As we approach fiscal 2009, we are encouraged by customer response to the steps we have taken to elevate the Starbucks Experience, which gives us increased confidence about our future. At the same time, the global economic environment remains extremely uncertain. This year, we have made a number of difficult, but prudent, business decisions in order to improve the health of Starbucks and transform the company for the future.

As we continued to apply great discipline in evaluating our operating expenses, including total compensation for U.S. partners, we determined that a number of adjustments were necessary for FY09. We considered several options, with the goal of balancing the significant challenges of the current operating environment with our desire to recognize and reward our partners for their contributions and commitment to transforming Starbucks

The following decisions have been made for this year:
We will maintain a competitive 3.5% salary increase budget for eligible U.S. assistant store managers, store managers, retail management trainees, district managers and most hourly roasting plant partners.

U.S. hourly retail partners will continue to follow the current guidelines for merit increases.

A 2% flat salary increase will be implemented for all other eligible U.S. partners below vice president level with a ME/CE performance rating (primarily support partners).

All U.S. vice presidents and above, including Howard Schultz and the senior leadership team, will receive no salary increases this year.

Based on Starbucks year-to-date performance, we are not currently on track to reach the requisite financial targets for the General Management Incentive Plan (GMIP). When we announce FY08 results in November, GMIP participants will learn more about the status of bonus payouts

While faced with a tough environment, we are energized and remain focused on our efforts to strengthen the business and build long-term value. This year, more than ever, we must come together to provide the Starbucks Experience to our customers in order to ensure the long-term health of the business – so that all partners can share in our future success. To do that, we need the support and commitment of all our valued partners, at every level.

You have my personal commitment. Thank you for all that you do every day.

Regards,

Chet Kuchinad