|
By Mary Jane Credeur
Bloomberg.com
Thursday, May 3, 2007
Starbucks Corp., the world's largest chain of coffee shops, said second-quarter profit rose 18 percent on demand for new latte and Frappuccino flavors and the addition of more cafes.
Net income climbed to $150.1 million, or 19 cents a share, from $127.3 million, or 16 cents, a year earlier, matching analysts' estimates. Sales increased 20 percent to $2.26 billion, the Seattle-based company said today in a statement.
Starbucks added Latin-inspired dulce de leche drinks and expanded its breakfast menu to more stores to keep customers from going to McDonald's Corp., which has promoted its coffee. The company opened 560 cafes during the quarter, including 150 in countries such as Egypt and China, as it seeks to triple its store count to 40,000 locations worldwide.
"Starbucks customers go to the stores for the ambiance and the experience,'' said Reed Bender, who helps manage $300 million including Starbucks shares at Robert Bender & Associates in Pasadena, California. "The opportunity for the company long-term really exists overseas.''
Separately today, Starbucks agreed to a licensing accord for Ethiopian coffee to end a trademark dispute in that country.
The company reiterated its full-year profit forecast of 87 to 89 cents a share. Analysts surveyed by Bloomberg are estimating 89 cents on average.
Starbucks said sales at stores open at least a year rose 4 percent in the second quarter. The median estimate of nine analysts surveyed by Bloomberg was 4.5 percent. A year earlier, Starbucks posted a same-store sales gain of 10 percent.
'Toughest Quarter'
This was the ``toughest quarter probably in the history of the company'' for same-store comparisons, Chief Executive Officer Jim Donald said today in an interview. He said he's "very comfortable'' with the company's long-term forecast of gains of 3 percent to 7 percent.
The company plans to repurchase up to 25 million shares of stock, worth about $790.5 million based on today's closing price, in addition to the 1.1 million shares remaining under its previous buyback plan.
Shares of Starbucks rose 23 cents to $31.85 at 6:22 p.m. in trading after the results were released. Earlier they climbed 37 cents to $31.62 in Nasdaq Stock Market composite trading. They have declined 21 percent since reaching a 52-week high Nov. 16.
Starbucks reaffirmed that it plans to open 2,400 new stores worldwide, or about 7 per day, in the year that ends September.
Analysts' Estimates
The average second-quarter earnings estimate of 15 analysts surveyed by Bloomberg was 19 cents a share on revenue of $2.3 billion for the quarter ended April 1.
Starbucks's profit was helped by a 5-cent per cup price increase in October intended to overcome higher costs for health benefits, employee wages, coffee and energy. It was the first price increase in two years.
Starbucks has doubled the number of blending stations for making icy Frappuccino drinks to avoid repeating the bottlenecks stores experienced last year when early-morning demand for the beverages rose more than expected, Donald said. Frappuccinos take longer to make than espresso-based drinks.
"We're feeling very comfortable this year that we're into the flow of this,'' Donald said.
The company will introduce new Frappuccino flavors soon, he said, without elaborating.
Pricing Plans
Starbucks has "no plans'' to raise prices again to overcome higher costs for rent, distribution, wages and dairy, Chairman Howard Schultz said today on a conference call with analysts and investors.
Starbucks said its cost of sales including occupancy increased to 41.9 percent of revenue for the quarter, from 40.3 percent a year earlier, because of the higher expenses.
Starbucks opened its first store in Egypt, and recently added a Romania location as it tries to achieve Schultz's short-term goal of adding 10,000 new locations in the next four years. As of quarter's end, the company had 13,728 stores.
Schultz said today on the call that he sees the 36-year- old company adding about 100 new locations per year in China, which he says could become its second-largest market behind the U.S.
Huge 'Opportunity'
"They still have huge penetration opportunity in developing countries,'' Emily Sanders, who manages $140 million in assets including Starbucks shares at Atlanta-based Sanders Financial Management, said on May 1.
Starbucks today agreed to license Ethiopian coffee from the Harar, Sidamo and Yirgacheffe regions to resolve a dispute over the country's efforts to trademark its beans. Terms of the agreement weren't disclosed.
Starbucks last year wanted Ethiopia to seek a different type of geographical certification, such as the ones that protect France's Bordeaux wines. The company said earlier this year it won't oppose Ethiopia's trademark efforts.
To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net .
|
