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Starbucks Profit Soars, Lifts Earnings Outlook; Stock Up


Specialty coffee retailer Starbucks Corp. (SBUX), Thursday posted a 25 percent jump in third-quarter profit, as coffee aficionados thronged its outlets in the U.S., China and Asia Pacific regions, and margins improved. Both earnings and revenue for the quarter topped Wall Street estimates.

The company lifted its earnings outlook for the fiscal year 2013, sending its shares up 6 percent in after-hours trade on the Nasdaq.

The results come as Starbucks has vibrant store-opening plans and is experimenting with baked products to add more teeth to its food portfolio. The coffee retailer is partnering French fresh diary products maker Danone to sell specialty yoghurts in Starbucks outlets and grocery stores in the coming two years.

Also of interest is Starbucks' expanded partnership with Green Mountain Coffee Roasters Inc. (GMCR) for the manufacture and and sale of Starbucks- and Tazo-branded single serve packs for use in Green Mountain's Keurig single serve brewing systems.

Seattle, Washington-based Starbucks reported third quarter net income of $418 million or $0.55 per share, up from $333 million or $0.43 per share last year. Analysts polled by Thomson Reuters estimated earnings of $0.53 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter grew 13 percent to $3.74 billion from $3.30 billion a year ago, topping analysts' expectations of $3.72 billion.

Total same-store sales were up 8 percent on a 7 percent growth in traffic. Among regions, Americas and China & Asia Pacific each gained 9 percent. Europe, Middle East and Africa was up 2 percent.

Revenues in the Americas were up 12 percent from last year, with operating margin up 210 basis points. China & Asia Pacific sales jumped 29 percent, with operating margin up 250 basis points. The growth comes even as rival McDonald's Corp. (MCD) recently reported a slide in this region, as did restaurant chain Yum! Brands Inc. (YUM), which has prolific store-opening plans in this region.

Consolidated operating margin for the quarter expanded 150 basis points to 16.4 percent in the quarter.

For the fourth quarter, Starbucks estimates earnings of $0.59 to $0.60 per share, including a $0.03 per share gain on the sale of Starbucks equity in Argentina and Chile. Analysts currently expect earnings of $0.57 per share for the quarter.

For the fiscal year 2013, Starbucks now expect earnings of $2.22 to $2.23 per share, up from prior range of $2.12 to $2.18 per share. The company continues to expect revenue growth of 10 percent to 13 percent. Analysts currently expect earnings of $2.19 per share on a 12 percent revenue growth for the year.

For the fiscal year 2014, the company expect earnings in the range of $2.55 to $2.65 per share, excluding gains of $0.06 per share on the 2013 sale of Starbucks equity in Mexico, Argentina and Chile. Revenue growth is expected in the range of 10 percent to 13 percent, with plans to open 1,400 net new stores.

Analysts currently expect earnings of $2.64 per share on revenue growth of 11.8 percent for 2014.

During the third quarter, Starbucks added 641 net new stores, and now operates 19,209 stores globally.

Starbucks' stock closed Thursday at $68.17, up $1.56 or 2.34%, on a volume of 6.7 million shares. In after hours, the stock gained $4.28 or 6.28%, trading at $72.45.

by RTTNews Staff Writer

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