Starbucks surprises with stellar results
Starbucks plans to open 1,400 cafes in the fiscal year that begins in October, 100 more than it is opening this year.
Seattle Times business reporter
Investors loved Starbucks on Thursday, when the company reported higher-than-expected profit of $417.8 million for the third quarter. At 55 cents a share, earnings were 2 cents better than Wall Street expected.
The coffee colossus also thrilled shareholders with a 9 percent increase in same-store sales in the United States, meaning many of its older stores continue to grow quickly. But executives do not want investors to assume Starbucks will always deliver such gleaming results.
“We are extraordinarily proud and stunned that we’re able to achieve a 9 percent comp, and it would be irresponsible to share with you that we can do that again in [the fourth quarter],” CEO Howard Schultz told analysts during a conference call.
Investors still celebrated, driving the stock up almost 6 percent in after-hours trading to $72.10. That followed a 2 percent gain to $68.17 in regular trading, before the earnings release.
For the third quarter, Starbucks’ profit rose 25 percent on sales that grew 13 percent to $3.7 billion.
The chain said it plans to open 1,400 cafes in the fiscal year that begins in October. That’s 100 more than it is opening this year.
Starbucks had 19,209 stores when the quarter ended June 30.
It is growing at about half the rate of its pre-recession juggernaut expansion, and is looking more toward international growth.
Of the 1,400 cafes scheduled to open in 2014, half are in Asia, 600 in the Americas and only 100 in Europe, Africa and the Middle East.
Most of Starbucks’ stores and profit still come from the Americas, primarily the United States and Canada.
In the third quarter, the Americas segment’s operating income rose 24 percent to $619.3 million on revenues of $2.78 billion.
In Asia, operating income climbed 38 percent to $84.7 million on revenues of $233.7 million.
Another strong performer was the company’s “channel development” business, which sells coffee, tea and other products in grocery stores, on airlines and elsewhere. Its operating income grew 14 percent to $96.3 million.
Starbucks’ struggling Europe, Middle East and Africa business saw a sharp increase in operating income from $1.6 million to $9.3 million on a modest 2 percent revenue gain. The low figure a year ago — which changed from a previously reported number of $2.6 million because the company shifted accounting for certain costs — was mostly due to costs in changing its distribution model in the U.K.
Executives said cost-cutting measures have helped in that region, as has adding stores that are licensed by Starbucks to other companies, rather than run by Starbucks.
Starbucks also has an “all other” category for online sales and two of the three companies it bought recently — the Teavana chain and Evolution Fresh juice company. (The third company, La Boulange Bakery, is part of the “Americas” segment.)
That category lost $9.4 million in the quarter, a little more than it lost a year ago, in part because Starbucks is spending money to develop those brands.
Despite Starbucks’ rich cash position — $1.2 billion as of March — and recent predilection for acquisitions, Schultz said no others are currently in the works.
Melissa Allison: 206-464-3312 or firstname.lastname@example.org. Twitter @AllisonSeattle.