Nov. 15 (Bloomberg) -- Starbucks Corp., the world's largest chain of coffee shops, posted quarterly profit that rose 35 percent on higher prices. The retailer lowered its sales and earnings forecasts after U.S. customer visits fell, sending the shares down 8 percent.

Earnings per share next year will be $1.02 to $1.05, a gain of at most 21 percent and less than its previous forecast of a 22 percent increase, Starbucks said today. Analysts were anticipating profit of $1.05 a share.

Starbucks lost customers after a 9-cent-per-cup price increase in late July caused consumers concerned about higher food, fuel and housing expenses to go to McDonald's Corp. or Dunkin' Donuts LLC stores instead. Margins have been hurt by higher dairy costs and sales of less-profitable breakfast sandwiches and salads.

``Unbeknownst to us, we saw economic headwinds that quite frankly came up probably stronger than I thought,'' Chief Executive Officer Jim Donald said in an interview. ``The consumer is being faced with rising costs in every sector of their lives, and so part of that is reflecting on us.''

Fourth-quarter net income advanced to $158.5 million, or 21 cents a share, from $117.3 million, or 15 cents, a year earlier, the Seattle-based company said in a statement. The results matched analysts' estimates. Revenue climbed 22 percent to $2.44 billion.

Revenue for the 12 months that end in September 2008 will rise by 17 percent to 18 percent, below its previous forecast of a gain of ``around 18 percent,'' Starbucks said. Same-store sales will increase in the range of 3 percent to 5 percent, lower than its long-term target of a 3 percent to 7 percent gain.

Consumer `Getting Hit'

``Starbucks is saying what the rest of the U.S. is saying, that the consumer is getting hit,'' said James Walsh, who helps manage $1.1 billion including Starbucks shares, at Coldstream Capital Management in Bellevue, Washington. ``They're not immune.''

Starbucks fell $1.92 to $22.18 at 5:15 p.m. in trading after the results were released. Earlier, they dropped 15 cents to $24.10 at 4 p.m. in Nasdaq Stock Market composite trading.

The stock has declined 32 percent this year on investor concern that sales at stores open at least 13 months may slow as the company tries to reach its goal of 40,000 locations worldwide.

Sales at stores open at least 13 months rose 4 percent for the quarter. Nine analysts surveyed by Bloomberg had a median same-store-sales estimate of 4.5 percent. U.S. customer transactions fell 1 percent.

Nineteen analysts estimated profit of 21 cents a share.

Dairy Costs

Starbucks has added breakfast sandwiches, salads and more pastry items in an effort to keep consumers from going to other chains such as Dunkin Donuts and McDonald's.

Starbucks lost to McDonald's earlier this year in a coffee taste-test by Consumer Reports magazine, whose staffers said the Starbucks brew was ``bitter enough to make your eyes water.'' McDonald's also sells iced coffee and flavored lattes.

In late July, Starbucks lifted prices by about 2.5 percent to cover rising costs for dairy, coffee, wages and benefits. It was the second increase in less than a year.

The price increase was ``the right thing to do'' because of the rising costs, Donald said today.

Milk prices rose 62 percent this year through September, data from the U.S. Department of Agriculture show.

Starbucks has been adding an average of 6 or 7 new cafes per day as it tries to reduce its dependence on the U.S., where it gets 80 percent of sales.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

Last Updated: November 15, 2007 17:21 EST