1 Starbucks' Steady Game [Special] May 10, 2004

David and Tom Gardner recently interviewedStarbucks(Nasdaq: SBUX) Chairman Howard Schultz onThe Motley Fool Radio Showon NPR. This is the first of five parts.

TMF: Howard Schultz is the chairman of Starbucks. He joins us from Starbucks corporate headquarters in Seattle, Wash. Howard, welcome back to The Motley Fool Radio Show

Schultz: It is great to be with you. 

TMF: Howard, you just reported second-quarter earnings that were up more than 50% over last year's numbers. You had the strongest quarterly same-store sales gains in 10 years. What is the biggest opportunity for Starbucks going forward, and what is the biggest challenge?

Schultz: Well, believe it or not, the biggest opportunity is the same opportunity we have had for the last 15 years. That is the continued growth and development of our retail stores. We still believe very strongly that we are in the early stages of building out our store base in North America despite the fact that we are sitting with 8,000 stores now; 6,000 in North America and 2,000 overseas. So, we are opening up 1,300 new stores a year. 

TMF: Howard, I am sure you've heard the joke that Starbucks is now going to start opening up Starbucks in the men's room of existing Starbucks. How much more can Starbucks expand? 

Schultz: When I am asked that question, I like to state the statistic that despite the ubiquity of Starbucks in terms of our store base, we have less than 7% share of total coffee consumption in the United States. So when you look at how strong the comps are and first-year sales, what that really demonstrates is that we are appealing to a much broader audience than we ever have before. The word "saturation" is not really in the lexicon of Starbucks, and we believe that the opportunities are significant for us. 

TMF: What is the biggest challenge for Starbucks going forward?

Schultz: The challenge is, in a very simplistic way, getting big and staying small; maintaining the culture, the values, and the guiding principles of our company while we grow. It is not a small task when you think about what has built the company. It really is this intimacy that we have with our people and our customers.  The challenge is making sure that we don't allow the size and scale of the company to change the way we interact and communicate, and, most importantly, serve our people and our customers.

Tomorrow: Would you like to burn a mixed CD with your latte? Find out more on how Starbucks is packing a one-two punch to the competition.

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