3:50 PM
Starbucks raises targets as prices, traffic rise
Addison Ray
By Lisa Baertlein
LOS ANGELES | Thu Nov 4, 2010 5:53pm EDT
LOS ANGELES (Reuters) - Starbucks Corp (SBUX.O) raised its full-year profit forecast, boosting investor confidence its turnaround plan has ushered in a new phase of growth and sending shares 3 percent higher.
Rising prices and improving traffic in its stores gave it leeway to hike its fiscal 2011 outlook. The world's biggest coffee company recently raised prices on large and labor-intensive drinks to offset surging prices for coffee and other commodities, easing concerns that those higher costs would dampen profits.
U.S. sales at restaurants open at least 13 months jumped 8 percent in the fiscal fourth quarter from a year ago, driven by a 6 percent rise in customer visits and a 2 percent increase in spending per visit.
International same-restaurant sales were up 7 percent, helped by a 4 percent traffic increase and a 3 percent rise in average ticket.
Those factors, coupled with efficiency efforts and cost controls, prompted the company to hike its earnings target for the current 2011 fiscal year to a range of $1.41 to $1.47 per share, from $1.36 to $1.41 previously. Wall Street's average forecast was for $1.43, near the low end of the new range.
"The increase really is based on the strength of the quarter we just recorded and the momentum we bring into the new year," Starbucks Chief Financial Officer Troy Alstead said in a telephone interview.
Shares in Starbucks, which dipped below $8 in 2006, rose 3 percent to $30.63 following the company's earnings report.
BIGGER PROFITS BREWING
Seattle-based Starbucks has returned to financial health after closing stores and slashing costs in 2008 and 2009. Some employees, however, said those fixes eroded the cafe culture that made the company great.
Starbucks is eyeing profit growth through new products like Via instant coffee and by expanding its middle-market Seattle's Best brand in the United States and building new cafes in important international markets like China.
"I am convinced that we are about to enter an era of even more opportunity for Starbucks, and am more convinced than ever that our future has never looked brighter," founder and Chief Executive Howard Schultz said in a statement.
Net income for the fourth quarter ended October 3 rose 86 percent to $278.9 million, or 37 cents per share, handily besting analysts' average call for a profit of 32 cents per share, according to Thomson Reuters I/B/E/S.
Net revenue grew more than 17 percent to $2.8 billion, after global sales at restaurants open at least 13 months rose a better-than-expected 8 percent.
Starbucks has more than 16,000 cafes around the world.
It gets about 75 percent of company revenue from its roughly 10,000 stores in the United States, where it is facing competition from the upscale independent coffee chains at the top of the market and from large companies like McDonald's Corp (MCD.N) and Dunkin' Donuts on the lower end.
(Editing by Edwin Chan, Gary Hill)
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