Starbucks Third-Quarter Profit Rises 37% on Via, Frappuccinos
Starbucks Third-Quarter Profit Rises 37% on Via
Tomohiro Ohsumi/Bloomberg
Howard Schultz, Starbucks CEO, poses during a promotional event for the company's VIA Coffee Essence instant coffee.
Howard Schultz, Starbucks CEO, poses during a promotional event for the company's VIA Coffee Essence instant coffee. Photographer: Tomohiro Ohsumi/Bloomberg
Starbucks Corp., the world’s largest coffee-shop chain, said third-quarter profit rose 37 percent on sales of instant coffee and Frappuccino frozen drinks.
Net income increased to $207.9 million, or 27 cents a share, Seattle-based Starbucks said today in a statement. Sales in the quarter ended June 27 advanced 8.7 percent to $2.61 billion. Excluding some items, earnings were in line with analysts’ estimates.
A promotion that allowed customers to add free syrups and toppings to their Frappuccinos boosted comparable-store sales by 2 percentage points, said Chief Financial Officer Troy Alstead. The company also started offering Via instant coffee in grocery stores and last year began selling Seattle’s Best coffee in fast-food chains like Subway to accelerate growth.
“We’re building Via as a growth platform over the next five years,” Alstead said in a telephone interview. Starbucks plans to increase its advertising spending by 2 cents a share in the current quarter to push products including Via, he said.
The company raised its forecast for earnings this year to as much as $1.23 a share, excluding projected restructuring charges, and said that amount would increase to as much as $1.41 in fiscal 2011. Analysts on average project earnings of $1.42 for 2011, according to estimates compiled by Bloomberg.
Starbucks fell 52 cents, or 2.1 percent, to $24.65 at 5:57 p.m. New York time. The shares have increased 9.2 percent this year in Nasdaq Stock Market trading.
Via in Japan
Starbucks expanded Via to more locations in the U.S., U.K. and Japan during the quarter. Via sales in Japan have already exceeded the company’s annual target for that region, Chief Executive Officer Howard Schultz said on a conference call. Via is now available at 37,000 points of distribution, he said.
After closing almost 900 locations since 2008, Starbucks also introduced free Wi-Fi service in remaining outlets during the quarter and sought to revive its coffee shop business.
The company’s “However-You-Want-It Frappuccino” promotion, started in May, has helped ward off competition from McDonald’s Corp.’s new, less expensive frozen Frappe drinks, said Tom Forte, restaurant analyst with New York-based Telsey Advisory Group. The free additions make the drinks seem like a better deal, he said.
“We haven’t seen any impact on our business at all” from the McDonald’s frappe drinks, Alstead said.
Sales at Starbucks stores open more than a year rose 9 percent in the third quarter, beating the 7 percent average estimate in a Bloomberg survey of 7 analysts.
Net income in the year-earlier period totaled $151.5 million, or 20 cents a share.
Starbucks, which declared its first dividend in March, raised its quarterly dividend to 13 cents a share from 10 cents today.
(Starbucks held a conference call at 5 p.m. New York time. To listen, visit http://investor.starbucks.com/.)
To contact the reporter on this story: Burt Helm in New York at bhelm3@bloomberg.net.
Rate These Stories
Rate this Page