News

Starbucks boosts profit, meets analyst expectations

July 21, 2010

Starbucks Corp. has reported a same-store sales increase of 9 percent for the company's U.S. operations during third quarter ended June 2, 2010, and an in-store traffic increase of 6 percent for the quarter. Customers, on average, also spent 3 percent more per visit than they did one year ago at locations in the United States.

The company reported its second quarter earnings late Wednesday.

Stores in international markets saw a comps increase of 6 percent, also driven by a 4 percent increase in traffic and a 2 percent increase in average ticket.

In addition to comp and in-store traffic increases, the company reported overall revenue for the quarter rose 8.7 percent to $2.61 billion, up from $2.4 billion reported during the same quarter last year and slightly better than the $2.56 billion analysts were seeking.

For U.S. restaurants, U.S. net revenues were $1.9 billion, an increase of 7 percent over Q3 2009. The increase was due to a rise in comps, transactions and a higher average spend per customer. Additionally, it was impacted by the net closure of 144 underperforming company-operated stores over the last 12 months.

International net revenues were $551.1 million for the quarter compared to $477.4 million in Q3 2009. The increase driven by a rise in comps, the effect of consolidating the company's previous joint venture operations in France, and the impact of foreign currency translation related to a stronger Canadian dollar.

The company’s net income increased to $207.9 million, or 27 cents per share, up from $151.5 million or 20 cents per share one year ago.

The company cited a better flow of customers to its coffee outlets and their willingness to shell out a few cents more per visit as to why its overall profit increased 37 percent for the quarter.

Net revenue growth was strongest overseas at 15 percent for the quarter, more than twice the growth rate at home. Despite closures, Starbucks said it has added 102 outlets overall so far this year, up from a net addition of 43 in the first three quarter of fiscal 2009.

“Starbucks third quarter results reflect a continuation of the strong performance and momentum we have been driving across our businesses around the world,” said Howard Schultz, chairman, president and CEO. “I'm particularly pleased to report that the significant Q3 increases in store traffic occurred at the same time as we posted the highest levels of customer satisfaction in Starbucks history and despite the challenging global economic environment. Strong performance is enabling us to deliver record results and increase the dividend to shareholders while continuing to innovate and invest in our businesses.

“Supported by the most significant marketing investment in the company's history, in Q3 we successfully launched Starbucks VIA into the grocery channel in the U.S., announced upcoming launches in the grocery channel in Japan and the U.K., brought innovation to the blended beverage category and re-energized our $2 billion Frappuccino beverage platform by creating real consumer and retailer excitement in this important growth category. Our Q3 investments provide us with a very solid foundation for growth in fiscal 2011 and beyond," added Schultz.

For fiscal 2011, the company estimated earnings at $1.36 to $1.41 a share.

The company also warned that it expects higher commodity prices, specifically coffee beans, to shave 4 cents a share off 2011 earnings. Other 2010 fiscal targets the company intends to pursue include:

• Approximately 250 net new stores globally of primarily licensed stores.
• Full-year non-GAAP operating margin (excluding restructuring charges) at the high end of 15 percent to 17 percent for the U.S. segment, and 8 percent to 10 percent for the international segment.
• Non-GAAP EPS of $1.22 to $1.23, excluding approximately $0.04 of expected restructuring charges and including approximately $0.05 from the extra week in the fiscal fourth quarter, as fiscal 2010 is a 53-week year for Starbucks.
• Capital expenditures to be approximately $450 million for the full year.