Bloomberg News

Starbucks Jumps as Profit Increases on U.S. Sales Gain

November 02, 2012

Starbucks Fourth-Quarter Profit Climbs as U.S. Store Sales Gain

Starbucks Corp. profit per share fell 1 cent to 46 cents as the number of shares outstanding increased. Photographer: Dhiraj Singh/Bloomberg

Starbucks Corp. (SBUX:US), the world’s largest coffee-shop operator, rose the most in 19 months after yesterday reporting fourth-quarter profit increased as new products helped boost U.S. sales.

Starbucks climbed 9.1 percent to $50.84 at the close in New York for the biggest gain since March 10, 2011. The shares (SBUX:US) have advanced 11 percent this year.

Net income (SBUX:US) climbed 0.1 percent to $359 million from $358.5 million a year earlier, the Seattle-based company said in a statement yesterday. Profit per share fell 1 cent to 46 cents as the number of shares outstanding increased. Fourth-quarter profit per share included 2 cents of charges related to store closings in Europe. The average estimate of 26 analysts was 45 cents, according to data compiled by Bloomberg.

Chief Executive Officer Howard Schultz has sought to boost sales by selling non-coffee items such as juice, tea and energy drinks at Starbucks shops. The company also recently introduced a single-serve coffee machine, the Verismo, to compete with brewers made by Green Mountain Coffee Roasters Inc. (GMCR:US) and Nestle SA. (NESN)

“They’re really searching for life even beyond coffee,” Jack Russo, a St. Louis-based analyst at Edward Jones & Co., said in an interview. “They’re trying to diversify the business model a little bit” and those different things “have all helped” U.S. revenue, he said.

The company said that profit in its fiscal 2013 will be $2.06 a share to $2.15 a share. That compares with a previous projection (SBUX:US) of $2.04 to $2.14.

Americas Sales

Sales at stores open at least 13 months in the U.S., Canada and Latin America advanced 7 percent in the quarter, helped by the U.S. retail business, Starbucks said in the statement. Analysts estimated a 5.1 percent increase, according to the average of 25 projections from Consensus Metrix.

U.S. consumer confidence rose in October from the month before to the highest level since before the last recession began five years ago. The Thomson Reuters/University of Michigan final consumer sentiment index climbed to 82.6, the highest since September 2007.

Global same-store sales rose 6 percent, compared with the 5 percent analysts’ estimate, according to Consensus Metrix, a researcher owned by Wayne, New Jersey-based Kaul Advisory Group. Same-store sales in the company’s Europe, Middle East and Africa region declined 1 percent in the quarter. Analysts estimated a gain of 0.6 percent.

Store Closings

Starbucks closed 22 stores in Europe, mostly in the U.K., in the fourth quarter and through the end of October, said Jim Olson, a company spokesman. The company is closing stores in Europe amid turnaround efforts it’s making there. Earlier this year, the coffee seller added more espresso to its lattes and ran television ads in the U.K. to help boost sales and attract customers.

There may be charges related to the store closings in the company’s fiscal 2013 first and second quarters, Chief Financial Officer Troy Alstead said in an interview yesterday.

Starbucks, which gets more than 20 percent of its revenue from international locations, is expanding in India, seeking to benefit from the growing middle class there. The coffee brewer, which formed a joint venture with Tata Global Beverages Ltd. (TGBL), opened its first cafes in Mumbai in October and will open a store in New Delhi early next year.

India will be one of the company’s five largest markets in the long term, Schultz said during a conference call yesterday.

Revenue advanced 11 percent to $3.36 billion in the three months ended Sept. 30. Analysts estimated $3.39 billion, on average.

Starbucks has more than 17,600 stores worldwide.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • SBUX
    (Starbucks Corp)
    • $78.9 USD
    • 0.25
    • 0.32%
  • GMCR
    (Keurig Green Mountain Inc)
    • $120.6 USD
    • -0.11
    • -0.09%
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