Starbucks Profit Tops Estimates as Americas Sales Increase

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Starbucks Corp., the world’s biggest coffee-shop chain, posted fiscal third-quarter profit that rose 22 percent after its sales gained in the Americas.

Net income increased to $626.7 million, or 41 cents a share, the Seattle-based company said in a statement on Thursday. Excluding some items, profit was 42 cents a share. Analysts estimated 41 cents, on average.

Chief Executive Officer Howard Schultz has been expanding beyond Starbucks’ core coffee beverages in a bid to boost domestic sales. The company is working to sell more Teavana tea while also adding new lunch items and expanding its cold-brew coffee across the U.S. and Canada. Same-store sales rose 8 percent in the Americas region, which includes the U.S., Canada and Latin America, helped by a 4 percent increase in customer traffic. Analysts had projected a 6.3 percent percent sales gain, according to Consensus Metrix.

“That increase in traffic is representative of the fact that we are reaching out to more and more customers,” Chief Operating Officer Kevin Johnson said in an interview.

Total revenue climbed 18 percent to $4.88 billion in the quarter ended June 28, topping projections.

The company raised its full-year profit forecast to as much as $1.58 a share, excluding certain items. The projection, which matches analysts’ estimates, is up from $1.57.

Starbucks rose 5.1 percent to $59.46 at 5:46 p.m. in late trading in New York. The shares already had gained 38 percent this year through Thursday’s close.

Bistro Box

Starbucks has been focused on selling more food in the U.S. In July, it introduced a new Omega-3 bistro box with salmon spread and trail mix, as well as a barbecue beef brisket sandwich. It’s bringing French cookies to some New York locations.

The coffee company is trying to increase sales by adding to its digital services. Earlier this year, Starbucks said it was expanding mobile ordering, which allows customers to order ahead of time. It’s also experimenting with offering delivery.

“Beverage innovation and technology are driving the acceleration in traffic,” said Peter Saleh, an analyst at BTIG. “A few quarters ago, investors were really concerned traffic was going to go flat and now it’s up.”

Some of that increase can be attributed to the growth of the company’s loyalty program. There are about 10.4 million U.S. rewards members, an increase of 28 percent from a year ago, Johnson said.

Asia Sales

Sales at stores open at least 13 months jumped 11 percent in China and Asia Pacific and gained 3 percent in Europe, the Middle East and Africa. Starbucks, which has about 1,700 locations in China, is expanding its grocery-store business there with iced K-cup pods and ready-to-drink coffee.

Starbucks said Thursday that PepsiCo Inc. will help market, sell and distribute its ready-to-drink coffee and energy beverages in Latin America.

The company earlier this month said it’s raising prices on some drinks, including brewed coffee, by as much as 20 cents in the U.S. The hikes, which vary by market, may increase the average amount customers spend by about 1 percent, Starbucks said.

Starbucks also said Thursday that its board gave it permission to buy back 50 million more shares of stock. The authorization has no expiration date and is in addition to 11 million shares remaining on its current allowance.

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