Starbucks plans to brew a stronger profit in 2013
NEW YORK (AP) — Starbucks Corp. plans to accelerate growth and brew up a stronger profit in the year ahead, with CEO Howard Schultz noting that customers of all walks of life consider its drinks an "affordable luxury" even in challenging economic times.
The Seattle-based company said Thursday that global revenue at cafes open at least a year rose 6 percent in its fiscal fourth quarter, driven by higher customer traffic. The measure is a key gauge because it strips out the impact of newly opened and closed locations. In the U.S, the figure rose by 7 percent.
Citing the strength of its core business and a pipeline of new products — such as improved baked goods and a single-serve brewer that was introduced this fall —Starbucks lifted its dividend and guidance for the fiscal year ending in September 2013.
In the year ahead, Starbucks said it also plans to open 1,300 net new stores, up from the 1,063 it opened in the just completed year.
The $5 latte pioneered by Starbucks has long been a hallmark of financial indulgence for many Americans. But in a conference call with analysts, Schultz said that he wouldn't "define Starbucks as a luxury brand." Instead, he said Starbucks was positioned as an everyday luxury that anyone could afford, giving the company the flexibility to navigate even through a weak economy.
In the latest quarter, for example, the sales spike in the U.S. was partly the result of the company's "treat receipt" promotion, which offers customers in the morning a discount if they bring back their receipt in the afternoon. Executives decided to go ahead with the promotion after noticing traffic trends slowing in the summer.
"We weren't planning on doing it this year, but when we saw that slowing in June and July, we decided to go back to the tried and true," said Troy Alstead, Starbucks' chief financial officer.
Although consumer packaged goods remain a relatively a small portion of Starbucks' business, revenue for that segment rose 33 percent to $393 million in the quarter. As Starbucks faces intensifying competition from fast-food chains offering specialty coffees, the company has been expanding into other areas, such as its Evolution fresh juices, Refreshers energy drinks and the purchase of a small chain of San Francisco bakeries earlier this year. The Verismo, a single-serve coffee brewer, began appearing in stores this fall.
In the China Asia Pacific region, where Starbucks is intensifying expansion, the company said sales at cafes open at least a year rose 10 percent. In its struggling Europe region, however, the sales figure fell 1 percent, dragged down by weak results in Germany. The company said the closures of underperforming stores and the licensing of some of its cafes in the region is expected to improve results in coming quarters.
For the period ended Sept. 30, Starbucks earned $359 million, or 46 cents per share. That's up slightly from $358.5 million, or 47 cents per share, a year ago, when a fewer number of outstanding shares boosted the per-share results. The year-ago results also benefited from a gain related to a real estate sale.
Revenue rose 11 percent to $3.36 billion.
Analysts expected profit of 45 cents per share on revenue of $3.39 billion.
For fiscal 2013, the company now expects to earn between $2.06 and $2.15 per share. That's up from its previous outlook of $2.04 to $2.14 per share and above the $2.14 analysts expected, according to FactSet. The company also raised its quarterly dividend to 21 cents, an increase of 24 percent.
Shares rose $2.82, or 6.1 percent, to $49.44 in after-market trading. The stock had closed up 72 cents to $46.62 in regular trading.