Starbucks 1Q profit up 10 per cent on strong sales - Metro US

Starbucks 1Q profit up 10 per cent on strong sales

PORTLAND, Ore. – Starbucks Corp. reported its biggest quarterly revenue gain since the recession began, but investors worried after the company issued a modest forecast for the year.

The Seattle-based coffee company reported on Thursday after the stock markets closed that fiscal first-quarter revenue grew 16 per cent — the largest quarterly gain since 2007. It attracted new customers by adding stores in China and Morocco, upgrading locations in the U.S. and rolling out single-serve coffee and other new items at grocery stores.

“Starbucks is firing on all cylinders and taking full advantage of the many global opportunities that lie ahead,” CEO Howard Schultz said in a statement.

Profit rose 10 per cent to $382.1 million, or 50 cents per share, for the quarter that ended Jan. 1. That’s up from $346.6 million, or 45 cents per share, in the same quarter last year. Revenue increased to $3.44 billion with growth from all its business lines.

Results beat the 49 cents per share on revenue of $3.29 billion that analysts expected, according to FactSet.

Starbucks said revenue from its stores open at least a year — an important measure because it strips away the impact of recently opened or closed stores — increased 9 per cent as more customers visited its cafes and spent more each trip. It was the company’s most successful holiday season ever, with customers buying more peppermint mochas, gingerbread lattes and Starbucks gift cards.

Starbucks also benefited from the addition of 241 new stores during the quarter. It now operates 17,244 stores worldwide, with plans to open another 800 in the coming year.

Additionally, Starbucks delivered major gains in its consumer products business, which sells its new single-serve coffee products, Via instant coffee, Starbucks ice cream and other items for sale in grocery stores and other retailers. Revenue from this segment increased 72 per cent and Starbucks expects the business to continue to grow.

The solid quarterly performance was followed by a full-year forecast that was slightly below Wall Street expectations as Starbucks acknowledged that it continues to struggle with higher costs for coffee beans, dairy products and other ingredients it needs.

Starbucks said these costs were $105 million higher for the quarter than this time last year, sending its operating margins down from 17 per cent to 16.2 per cent for the quarter. Starbucks said commodity costs will add up to $230 million in costs for the full fiscal year but it anticipates the pressure will lesson in the second-half of the year.

Starbucks nudged up the lower-end of its earnings guidance. It now expects to earn $1.78 to $1.82 per share for the full year, up from prior guidance of $1.75 to $1.82 for the year. But it falls just short of analyst expectations of $1.83 per share, according to FactSet.

Jack Russo, an analyst with Edward Jones, said the modest outlook and lower margins drove some investors away in after-hours trading. On the news, the company’s shares fell 54 cents to $47.80 after the markets closed.

Starbucks remains a strong growth company, Russo said, but the stock is already rich. It has hovered near record highs this week. Its shares have traded between $30.75 and $48.39 in the past 52 weeks.

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