Starbucks’ profit shows Americans need coffee fix
The world’s biggest coffee chain said its profit rose 26 percent in its fiscal second quarter as a key sales figure climbed in the U.S., its biggest market.
The Associated Press
NEW YORK — Americans may not feel optimistic about the economy but they’re still spending more at Starbucks.
The world’s biggest coffee chain said Thursday that its profit rose 26 percent in its fiscal second quarter as a key sales figure climbed in the U.S., its biggest market. New drinks and food, such as its sandwiches and prepackaged lunch boxes, helped lift sales.
A 7 percent sales bump at U.S. cafes open at least 13 months came despite the broader industry’s struggles to grow at a time when other fast-food companies say people are being more careful with money. McDonald’s and Burger King saw sales decline during the first three months of the year and even Chipotle, which has grown rapidly in recent years, said sales at established restaurants grew just 1 percent.
Starbucks has been evolving its mix of food and drinks and expanding overseas as it faces intensifying competition at home from fast-food chains, which are offering more lattes and frozen coffee drinks. For example, the company recently started rolling out Evolution bottled juices in its cafes, and new baked goods from a San Francisco bakery chain are expected in all stores by the end of 2014.
Chief Financial Officer Troy Alstead said the hope is that Starbucks will become more of a lunch destination. He noted that traffic was growing in the afternoon hours, when traffic is generally slower than the morning rush.
The company also is making a big push behind its loyalty program, a move that’s expected to get people to come back more often and spend more when they visit. A recent offer for a $5 gift card for joining the program resulted in 1 million new registered members, the company said.
Starbucks, which has 18,000 locations around the world, said global sales at established cafes rose 6 percent during the period. That included an 8 percent increase in Asia, where the company has been focusing its expansion efforts.
But the figure fell 2 percent in Europe, where Starbucks has struggled to compete with local chains. The company also says the economy has made its turnaround push particularly difficult.
To improve results in the region, the company is shifting to more of a licensing model that lowers overhead costs and hands over control to local partners who may be more adept at adapting to local tastes.
Based on the momentum seen through the first half of the fiscal year, Starbucks said it was raising its outlook for 2013.
For the quarter, Starbucks earned $390.4 million, or 51 cents a share. That’s up from $309.9 million, or 40 cents a share, a year ago. Not including one-time items, it earned 48 cents per share, in line with analyst estimates.
Revenue rose 11 percent to $3.56 billion. But that was shy of the $3.58 billion Wall Street expected, according to FactSet. The company says it now expects full-year earnings of $2.12 to $2.18, up from the previous forecast of $2.06 to $2.15 per share.
In extended trading — after the company made its quarterly report — Starbucks shares dropped $1.55, or 2.6 percent, to $58.95. It had ended the regular trading day at $60.50, up 67 cents, or 1.1 percent.
OTHER LOCAL EARNINGS REPORTS
Alaska Air Group reported first-quarter net income of $37 million, or 51 cents a share, down from $41 million, or 56 cents a share, for the same period last year.
The Seattle-based parent of Alaska Airlines and Horizon Air said that setting aside adjustments for fuel hedges and other special items, it had record net income of $44 million, or 62 cents a share, up sharply from $28 million, or 39 cents.
CEO Brad Tilden said the company’s record adjusted net income during a traditionally weak season “is due to steady demand that kept pace with our growth.”
Expedia reported a larger loss in the first quarter as the online travel agency’s stock-based compensation, legal reserve and depreciation costs surged compared to a year ago.
But its adjusted income and revenue surpassed Wall Street’s expectations.
Expedia said it lost $104.2 million, or 77 cents a share, compared with a year-ago loss of $3.3 million, or 2 cents a share. The Bellevue company said it earned 25 cents per share during the most-recent quarter if the one-time items are excluded.
Revenue climbed 24 percent to $1.01 billion, mostly on greater international sales.
Coinstar, owner of the Redbox DVD rental machines, posted first-quarter profit that beat analysts’ forecasts, citing efforts to squeeze more from its kiosks after expanding the service last year.
Net income declined 58 percent to $22.6 million, or 78 cents a share, from $53.7 million or $1.65, a year earlier, The Bellevue company said. Sales rose 1.1 percent to $574.7 million.
The company also announced it will change its name to Outerwall, a move reflecting efforts to diversify beyond its namesake business.
Compiled from Seattle Times staff, Bloomberg News and
The Associated Press