CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Certain statements herein, including statements regarding trends in or expectations relating to the expected effects of our initiatives and plans, as well as trends in or expectations regarding earnings per share, revenues, operating income, operating margins, comparable store sales, sales leverage, expenses, dividends, share repurchases, other financial results, capital expenditures, scaling and expansion of international operations, profitable growth models and opportunities, strategic acquisitions, changes to the organizational and leadership structures, commodity costs and our mitigation strategies, the transition from our distribution arrangement with Kraft to a direct distribution model, liquidity, cash flow from operations, anticipated store openings, closings and renovations, the health and growth of our business overall and of specific businesses or markets, benefits of recent initiatives, increased traffic to our stores, operational efficiencies, product innovation and distribution, tax rates, and economic conditions in the US and international markets 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 execution of our initiatives, successful execution of internal plans, fluctuations in US and international economies and currencies, the impact of competitors' initiatives, the effect of legal proceedings, and other risks detailed in our filings with the SEC, including in Part I Item IA "Risk Factors" in 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. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. We are 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 10-Q 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
Our 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, unless otherwise noted.
Overview
Starbucks results for the first quarter of fiscal 2013 continue to demonstrate the strength and relevancy of our diversified growth model. Total net revenues increased 11% to $3.8 billion, driven by global comparable store sales growth of 6%. Strong holiday performance combined with continued expansion of Channel Development and growth throughout the China and Asia Pacific region also contributed to an increase in both operating income and earnings per share. The Americas segment performed well for the first quarter with a 10% increase in revenues over the prior year, primarily due to strong comparable store sales growth of 7%, comprised of an increase in the number of transactions of 4% and an increase in average ticket of 2%. Operating income reached $590 million, while operating margin contracted 50 basis points to 20.8%. The margin contraction was primarily due to costs associated with our October Global Leadership Conference, incremental litigation charges and the impact of Superstorm Sandy, which negatively impacted operating margin by 190 basis points. Productivity, which drove strong sales leverage, largely offset these costs. Looking forward, we expect to continue driving sales growth and profitability through new store development and expansion of our pipeline of new product offerings to increase revenues throughout all dayparts. Our work in the turnaround of our EMEA segment is well underway and we are making great progress in driving customer and brand relevancy as well as a new model for growth. Revenues for the region reflect the shift in our ownership structure, including the sale of our Ireland store portfolio and certain UK airport locations to licensed partners, as well as our focus on closing underperforming company-operated stores and growing our licensed store base in profitable locations. These changes drove an increase in revenues of 1% for the quarter, which, combined with a continued focus on cost efficiencies, contributed to a 110 basis point increase in operating margin. We expect the investments we are making will result in improved operating performance as we progress on our plan towards mid-teens operating margin; however, this turnaround will take time to gain traction.

Our CAP segment results reflect a combination of rapid new store development and solid performance from our existing store base. This performance led to revenue growth of 28% and operating income growth of 26% compared to the same quarter in the prior year and is especially encouraging given the economic uncertainty within the region over the past year. We expect this segment to continue to grow rapidly and become a more meaningful contributor to overall company profitability, with growth coming from a mix of net new store openings and comparable store sales growth.
Channel Development segment revenues grew 13% for the quarter, driven by sales of Starbucks- and Tazo-branded K-Cup® portion packs. During the quarter, we also launched our Verismo® system by Starbucks and are encouraged by the strong retailer support and customer interest we experienced during the quarter. We expect continued innovation and new product offerings to drive further growth and profitability within this segment over time. Comparable Store Sales
Comparable store sales for the first quarter of fiscal 2013 are as follows:

                              Quarter Ended Dec 30, 2012
                        Sales          Change in        Change in
                       Growth        Transactions        Ticket
Consolidated             6  %             4 %              2  %
Americas                 7  %             4 %              2  %
EMEA                    (1 )%             2 %             (3 )%
China / Asia Pacific    11  %             8 %              3  %

Our comparable store sales represent the growth in revenue from company-operated stores open 13 months or longer. Comparable store sales exclude the effect of fluctuations in foreign currency exchange rates. Fiscal 2013 - Financial Outlook for the Year For fiscal year 2013, we expect moderate revenue growth driven by mid single-digit increased comparable store sales, new store openings and strong growth in the Channel Development business. Licensed stores will comprise between one-half and two-thirds of new store openings.
We expect continued robust consolidated operating margin and EPS improvement compared to fiscal 2012, reflecting the strength of our global business and the pipeline of profitable growth initiatives.
We expect increased capital expenditures in fiscal 2013 compared to fiscal 2012, reflecting additional investments in manufacturing capacity, new store growth and store renovations.
Results of Operations (in millions)

Revenues

                                     Quarter Ended
                            Dec 30,       Jan 1,        %
                              2012         2012      Change
Company-operated stores    $ 2,989.6    $ 2,731.8      9.4 %
Licensed stores                350.2        306.6     14.2
CPG, foodservice and other     459.8        397.5     15.7
Total net revenues         $ 3,799.6    $ 3,435.9     10.6 %

Total net revenues for the first quarter of fiscal 2013 increased $364 million over the prior year period, primarily due to a $258 million increase in company-operated store revenues, driven by 6% global comparable store sales growth (approximately $163 million) and incremental revenues from 401 net new company-operated store openings over the past 12 months (approximately $82 million).

Also contributing to the increase in total net revenues was licensed store revenue growth of $44 million due to higher product sales to and royalty revenues from our licensees, resulting from improved comparable store sales and the opening of 633 net new licensed stores over the last 12 months.

CPG, foodservice and other revenues increased $62 million for the first quarter of fiscal 2013, primarily due to increased sales of Starbucks- and Tazo-branded K-Cup® portion packs (approximately $28 million ). Also contributing to the revenue growth were incremental sales related to the launch of the Verismo® system by Starbucks (approximately $8 million).

Operating Expenses

                                                            Quarter Ended
                                          Dec 30,         Jan 1,       Dec 30,       Jan 1,
                                            2012           2012          2012         2012
                                                                            % of Total
                                                                           Net Revenues
Cost of sales including occupancy costs $  1,620.7     $  1,496.1         42.7 %       43.5 %
Store operating expenses                   1,089.5          995.7         28.7         29.0
Other operating expenses                     132.5          106.7          3.5          3.1
Depreciation and amortization expenses       148.9          134.8          3.9          3.9
General and administrative expenses          231.9          191.5          6.1          5.6
Total operating expenses                   3,223.5        2,924.8         84.8         85.1
Income from equity investees                  54.5           44.9          1.4          1.3
Operating income                        $    630.6     $    556.0         16.6 %       16.2 %
Store operating expenses as a % of
related revenues                                                          36.4 %       36.4 %

Cost of sales including occupancy costs as a percentage of total net revenues decreased 80 basis points for the first quarter of fiscal 2013, driven by lower coffee-related costs, which includes lower commodity costs (approximately 50 basis points).
Store operating expenses as a percentage of total net revenues decreased 30 basis points for the first quarter of fiscal 2013, driven by increased Channel Development and licensed store revenues. Store operating expenses as a percentage of company-operated store revenues was flat compared to the prior year period. Increased sales leverage (approximately 80 basis points) was offset by an increase in litigation charges (approximately 50 basis points) and an increase in marketing related to the launch of the Verismo® system by Starbucks in company-operated stores (approximately 30 basis points).

Other operating expenses as a percentage of total net revenues increased 40 basis points for the first quarter of fiscal 2013. Excluding the impact of company-operated store revenues, other operating expenses increased 120 basis points for the first quarter, primarily driven by increased marketing related to the launch of the Verismo® system by Starbucks in Channel Development (approximately 110 basis points).

General and administrative expenses as a percentage of total net revenues increased 50 basis points for the first quarter of fiscal 2013, driven by the company's October Global Leadership Conference (approximately 70 basis points). Income from equity investees increased $9.6 million for the first quarter of fiscal 2013, primarily due to improved performance from our North American Coffee Partnership joint venture which produces, bottles and distributes our ready to drink beverages, as well as increased income from our joint venture operations in Japan and China.
The combination of these changes resulted in an increase in operating margin of 40 basis points for the first quarter of fiscal 2013.

Other Income and Expenses

                                                             Quarter Ended
                                          Dec 30,         Jan 1,        Dec 30,       Jan 1,
                                            2012           2012          2012          2012
                                                                             % of Total
                                                                            Net Revenues
Operating income                        $    630.6     $    556.0         16.6  %       16.2  %
Interest income and other, net                (2.9 )         23.2         (0.1 )         0.7
Interest expense                              (6.6 )         (8.6 )       (0.2 )        (0.3 )
Earnings before income taxes                 621.1          570.6         16.3          16.6
Income taxes                                 188.7          188.4          5.0           5.5
Net earnings including noncontrolling
interests                                    432.4          382.2         11.4          11.1
Net earnings (loss) attributable to
noncontrolling interest                        0.2            0.1            -             -
Net earnings attributable to Starbucks  $    432.2     $    382.1         11.4  %       11.1  %
Effective tax rate including
noncontrolling interest                                                   30.4  %       33.0  %

For the first quarter of fiscal 2013, net interest income and other decreased $24 million, primarily due to mark-to-market adjustments from derivatives used to manage our risk of commodity price fluctuations (approximately $13 million). Also contributing were unfavorable foreign exchange fluctuations (approximately $5 million) and a decrease in unrealized gains in our Management Deferred Compensation Plan portfolio (approximately $5 million).

The effective tax rate for the quarter ended December 30, 2012 was 30.4% compared to 33.0% for the same quarter in fiscal 2012. The decrease in the rate was due to the recognition of a net tax benefit in the first quarter of fiscal 2013 primarily from state income tax expense adjustments for returns filed in prior years.

Segment Information
Segment information is prepared on the same basis that our management reviews
financial information for operational decision-making purposes. The following
tables summarize the results of operations by segment (in millions):
Americas
                                                            Quarter Ended
                                          Dec 30,         Jan 1,       Dec 30,       Jan 1,
                                            2012           2012          2012         2012
                                                                           % of Americas
                                                                           Net Revenues
Total net revenues                      $  2,840.7     $  2,578.6
Cost of sales including occupancy costs    1,092.5        1,006.7         38.5 %       39.0 %
Store operating expenses                     959.8          874.8         33.8         33.9
Other operating expenses                      30.0           20.5          1.1          0.8
Depreciation and amortization expenses       105.4           97.1          3.7          3.8
General and administrative expenses           62.7           30.6          2.2          1.2
Total operating expenses                   2,250.4        2,029.7         79.2         78.7
Operating income                        $    590.3     $    548.9         20.8 %       21.3 %
Store operating expenses as a % of
related revenues                                                          37.1 %       37.1 %

Revenues
Americas total net revenues for the first quarter of fiscal 2013 increased $262 million, or 10%, primarily driven by increased revenues from company-operated stores (contributing $230 million) and licensed stores (contributing $23 million).
The increase in company-operated store revenues was driven by a 7% increase in comparable store sales (approximately $154 million) and the opening of 253 net new company-operated stores over the past 12 months (approximately $61 million). The

licensed store revenue growth was primarily due to increased product sales to and royalty revenues from licensees, primarily resulting from improved comparable store sales and the opening of 236 net new licensed stores over the past 12 months.
Operating Expenses
Cost of sales including occupancy costs as a percentage of total net revenues decreased 50 basis points for the first quarter of fiscal 2013, driven by lower coffee-related costs, which includes reduced commodity costs (approximately 30 basis points).
Store operating expenses as a percentage of total net revenues decreased 10 basis points for the first quarter of fiscal 2013, driven by increased licensed stores revenues. Store operating expenses as a percentage of company-operated store revenues was flat compared to the prior year period. Increased sales leverage (approximately 110 basis points) was offset by an increase in litigation costs (approximately 70 basis points) and an increase in marketing primarily related to the launch of the Verismo® system by Starbucks in company-operated stores (approximately 30 basis points).
Other operating expenses as a percentage of total net revenues increased 30 basis points for the first quarter of fiscal 2013. Other operating expenses as a percentage of non-company-operated store revenues increased 260 basis points compared to the prior year period. These increases were due to incremental costs related to our acquisition of Bay Bread, LLC (doing business as La Boulange), which was completed in the fourth quarter of fiscal 2012.
General and administrative expenses as a percentage of total net revenues increased 100 basis points for the first quarter of fiscal 2013, driven by the company's October Global Leadership Conference (approximately 90 basis points). Also contributing to the change in operating margin for the quarter was increased sales leverage resulting in lower depreciation and amortization expenses as a percentage of total net revenues (approximately 10 basis points). The combination of these changes resulted in an overall decrease in operating margin of 50 basis points for the first quarter of fiscal 2013.

EMEA

                                                            Quarter Ended
                                           Dec 30,         Jan 1,       Dec 30,       Jan 1,
                                            2012            2012          2012         2012
                                                                              % of EMEA
                                                                            Net Revenues
Total net revenues                      $     306.1     $    303.0
Cost of sales including occupancy costs       152.5          150.4         49.8 %       49.6 %
Store operating expenses                       90.3           93.8         29.5         31.0
Other operating expenses                        8.4            8.6          2.7          2.8
Depreciation and amortization expenses         14.2           14.2          4.6          4.7
General and administrative expenses            18.4           17.4          6.0          5.7
Total operating expenses                      283.8          284.4         92.7         93.9
Income from equity investees                      -            0.3            -          0.1
Operating income                        $      22.3     $     18.9          7.3 %        6.2 %
Store operating expenses as a % of
related revenues                                                           35.7 %       35.5 %

Revenues
EMEA total net revenues for the first quarter of fiscal 2013 increased $3 million, or 1%, driven by 41% revenue growth in licensed stores (approximately $13 million), due to higher royalty revenues from and increased product sales to licensees, primarily resulting from the opening of 111 net new licensed stores over the past 12 months and improved comparable store sales. The licensed stores revenue increase was nearly offset by a decline in company-operated store revenue (approximately $12 million) as a result of our recent store portfolio optimization activities, including the sale of the Ireland store portfolio and certain UK airport locations to licensed partners, as well as the closure of underperforming stores in the UK.
Operating Expenses
Cost of sales including occupancy costs as a percentage of total net revenues increased 20 basis points for the first quarter of fiscal 2013, primarily driven by a shift in the composition of our store portfolio in the region to more licensed stores.

Store operating expenses as a percentage of total net revenues decreased 150 basis points for the first quarter of fiscal 2013, driven by increased licensed stores revenues. Store operating expenses as a percentage of company-operated store revenues increased 20 basis points compared to the prior year period. Increased marketing (approximately 60 basis points) was partially offset by operational efficiencies.
Other operating expenses as a percentage of total net revenues decreased 10 basis points. Excluding the impact of company-operated store revenues, other operating expenses decreased 650 basis points, primarily driven by increased sales leverage and operational efficiencies.
The combination of these changes resulted in an overall increase in operating margin of 110 basis points for the first quarter of fiscal 2013.

China / Asia Pacific

                                                            Quarter Ended
                                           Dec 30,         Jan 1,       Dec 30,       Jan 1,
                                            2012            2012          2012         2012
                                                                              % of CAP
                                                                            Net Revenues
Total net revenues                      $     214.1     $    166.9
Cost of sales including occupancy costs       106.5           84.5         49.7 %       50.6 %
Store operating expenses                       39.4           27.1         18.4         16.2
Other operating expenses                       10.2           11.4          4.8          6.8
Depreciation and amortization expenses          7.4            5.0          3.5          3.0
General and administrative expenses            12.6            9.2          5.9          5.5
Total operating expenses                      176.1          137.2         82.3         82.2
Income from equity investees                   34.1           27.6         15.9         16.5
Operating income                        $      72.1     $     57.3         33.7 %       34.3 %
Store operating expenses as a % of
related revenues                                                           26.2 %       24.3 %

Revenues
CAP total net revenues for the first quarter of fiscal 2013 increased $47 million, or 28%, primarily driven by increased revenues from company-operated stores (contributing $39 million) and licensed stores (contributing $8 million). The increase in company-operated store revenues was driven by the opening of 166 net new company-operated stores over the past 12 months (approximately $24 million) and an 11% increase in comparable store sales (approximately $12 million). The licensed store revenue growth was primarily due to higher royalty revenues from and increased product sales to licensees, resulting from the opening of 286 net new licensed stores over the past 12 months and improved comparable store sales.
Operating Expenses
Cost of sales including occupancy costs as a percentage of total net revenues decreased 90 basis points for the first quarter of fiscal 2013, primarily due to a decline in commodity costs (approximately 40 basis points), mainly coffee. Store operating expenses as a percentage of total net revenues increased 220 basis points for the first quarter of fiscal 2013. Store operating expenses as a percentage of company-operated store revenues increased 190 basis points, primarily driven by increased costs associated with the expansion efforts of company-operated stores in mainland China.
Other operating expenses as a percentage of total net revenues decreased 200 basis points the first quarter of fiscal 2013. Other operating expenses as a percentage of non company-operated store revenues decreased 450 basis points, primarily driven by lower performance-based compensation compared to the first quarter of fiscal 2012 when the region significantly outperformed its operating plan (approximately 240 basis points) and the absence of prior period asset impairments (approximately 150 basis points).

Income from equity investees increased $7 million for the first quarter of fiscal 2013, driven by improved performance of our joint venture operations in Japan and China. Income from equity investees declined as a percentage of total net revenues (approximately 60 basis points) primarily due to the growth in segment revenues.
The changes in the above line items contributed to an overall decrease in operating margin of 60 basis points for the first quarter of fiscal 2013.

Channel Development

                                                          Quarter Ended
                                        Dec 30,     Jan 1,       Dec 30,          Jan 1,
                                         2012        2012          2012            2012
                                                                % of Channel Development
                                                                      Net Revenues
Total net revenues                     $  379.8    $ 335.8
Cost of sales                             235.2      220.6           61.9 %          65.7 %
Other operating expenses                   63.1       50.1           16.6            14.9
Depreciation and amortization expenses      0.3        0.4            0.1             0.1
General and administrative expenses         4.8        3.8            1.3             1.1
Total operating expenses                  303.4      274.9           79.9            81.9
Income from equity investees               20.4       17.0            5.4             5.1
Operating income                       $   96.8    $  77.9           25.5 %          23.2 %

Revenues
Total Channel Development net revenues for the first quarter of fiscal 2013 increased $44 million, or 13%, primarily due to sales of Starbucks- and Tazo-branded K-Cup® portion packs (approximately $28 million). Also contributing . . .