IE 11 is not supported. For an optimal experience visit our site on another browser.

Starbucks brews up strong  quarterly profit

Starbucks Corp. said Wednesday that its first fiscal-quarter earnings rose 20 percent over last year, driven by strong holiday sales of its many coffee drinks.
/ Source: The Associated Press

Starbucks Corp. said Wednesday that its first fiscal quarter earnings rose 20 percent over last year, driven by strong holiday sales of eggnog lattes and other coffee drinks.

The world’s largest specialty coffee retailer boosted its earnings targets for the year, saying it expects earnings will be 68 cents to 70 cents a share — 5 cents more than previously forecast.

The company released its latest earnings after the markets closed.

For the 13 weeks ended Jan. 1, Starbucks said it earned $174 million, or 22 cents per share, up from $145 million, or 17 cents per share, in the comparable period a year earlier.

Revenue for the latest quarter increased 22 percent to $1.93 billion, up from $1.59 billion in the comparable period last year.

The consensus forecast of analysts surveyed by Thomson Financial was 20 cents per share on revenue of $1.93 billion.

Sales at Starbucks’ growing number of international stores posted a slightly bigger increase than sales at stores in the U.S.

Total international net revenues increased 25 percent to $314 million for the first fiscal quarter, compared to $251 million for the same period last year. In the United States, total net revenues rose 21 percent to $1.6 billion compared to $1.3 billion last year.

Chief Financial Officer Michael Casey said Starbucks sees enormous growth potential in China, where 50 new stores opened over the past year, bringing the country’s total to 221. Casey said he expects China could one day have several thousand stores.

Jim Donald, Starbucks’ president and chief executive, said the company also has high hopes for Brazil, Russia and India, three countries where it doesn’t yet have any stores.

Starbucks said it opened about 560 new stores in the latest quarter, bringing the number of its stores to 10,801 in 37 countries. The company said it expects to open approximately 1,800 new stores globally over the next year, about 1,300 of them in the United States and 500 internationally.

“We have never been more enthused or confident about the way in which we have been received and the ongoing profitability of the international business,” Starbucks Chairman Howard Schultz said in a conference call with financial analysts.

Besides the quarterly earnings, Starbucks announced that its same-store sales, or sales at stores open at least a year, rose 10 percent in January.

Mike Koskuba, an analyst with New York-based Victory NewBridge Capital Management, called Starbucks “a great global brand” and said the company appears to be expanding at a prudent pace, especially overseas.

“It’s always surprising to us that Starbucks could find success in Paris, but it has,” Koskuba said.

Asked about competition from McDonald’s Corp., which has been focusing more on premium roast coffee, and Tim Hortons Inc., a Canadian coffee chain that’s planning a bigger presence in the United States, Schultz said Starbucks did not feel threatened.

“We’re mindful of the competitors, but we think that when all is said and done it’s a positive effect on the (coffee) category, and we’ll benefit from it,” Schultz said.