07:45 AM PST on Thursday, February 9, 2006

Associated Press

AP

Howard Schultz, Starbucks Coffee chairman, speaks of the company's success during the annual meeting of shareholders on Wednesday, Feb. 8, 2006 in Seattle.

SEATTLE - A packed crowd gave Starbucks Corp. Chairman Howard Schultz something you rarely see at a straight-laced shareholders meeting - many boisterous rounds of applause.

That wasn't surprising, given that Schultz opened Wednesday's meeting by boasting that the company's stock had soared to an all-time high on strong earnings the week before.

Hours later, Starbucks shares rose 40 cents to close at $34.72 on the Nasdaq Stock Market on Wednesday after hitting a new all-time high of $35 in intraday trading. Before Wednesday, the historic high was $34.85, reached in intraday trading on Feb. 2, after the stock closed at $34.40 - nearly $3 higher than the previous record.

The stock opened at $34.84 on Thursday, then rose as high as $35.33 in early trading.

Schultz played to the crowd, showing a slide noting that, since the company went public in 1992, share value had risen 6,400 percent - enough to turn a $10,000 investment into roughly $650,000. By comparison, the S&P 500 rose 211 percent during the same period.

There's usually plenty of pomp and circumstance at the maker of pricey coffee drinks' annual meetings. This time around, there was an extra dose of glee and optimism in executives' presentations to the estimated 5,000 shareholders at Seattle's McCaw Hall, the city's ballet and opera house.

Starbucks expects to open 1,800 stores worldwide this fiscal year ending in October, and Chief Executive Jim Donald said the company thinks it will one day be able to open stores even more rapidly.

That confidence, he said, stems from both the steady opening of new stores and growing sales at each store. He noted that Starbucks nearly doubles its sales every few years, and got some laughs when he said an average newborn baby growing that fast would be 50 feet tall by age 9.

Starbucks, which has more than 11,000 stores in 37 countries, maintained its estimates of eventually opening at least 30,000 stores worldwide. Today most of its stores are in the United States, but eventually, the company expects half of its stores to be in foreign countries.

Schultz said the company was entering its a new stage, focusing on what he called "the Starbucks effect."

He said that involves increasing its focus on selling music, striking movie marketing partnerships and otherwise giving customers already hooked on its lattes and Frappuccinos new ways to enjoy the Starbucks brand.

Starbucks announced it will release a CD by legendary crooner Tony Bennett later this year in honor of his 80th birthday. The silver-haired singer got a standing ovation Wednesday after he performed "The Best Is Yet To Come," and "I Left My Heart in San Francisco." The compilation of Bennett's favorite songs will begin selling April 4.

Schultz hinted that the company planned to expand on its current wireless Internet access partnership with T-Mobile, but he didn't disclose many details. Speaking to reporters after the meeting, Schultz said the company is exploring ways to deliver online content.

AP

Singer Tony Bennett performs before the 5,000 in attendence during the Starbucks Coffee annual meeting of shareholders on Wednesday, Feb. 8, 2006 in Seattle.

"One of the compelling questions that's being asked by our customers on a continuous basis is, 'When are we going to be able to digitally fill up music at Starbucks?' The WiFi asset that we have ... gives us a very, very unique proprietary competitive advantage of when we will do this. And the question is not if but when."

Schultz said that doesn't mean Starbucks will be backing away from the CD-burning service it offers at two stores - one in Santa Monica, the other in San Antonio. A third will open next week in Miami.

Starbucks recently formed a partnership with film studio Lions Gate Entertainment Corp. to market the upcoming film "Akeelah and the Bee," billed as an inspiring tale of an inner-city girl making it to a national spelling bee.

Though Starbucks expects to make money from the partnership, Schultz said the real goal is to promote the company alongside a movie it thinks its customers will love.

"If we don't sell another cup of coffee as a result of this movie initiative, we're fine with that because the message of hope and community and humanity adds texture to the equity of the brand and the experience and trust our customers have in us. And we're proud to see our name associated with a movie," he said.

Waxing nostalgic about the company's early days, Schultz said he struggled over his decision in 1991 to offer health care coverage to both part-time and full-time employees. He said he knew it would weigh down shareholder value at first, but felt it would pay off over the long haul.

"We've offered many members of Congress to use Starbucks as an example that you can build value for your shareholders by creating value for employees, and health care ... is one of the transformational components of how we got here," Schultz said after the meeting.

Also on Wednesday, Starbucks announced it will begin selling cans of iced coffee in its North American stores in late March, and will stock grocery and convenience stores with the item in May.