Sat, Jul 30, 2011 - Page 10 News List

Starbucks beats forecasts with 34% Q3 profit growth

AP, PORTLAND, OREGON

Starbucks Corp brewed up a hot third quarter, reporting on Thursday that its profit rose 34 percent to beat expectations.

The world’s largest coffee retailer said that despite tough economic times, more people are visiting its stores than last year at this time, and they are spending more. Starbucks raised its full-year forecast based on the strong trends and its shares rose after hours.

“The third quarter really continues the trends we’ve seen for some time,” chief financial officer Troy Alstead said in an interview. “It’s even more remarkable in what is a fragile consumer environment.”

Starbucks, based in Seattle, has been a standout recently as consumers have begun spending a bit more on small indulgences and the company’s more aggressive business strategy has paid off.

The company earned US$279.1 million, or US$0.36 per share, for the quarter ending July 3. That’s up from US$207.9 million, or US$0.27 per share, earned in the same quarter last year.

Revenue rose 12 percent to US$2.93 billion.

Analysts on average were expecting earnings of US$0.34 per share on revenue of US$2.83 billion, according to FactSet.

Starbucks, which has resumed aggressive expansion abroad, said revenue from its US operations rose 9 percent to US$2 billion and revenue from its international business rose 20 percent to US$658.5 million.

The company also reported its first full quarter with complete control over distribution of its consumer products after ending a contract with Kraft Inc. Revenue from that business unit rose more than 25 percent to US$218.4 million as a result of the change.

Starbucks leaders attributed the bulk of the quarter’s success to the company’s work in its stores, where they say they have upgraded the customer experience with new products and improved service.

The company said revenue at stores open at least a year rose 8 percent in North America and 5 percent internationally. This comparison is a key measure of a retailer’s performance because it excludes stores that recently opened or closed.

Company leaders said its costs for coffee and other commodities remained “stubbornly” high during the third quarter, but have abated some. They said they had secured prices on key items for the year, providing some security.

“Starbucks has never been healthier, more connected to our customers and partners, or better positioned to go after the tremendous business opportunities that lie ahead,” CEO Howard Schultz said during a conference call.

The company raised its full-year expectations, saying it now expects to earn US$1.50 to US$1.51 per share, in line with analyst expectations of US$1.50, according to FactSet. That’s up from an earlier forecast for earnings of US$1.46 to US$1.48 per share.

Starbucks also said it plans to add 800 stores in fiscal 2012.

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