the securities of companies doing business with Starbucks) from time to time in accordance with the Company’s Insider Trading Policy and Blackout Procedures. A copy of the policy will be provided to you and you will be required to sign a certificate indicating that you have read and understood the policy.

Management Deferred Compensation Plan

Executive Life Insurance

As an executive, you and your family have a greater exposure to financial loss resulting from your death. Starbucks recognizes this exposure and has provided for coverage greater than outlined in Your Special Blend . You will receive partner life coverage equal to 3 times your annualized base pay, paid for by Starbucks. You may purchase up to an additional 2 times your annualized base pay (for a total of 5 times pay) to a maximum life insurance benefit of $2,000,000.

Executive Physical Exam

You are eligible to participate in Starbucks executive physical program. Information about the program and our program provider wiIl be emailed to you (new participants are notified at the beginning of each calendar quarter). The program provider will contact you shortly thereafter to establish an appointment. If you have questions about this physical, please contact Kelley Hardin at 206-318-7756.

Relocation Benefits

This letter summarizes the terms of your relocation to Starbucks Coffee Company located in the United States. Starbucks wants your more to Seattle, WA to be a positive one. To assist you, we have partnered with Altair Global Relocation to provide you with relocation services. You will be assigned a counselor to be your central point of contact to address issues and questions you many have regarding your relocation.

Starbucks will activate your relocation services upon acceptance of our offer. A consultant will contact you to begin the process within 24 hours of receiving the relocation authorization from Starbucks. If you have any questions in the interim, please contact either your Altair consultant at 925-945-1001 or 800-

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934-5400 or contact your Starbucks Partner Resources generalist, Bob Ravener at 206-318-5780. The following relocation benefits are available to you. Please refer to the enclosed Relocation Policy for further detail and important information on each benefit.

	•		Miscellaneous expense payment of $15,000 less payroll taxes

	•		Moving your household goods by a Starbucks preferred van line and storage to a maximum time limit of 60 days if renter, 90 days if homeowner

	•		Temporary housing in your destination city, to a maximum time limit of 60 days if renter, 90 days if homeowner

	•		New area orientation tour in your destination area and Rental Finding Assistance

	•		Home finding trips for a maximum of seven (7) in total, to include meals, lodging, airfare and car rental

	•		Final Move expenses associated with relocating you and your spouse, partner, dependents and pets to your destination area

	•		Home Marketing Assistance, which includes reimbursement of usual and customary closing costs if homeowner

	•		New Home Purchase Closing Costs if homeowner.

No relocation expenses should be charged to a Starbucks Corporate Credit Card, nor should they be submitted to Starbucks Accounts Payable via Gelco. If you have any questions regarding your relocation expenses, please reach out to your relocation consultant. All relocation benefits must be utilized within one year of offer acceptance date.

The federal gross-up rate for your relocation is 33% plus mandatory FICA, Medicare, and any applicable state/local taxes (subject to change in accordance with Federal guidelines). Please refer to the enclosed Policy Summaries for information on each benefit’s eligibility for gross-up.

Please Note: Should you voluntarily terminate your reemployment with Starbucks Coffee Company during the first year, you will be responsible for reimbursing Starbucks for a pro-rata share of all relocation expenses incurred by Starbucks on your behalf.

Immigration Assistance

Starbucks will apply any required work permits. on your behalf and will reimburse you for cost associated with obtaining passports, work and residence permits. The relocation terms below are conditioned upon your receiving the appropriate work authorization and residence permits in the U.S.

Taxes

Starbucks will retain the services of a third party independent tax consultant to assist you with your tax return preparation obligations for the year of your relocation. Tax returns may be required for U.K. as well as for U.S. In addition, the tax consultants will handle any inquiries from the taxing authorities relating to the relocation.

You are responsible for providing the tax consultants with all information and records relating to your compensation, investments, and relocation in a timely manner. Starbucks will not reimburse for any fees incurred by you in utilizing the services of an unauthorized tax preparer.

You are responsible for the payment in full of any taxes owed to the U.K. or U.S. tax authorities.

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Coffee Hedging

Additional Information

Attached to this letter is Your Special Blend , an overview of Starbucks benefits, savings and stock programs. If you have questions regarding these programs or eligibility, please call Dave Hill at 206-318-7162. Please note that although it is Starbucks intent to continue these plans, they may be amended or terminated at any time without notice.

This offer supersedes your terms and conditions of employment both as an employee of Starbucks UK and under the letter of understanding dated September 6, 2005 concerning your assignment to work in the Netherlands as president, EMEA. Accordingly, your employment with Starbucks Corporation is ‘at will,’ meaning that either you or your employer can end the employment relationship at any time, for any reason not prohibited by law.

On behalf of the entire team, I am excited to have you join us in the U.S. in this key position at a very exciting time in our history. If you have any questions, please call me at 206-318-7175.


Warm regards,

/s/ Martin Coles Martin Coles
chief operating officer


cc:		partner file Stock Administration (S-HR3) Chet Kuchinad

Enc.		Non-Competition Agreement

I accept employment with Starbucks Corporation, and its wholly owned subsidiaries, according to the terms set forth above.


/s/ Clifford Burrows Clifford Burrows		28 ^th February 2008 Date

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Exhibit 10.4

SEPARATION AGREEMENT AND RELEASE

This Separation Agreement and Release (the “ Agreement ”) is entered into effective for all purposes and in all respects as of January
7, 2008 by and between James L. Donald (“ Donald ”) and Starbucks Corporation (“ Starbucks ”).

RECITALS

A. Donald was employed by Starbucks as its president and chief executive officer. Donald’s employment at Starbucks was terminated by Starbucks on January 7, 2008 (the “ Separation Date ”); and, as a consequence thereof, Donald resigned from the Board of Directors of Starbucks (the “ Board ”) effective as of January 7, 2008.

B. Starbucks and Donald enter this Agreement to clarify their respective rights and responsibilities arising out of the termination of Donald’s employment relationship and his resignation as a member of the Board, in exchange for Donald’s (1) agreement to cooperate in the transition of his executive responsibilities, (2) reaffirmation and clarification of his existing obligations arising under the non-competition agreement pursuant to Paragraph 5 (the “ Non-Competition Agreement ”), and (3) additional confidentiality agreement set forth in Paragraph 5 (the “ Confidentiality Agreement ”).

AGREEMENTS

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises contained below, the parties hereto, intending legally and equitably to be bound, hereby agree as follows:

1. Separation Date and Responsibilities. Donald’s employment with Starbucks ended on January 7, 2008, and Donald resigned from the Board effective as of such date. Accordingly, Donald has no further duties or responsibilities to Starbucks or the Board, as applicable. Donald does, however, agree to remain reasonably available to Starbucks over the course of the subsequent twelve (12)-month period following the Separation Date to assist on an as-needed basis in transitioning his executive responsibilities; provided, however, that, in the event that Starbucks calls upon Donald to do so, Starbucks shall pay Donald a mutually agreeable fee and reimburse him for all associated costs and expenses.

2. Compensation. Except as is expressly provided in this Agreement, Donald agrees and acknowledges that he is, and shall be, entitled to no further or additional compensation of any kind after the Separation Date. If Donald signs this Agreement and does not revoke it pursuant to Paragraph 14, then, in exchange for the obligations pursuant to the Non-Competition Agreement and the Confidentiality Agreement, the transition of executive responsibilities, and the releases and promises contained in this Agreement, Starbucks shall pay Donald an amount equal to $1,250,000, payable in equal amounts on a bi-weekly basis during the twelve (12)-month period immediately following the Separation Date (with a make-up in the

first payment for the time lag between January 7, 2008 and the latter date of execution of this Agreement by the parties hereto), subject to customary tax and other withholdings. Starbucks and Donald agree that these payments are expressly conditioned on Donald’s strict compliance with the Non-Competition Agreement (as modified in the second subparagraph of Paragraph 5 hereof) and the Confidentiality Agreement. Any material violation of either of such Agreements, shall — after (i) written notice to Donald of the alleged violation, (ii) a period of ten (10) business days for Donald to respond thereto in writing, (iii) if in dispute, a period of thirty (30) days to resolve the same or submit the same to arbitration and (iv) if submitted to arbitration, a period of ninety (90) days for the arbitrator (after appointment by the President of the American Arbitration Association) to reach a conclusion — result in a forfeiture by Donald of any unpaid compensation that might otherwise be owing to him pursuant to this Paragraph 2. Subject to the foregoing notice and resolution provisions, Starbucks may, in addition, pursue whatever other rights or remedies it may have against Donald, including, without limitation, enforcing this Agreement, the Non-Competition Agreement (as modified in the second subparagraph of Paragraph 5 hereof) or the Confidentiality Agreement, through injunctive relief and/or seeking an award of attorneys’ fees and costs.

3. Valid Consideration. Donald and Starbucks agree that the offer of compensation by Starbucks to Donald described in the preceding paragraph is not required by Starbucks policies or procedures or by any pre-existing contractual obligation of Starbucks or by any statute, regulation or ordinance, and is agreed to by Starbucks and Donald solely as consideration to Donald for entering into and executing this Agreement.

4. Stock Options and Other Compensation and Benefits. Donald acknowledges and agrees that any vested options to acquire shares of Starbucks common stock shall expire or be exercisable in accordance with the terms and conditions of the applicable plan documents, program documents and grant agreements, as summarized in Exhibit A attached hereto, captioned “Options and Awards Summary”. Donald agrees that he will conduct any and all market transactions involving Starbucks securities in compliance with the Starbucks Insider Trading Policy and Blackout Procedures, if and so long as the same are applicable to him.

Donald shall be entitled to certain coverage under the Starbucks group health plans after the Separation Date to the extent he timely elects and remains eligible for such coverage pursuant to the Federal law known as “COBRA” and the Starbucks COBRA procedures.

Donald’s continuing participation in all equity compensation, incentive compensation and all other compensation and benefits plans, programs and agreements shall terminate effective as of the Separation Date. Donald acknowledges and agrees that he shall not be entitled to any compensation and benefits from and after the Separation Date except as specified in this Agreement, the terms of the Starbucks 401(k) Plan or the Management Deferred Compensation Plan, as summarized in Exhibit B attached hereto, captioned “MDCP Savings Statement”.

5. Reaffirmation and Clarification of Non-Competition Agreement and Confidentiality Agreement. Donald expressly reaffirms and clarifies his on-going duties and responsibilities under the Non-Competition Agreement by executing the Non-Competition Agreement attached to this Agreement.

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Starbucks agrees and clarifies that, under Donald’s Non-Competition Agreement, it shall not seek to limit Donald’s subsequent employment with a grocery chain (such as Pathmark, Albertson’s or Safeway), or with another retailer the principal business of which is not coffee or coffee related, or with a fast-food restaurant chains such as Wendy’s, Arby’s or Burger King. However, it is agreed by both Starbucks and Donald that McDonald’s and Dunkin’ Donuts are companies that directly compete with Starbucks field of business, so that Donald’s obligations under the Non-Competition Agreement will apply.

In addition, Donald agrees not to use, publish, misappropriate or disclose any Confidential Information following the Separation Date, except as expressly authorized in writing by the Board. For this purpose, “Confidential Information” shall have the meaning set forth in the Non-Competition Agreement and incorporated herein by reference. If Donald violates his agreement set forth in this subparagraph, Starbucks shall have (i) the right or remedy, in the event of a breach or a threatened breach, to have the provisions of this Agreement specifically enforced by any court having jurisdiction, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Starbucks and that money damages will not provide an adequate remedy, and (ii) all other rights and remedies available at law or in equity. The agreement set forth in this paragraph supplements Donald’s other confidentiality agreements with Starbucks, including obligations imposed under all applicable Starbucks policies and procedures, as well as those imposed by law.

6. General Release of Claims. Donald expressly waives any claims against Starbucks, including its affiliates, subsidiaries, stockholders, directors, officers, managers, representatives, agents, and employees, past and present from any claims, whether known or unknown, which existed or may have existed at any time up to the date of this Agreement, including claims related in any way to Donald’s employment with Starbucks or the ending of that relationship, except as to Starbucks’ current and ongoing obligations set forth in this Agreement. This release includes, but is not limited to, any claims for wages, bonuses, employment benefits, stock options, or damages of any kind whatsoever, arising out of any common law torts, arising out of any contracts, express or implied, any covenant of good faith and fair dealing, express or implied, any theory of wrongful discharge, any theory of negligence, any theory of retaliation, any theory of discrimination or harassment in any form, any legal restriction on Starbucks right to terminate employees, or any Federal, state, or other governmental statute, executive order, or ordinance.

This waiver and release shall be construed as broadly and comprehensively as applicable law permits. However, it shall not be construed as releasing or waiving any right that, as a matter of law, cannot be released or waived, including without limitation the right to file a charge or participate in an investigation or proceeding conducted by the EEOC pursuant to the Age Discrimination in Employment Act (“ ADEA ”); provided that Donald waives any right to recover monetary remedies on his own behalf.

Starbucks expressly waives and releases any claim against Donald related in any way to his employment with Starbucks, whether known or unknown, which existed or may have existed at any time up to the date of this Agreement. The only exception to this waiver and release is any claim Starbucks might have against Donald for fraud or willful misconduct.

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7. Nondisparagement. Donald agrees to refrain from making any derogatory or disparaging comments to the press or any individual or entity regarding Starbucks, its business or related activities, its shareholders, employees or agents or the relationship between the parties.

Starbucks agrees that its Board members and principal officers shall similarly refrain from making any derogatory or disparaging comments about Donald to the press or any individual or entity.

8. Return of Property. Donald confirms that he has or will expeditiously return to Starbucks all files, memoranda, records, credit cards, pagers, computers, computer files, passwords and pass keys, card keys, or related physical or electronic access devices, and any and all other property received from Starbucks or any of its current or former employees or generated by Donald on behalf of Starbucks in the course of Donald’s employment. Starbucks shall expeditiously notify Donald if it believes that Donald has not so returned any item or items.

9. Additional Cooperation. Donald agrees that he will give Starbucks his full cooperation in connection with any claims, lawsuits or proceedings that relate in any manner to Donald’s conduct or duties at Starbucks or that are based on facts about which Donald obtained personal knowledge while employed at Starbucks. In return, Starbucks agrees, at its sole cost and expense, to provide legal counsel on Donald’s behalf and to reimburse Donald for his direct and reasonable out of pocket expenses (including reasonable attorney’s fees) incurred by Donald with respect to rendering such cooperation. Donald further agrees that he will not voluntarily become a party to, or directly aid or encourage any other party in connection with, any lawsuit, claim, demand, or adversarial or investigatory proceeding of any kind involving Starbucks or that relates in any material way to his employment with Starbucks or that is based on facts about which Donald obtained personal knowledge while employed with Starbucks. Donald’s compliance with a subpoena or other legally compulsive process will not be a violation of this provision.

In the event that Starbucks calls upon Donald to be reasonably available to assist Starbucks in an advisory capacity regarding Starbucks’ business in 2008, Starbucks shall pay Donald a mutually agreeable fee and reimburse him all associated costs and expenses.

10. Failure to Enforce. Any party’s failure to enforce this Agreement on the occurrence of one or more events that violate (or allegedly violate) this Agreement shall not constitute a waiver or release of any right to enforce this Agreement against subsequent violations.

11. Severability. The provisions of this Agreement are severable, and, except for Paragraph 6, if any part of them are found to be unlawful or unenforceable, the other provisions of this Agreement shall remain fully valid and enforceable to the maximum extent consistent with applicable law. If the first subparagraph of Paragraph 6 shall be held unlawful or unenforceable, any further obligations of Starbucks to Donald under Paragraph 2 shall immediately cease.

12. Entire Agreement. This Agreement sets forth the entire understanding and agreement between Donald and Starbucks and supersedes any prior agreements or understandings, express or implied, pertaining to the terms of Donald’s employment with

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Starbucks and the employment relationship, with the exception of (a) the attached Non-Competition Agreement (as modified in the second subparagraph of Paragraph 5 hereof) and (b) the Confidentiality Agreement, both of which shall remain fully enforceable and which are incorporated into this Agreement by reference. Donald acknowledges that, in executing this Agreement, Donald does not rely upon any representation or statement by any representative of Starbucks concerning the subject matter of this Agreement, except as expressly set forth in the text of this Agreement. No modification or waiver of this Agreement shall be effective unless evidenced in a writing signed by both parties. This Agreement, including the attached Non-Competition Agreement, may be executed in one or more copies or counterparts and each such copy shall constitute a duplicate original of this Agreement. This Agreement shall be binding upon, and inure to the benefit of, Starbucks, its successors and assigns, and Donald, his heirs, executors and administrators, and personal and legal representatives.

13. Governing Law; Attorney’s Fees. This Agreement will be governed by and construed exclusively in accordance with the laws of the State of Washington without reference to its choice of law principles. Any disputes arising under this Agreement, or the attached Non-Compensation Agreement, shall be brought in a court of competent jurisdiction in King County, Washington. In any action brought to enforce any obligation arising out of this Agreement, the substantially prevailing party shall be entitled to recover his or its reasonable attorney’s fees and costs.

14. Knowing and Voluntary Agreement. Donald agrees that he has carefully read and fully understands all aspects of this Agreement including the fact that this Agreement releases any claims that Donald might have against Starbucks, except any claims under this Agreement. Donald agrees that he has not relied upon any representations or statements not set forth herein or made by Starbucks’ agents or representatives. Finally, Donald agrees that he has been advised to consult with an attorney prior to executing the Agreement, and that Donald has either done so or knowingly waived the right to do so, and now enters into this Agreement without duress or coercion from any source. Donald agrees that he has been provided the opportunity to consider for twenty-one (21) days whether to enter into this Agreement, and has voluntarily chosen to enter into it on this date. Donald may revoke this Agreement for a period of seven (7) days following the execution of this Agreement by written notice timely delivered to the Executive Vice President, General Counsel and Secretary of Starbucks. This Agreement shall become effective following expiration of this seven (7) day period.



STARBUCKS CORPORATION		JAMES L. DONALD


By:	/s/ Paula E. Boggs	/s/ James L. Donald

Its:	evp,general counsel & secretary


Dated: January 22, 2008		Dated: January 22, 2008

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Exhibit 10.5

SEPARATION AGREEMENT AND RELEASE

This Separation Agreement and Release (the “ Agreement ”) is entered into by Launi Skinner (“ Skinner ”) and Starbucks Corporation (“ Starbucks ”).

RECITALS

A. Skinner has been employed by Starbucks as president, Starbucks Coffee U.S.. Skinner’s employment at Starbucks will terminate on March 3, 2008 (the “ Separation Date ”).

B. Starbucks and Skinner enter this Agreement to clarify their respective rights and responsibilities arising out of the conclusion of Skinner’s employment relationship, including Skinner’s reaffirmation of post-separation commitments arising under the non-competition agreement between Starbucks and Skinner (the “ Non-Competition Agreement ”) and the confidentiality agreement set forth in Paragraph 7 (the “ Confidentiality Agreement ”).

AGREEMENTS

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises contained below, it is agreed as follows:

1. Separation Date and Responsibilities. Skinner’s employment with Starbucks will end on March 3, 2008. Skinner thereafter will have no further duties or responsibilities to Starbucks.

2. Compensation. Except as may be expressly provided for in this Agreement, Skinner agrees and acknowledges that she is and shall be entitled to no further or additional compensation of any kind after the Separation Date. If Skinner signs this Agreement and does not revoke it pursuant to Paragraph 19, Starbucks will pay Skinner the equivalent of twelve months of her base salary, payable in a lump sum immediately following the revocation period set forth in Paragraph 19, subject to customary tax and other withholdings.

Starbucks and Skinner agree that these payments are expressly conditioned on Skinner’s strict compliance with the terms of this Agreement, the Non-Competition Agreement and the Confidentiality Agreement. Any violation of any of these agreements, whether material or not, shall result in (a) a forfeiture by Skinner of any unpaid compensation that might otherwise be owing to Skinner pursuant to this Paragraph 2, and (b) an obligation by Skinner to immediately repay to Starbucks any and all compensation previously paid to Skinner by Starbucks pursuant to this Paragraph 2. Starbucks may, in addition, pursue whatever other rights or remedies it may have against Skinner, including, without limitation, enforcing this Agreement, the Non-Competition Agreement or the Confidentiality Agreement, through injunctive relief and/or seeking an award of attorneys fees and costs.

3. Medical Coverage. Starbucks agrees to provide Skinner with a lump sum payment equal to the cost of COBRA continuation coverage under the applicable Starbucks medical, dental and vision programs for a period of twelve months, less applicable withholding taxes. This payment may be used by Skinner at her discretion to pay for the post-employment continuation of medical, dental and/or vision coverage pursuant to COBRA if Skinner properly elects such coverage. Skinner agrees and acknowledges that Skinner will be solely responsible for remitting all COBRA payments, and will be solely responsible for the cost of any additional COBRA coverage at the standard COBRA rate and in accordance with the terms and conditions of COBRA and the Starbucks COBRA procedures.

4. Outplacement Services. Starbucks will provide Skinner with twelve months of outplacement services (until March 3, 2009) through the firm of Lee Hecht Harrison, up to a maximum of $14,000. Such services shall commence as of the Separation Date.

5. Starbucks Partner Card. Starbucks will provide Skinner a Partner Card that will entitle Skinner to the markout and merchandise discount for her lifetime.

6. Valid Consideration. Skinner and Starbucks agree that the offer of compensation by Starbucks to Skinner described in Paragraph 2 is not required by Starbucks policies or procedures or by any pre-existing contractual obligation of Starbucks or by any statute, regulation or ordinance, and is offered by Starbucks solely as consideration for this Agreement.

7. Stock Options and Other Compensation and Benefits. Skinner acknowledges and agrees that any vested options to acquire shares of Starbucks common stock shall expire or be exercisable in accordance with the terms and conditions of the applicable plan documents, program documents and grant agreements. Skinner agrees that Skinner will conduct any and all market transactions involving Starbucks securities in compliance with the Starbucks Insider Trading Policy and Blackout Procedures.

Skinner’s participation in all equity compensation, incentive compensation and all other compensation and benefits plans, programs and agreements shall terminate effective as of the Separation Date. Skinner acknowledges and agrees that Skinner shall not be entitled to any compensation and benefits after the Separation Date except as specified in this Agreement or by the terms of the Starbucks 401(k) Plan or Management Deferred Compensation Plan.

8. Post-Separation Commitments. Skinner expressly reaffirms Skinner’s on going duties and responsibilities under the Non-Competition Agreement following the Separation Date.

In addition, Skinner agrees not to use, publish, misappropriate or disclose any Confidential Information following the Separation Date, except as expressly authorized in writing by the Board. For this purpose “Confidential Information” shall have the meaning set forth in the Non-Competition Agreement and incorporated herein by reference. If Skinner violates the agreement set forth in this Paragraph 8, Starbucks and its successors and assigns

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shall have (a) the right or remedy, in the event of a breach or a threatened breach, to have the provisions of this Agreement specifically enforced by any court having jurisdiction, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Starbucks and that money damages will not provide an adequate remedy, and (b) all other rights and remedies available at law or in equity. The agreement set forth in this Paragraph 8 supplements Skinner’s other confidentiality agreements with Starbucks, including obligations imposed under all applicable Starbucks policies and procedures, as well as those imposed by law.

9. Additional Confidentiality. Skinner agrees to keep the fact, terms and amount of this Agreement completely confidential and further agrees that disclosure to the public or to any employee of Starbucks of the terms of this Agreement will constitute a material breach. Skinner will be permitted to provide information concerning this Agreement to Skinner’s attorneys, accountants, immediate family members, or to make other disclosures which are required by law, but Skinner must first inform any such person of this confidentiality provision and instruct them that they are bound by it and have an obligation to abide by it.

10. General Release of Claims. Skinner expressly waives any claims against Starbucks, including its affiliates, subsidiaries, stockholders, directors, officers, managers, representatives, agents, and employees, past and present from any claims, whether known or unknown, which existed or may have existed at any time up to the date of this Agreement, including claims related in any way to Skinner’s employment with Starbucks or the ending of that relationship. This release includes, but is not limited to, any claims for wages, bonuses, employment benefits, stock options, or damages of any kind whatsoever, arising out of any common law torts, arising out of any contracts, express or implied, any covenant of good faith and fair dealing, express or implied, any theory of wrongful discharge, any theory of negligence, any theory of retaliation, any theory of discrimination or harassment in any form, any legal restriction on Starbucks right to terminate employees, or any federal, state, or other governmental statute, executive order, or ordinance.

This waiver and release shall be construed as broadly and comprehensively as applicable law permits. However, it shall not be construed as releasing or waiving any right that, as a matter of law, cannot be released or waived, including without limitation the right to file a charge or participate in an investigation or proceeding conducted by the EEOC pursuant to the Age Discrimination in Employment Act (“ ADEA ”); provided that Skinner waives any right to recover monetary remedies on Skinner’s own behalf.

11. No Sale, Transfer or Assignment of Interest. Skinner warrants and affirms that she has not sold, transferred, or otherwise assigned all or any of her interest in any of the claims or causes of action released in this Agreement and that Skinner is the only person empowered to release such claims.

12. Nondisparagement . Skinner agrees to refrain from making any derogatory or disparaging comments to the press or any individual or entity regarding Starbucks, its

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business or related activities, its shareholders, employees or agents or the relationship between the parties.

13. Return of Property. Skinner confirms that she has or will immediately, upon the Separation Date, return to Starbucks all files, memoranda, records, credit cards, pagers, computers, computer files, passwords and pass keys, card keys, or related physical or electronic access devices, and any and all other property received from Starbucks or any of its current or former employees or generated by Skinner in the course of employment.

14. Additional Cooperation. Skinner agrees to give Starbucks her full cooperation in connection with any claims, lawsuits or proceedings that relate in any manner to Skinner’s conduct or duties at Starbucks or that are based on facts about which Skinner obtained personal knowledge while employed at Starbucks. In return, Starbucks agrees to provide legal counsel on Skinner’s behalf and to reimburse Skinner for her direct and reasonable out of pocket expenses (including reasonable attorney’s fees) incurred with respect to rendering such cooperation. Skinner further agrees that she will not voluntarily become a party to, or directly or indirectly aid or encourage any other party in connection with, any lawsuit, claim, demand, or adversarial or investigatory proceeding of any kind involving Starbucks or that relates in any material way to Skinner’s employment with Starbucks or that is based on facts about which Skinner obtained personal knowledge while employed with Starbucks. Skinner’s compliance with a subpoena or other legally compulsive process will not be a violation of this provision.

15. Breach or Default. Any party’s failure to enforce this Agreement in the event of one or more events that violate this Agreement shall not constitute a waiver of any right to enforce this Agreement against subsequent violations.

16. Severability. The provisions of this Agreement are severable, and except for Paragraph 10, if any part of them are found to be unlawful or unenforceable, the other provisions of this Agreement shall remain fully valid and enforceable to the maximum extent consistent with applicable law. Should Paragraph 10 be held unlawful or unenforceable, Starbucks obligations to Skinner under Paragraph 2 shall cease, and Skinner shall immediately return to Starbucks any monetary payments Skinner may have received pursuant to Paragraph 2.

17. Entire Agreement. This Agreement sets forth the entire understanding between Skinner and Starbucks and supersedes any prior agreements or understandings, express or implied, pertaining to the terms of Skinner’s employment with Starbucks and the employment relationship, with the exception of (a) the Non-Competition Agreement and (b) the Confidentiality Agreement, both of which shall remain fully enforceable and which are incorporated into this Agreement by reference. Skinner acknowledges that in executing this Agreement, Skinner does not rely upon any representation or statement by any representative of Starbucks concerning the subject matter of this Agreement, except as expressly set forth in the text of the Agreement. No modification or waiver of this Agreement shall be effective unless evidenced in a writing signed by both parties. This

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Agreement may be executed in one or more copies or counterparts and each such copy shall constitute a duplicate original of this Agreement.

18. Governing Law; Attorney’s Fees. This Agreement will be governed by and construed exclusively in accordance with the laws of the State of Washington without reference to its choice of law principles. Any disputes arising under this Agreement, or the Non-Competition Agreement, shall be brought in a court of competent jurisdiction in King County, Washington. In any action brought to enforce any obligation arising out of this Agreement, the substantially prevailing party shall be entitled to recover reasonable attorney’s fees and costs.

19. Knowing and Voluntary Agreement. Skinner agrees that she has carefully read and fully understands all aspects of this Agreement including the fact that this Agreement releases any claims that Skinner might have against Starbucks. Skinner agrees that she has not relied upon any representations or statements not set forth herein or made by Starbucks agents or representatives. Finally, Skinner agrees that she has been advised to consult with an attorney prior to executing the Agreement, and that Skinner has either done so or knowingly waived the right to do so, and now enters into this Agreement without duress or coercion from any source. Skinner agrees that she has been provided the opportunity to consider for twenty-one (21) days whether to enter into this Agreement, and has voluntarily chosen to enter into it on this date. Skinner may revoke this Agreement for a period of seven (7) days following the execution of this Agreement by written notice timely delivered to the Executive Vice President, General Counsel and Secretary of Starbucks. This Agreement shall become effective following expiration of this seven (7) day period.

STARBUCKS CORPORATION

LAUNI SKINNER

By:

/s/ Chet Kuchinad

/s/ Launi Skinner

Its:

evp, partner resources

Dated:

March 3, 2008

Dated:

March 3, 2008

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EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Howard Schultz, certify that:

1.		I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2008 of Starbucks Corporation (the “Registrant”);

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.		The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

	a)		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

	a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.



May 7, 2008	/s/ Howard Schultz
	Howard Schultz
	chairman, president and chief executive officer

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter Bocian, certify that:

1.		I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2008 of Starbucks Corporation (the “Registrant”);

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.		The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

	a)		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

	a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.



May 7, 2008	/s/ Peter Bocian
	Peter Bocian
	executive vice president, chief financial officer and chief administrative officer

EXHIBIT 32

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Starbucks Corporation (“Starbucks”) on Form 10-Q for the fiscal quarter ended March 30, 2008, as filed with the Securities and Exchange Commission on May 7, 2008 (the “Report”), Howard Shultz, chairman, president and chief executive officer, and Peter Bocian, executive vice president, chief financial officer and chief administrative officer of Starbucks, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1)		the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)		the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Starbucks.



May 7, 2008	/s/ Howard Schultz
	Howard Schultz
	chairman, president and chief executive officer


May 7, 2008	/s/ Peter Bocian
	Peter Bocian
	executive vice president, chief financial officer and chief administrative officer