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Originally published January 23, 2014 at 1:32 PM | Page modified January 24, 2014 at 2:01 PM

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Sales growth slows for Starbucks, but profit jumps 25 percent

The Starbucks growth machine in the U.S. isn’t running as fast as before, but the world’s largest coffee-shop chain still posted record profit.


Seattle Times business reporter

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25% profit for a drink & food company could only means they are ripping its... MORE
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Starbucks posted record quarterly sales and profit, as well as an unprecedented $1.4 billion loaded onto its loyalty cards — a figure that augurs a busy near future as customers flock to stores to redeem their beverages.

But its growth machine in the U.S. has slowed down somewhat, in part due to what the company says is a seismic shift driving consumers toward online shopping.

The coffee giant’s Americas division saw growth in same-store sales shrink to 5 percent in the quarter ended in December, from 8 percent in the preceding quarter. Worldwide, the company’s revenue came in under Wall Street expectations.

The figures underscore the growing challenge Starbucks faces to maintain its breakneck pace of growth in the U.S., its biggest and most mature market, and one that’s at the forefront of big, technology-driven swings in consumer behavior.

Analysts have been concerned about that moderation in growth. On Monday Goldman Sachs analysts said the slowdown in U.S. same-store sales could result in lower earnings guidance for the year.

Starbucks Chief Executive Howard Schultz said the coffee chain is well positioned to navigate successfully the shift toward online retail, thanks to its investments in mobile payments and digital expertise. That allows the company to keep a close connection with customers and study their preferences.

Also, a lot of what Starbucks stores have to offer — handcrafted beverages, a refuge away from the home and the office — can’t be replicated online, Chief Financial Officer Troy Alstead said in an interview.

But Alstead acknowledged that growth had somewhat softened last month as many shoppers stayed home and weren’t at the mall to purchase lattes. “Fewer people were out and about during the holidays,” he said.

Starbucks said that its sales growth and store-traffic numbers were strong and greatly outpaced the figures given by most retailers. The company said that the number of transactions at its stores in the Americas grew by 4 percent, a contrast to the big drop seen by many brick-and-mortar stores.

Research firm ShopperTrak said in a report earlier this month that national sales at all retailers in November and December increased 2.7 percent and foot traffic dropped 14.6 percent versus 2012.

Schultz said Starbucks was one of a handful of retailers benefiting from customers’ embrace of online sales and gift cards.

Cards, in particular, have been a big boon to Starbucks, as they secure future business and present the opportunity to gain new customers. Loyalty cards loaded during the latest quarter represent more than $1 billion of deferred revenue, the first time that ever happens, executives said.

The company is also counting on new types of stores to drive traffic and higher margins. Schultz highlighted the growing importance of drive-thrus, which he called surprisingly profitable.

“You’ll see us do that in great numbers in the future,” he said.

The company also posted good results in Europe, the Middle East and Africa, an area where it has historically struggled. Revenues jumped 11 percent to $339.5 million.

Net income in the three months ended Dec. 29 increased 25 percent to $540.7 million, or 71 cents a share, from $432.2 million, or 57 cents, a year earlier. Analysts had estimated 69 cents a share, the average of 29 projections compiled by Bloomberg.

First-quarter revenue rose 12 percent to $4.24 billion, the company said Thursday in a statement. Analysts had projected $4.29 billion.

Starbucks shares rose 0.8 percent to $74.00 in extended trading after the market close.

Information from Bloomberg News is included in this story.

Ángel González; 206-464-2250 or agonzalez@seattletimes.com. On Twitter: @gonzalezseattle



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