Starbucks rises! Via Instant Coffee and Seattle's Best Coffee included.
NEW YORK – As more people visited Starbucks cafes and spent more at the end of summer, the company's fourth-quarter net income nearly doubled, handily beating estimates, and the company raised its target Thursday for fiscal 2011 profit.
The world's largest cafe chain earned $278.9 million, or 37 cents per share, in the quarter that ended Oct. 3. That compares with $150 million, or 20 cents per share, a year earlier.
Revenue rose 17.2 percent to $2.84 billion.
Analysts on average expected the Seattle company to earn 32 cents per share on revenue of $2.77 billion, according to Thomson Reuters.
The traffic increase was particularly strong in U.S. Starbucks stores, where 6 percent more people came in and each spent 2 percent more, on average, than a year earlier. Abroad, 4 percent more people came in and spent an average of 3 percent more.
Revenue at stores open at least a year rose 8 percent in the U.S. and around the world during the quarter, Starbucks said. The figure is key for retailers because it excludes stores that opened or closed during the year.
Starbucks shares soared on the news. After setting a new 52-week high of $30 during regular trading Thursday and closing at $29.75, up 2.2 percent, they rose to $30.52 in aftermarket trading. That's another 77 cents, or 2.6 percent.
Starbucks' revenue slumped during the recession partly because of new competition from McDonald's Corp.'s expanding line of fancy coffee drinks, and the cafe chain closed stores and laid off employees.
The company also created new products such as Via instant coffee and sold more offerings through grocery stores to reach customers who may be avoiding the cafes to save money. This summer, to lure more customers into its cafes, Starbucks started offering free wireless Internet. And just last month, it launched a digital portal with free content such as the Wall Street Journal.
Now Starbucks is focusing on Via and other products sold in stores, with new flavors, including a Christmas Blend version, and expanding Via to other countries.
When people come into stores, they're splurging on packets of Via, in addition to buying a prepared drink, CFO Troy Alstead said in an interview. Alstead sees signs that shoppers are willing to spend more and the economy may be rebounding.
"I think perhaps as customers have gone through this past year they've felt better than they have from years ago," he said. "But there is some caution."
Starbucks is wooing more customers with its new products, including newly customizable Frappuccinos and warm foods like oatmeal, said Morningstar senior analyst R.J. Hottovy.
And, at just few dollars apiece, Starbucks treats appeal to people seeking a small indulgence.
"It's a guilty pleasure," he said.
For the full year, the company earned $945.6 million, or $1.24 per share, more than double the $390.8 million, or 52 cents per share, it earned in fiscal 2009. This year's fiscal calendar included an extra week. Revenue rose 9.5 percent to $10.71 billion.
Analysts expected earnings per share of $1.24 on revenue of $10.63 billion.
The company now expects earnings per share of $1.41 to $1.47 for next year, up from $1.36 to $1.41 per share. Analysts expect $1.43 per share, according to Thomson.
Starbucks announced Thursday that it has informed Kraft Foods Inc. that it is ending their decade-old agreement for distributing Starbucks' coffee to grocery stores. Starbucks did not say what the deal was worth, or if it or another company would take over distribution.
Sales at grocery stores and other retailers are increasingly important to Starbucks, primarily because of its Via brand.
CEO Howard Schultz told investors the company plans to have more products available in stores in the future, after first introducing them in its cafes.
Speaking during a conference call Thursday to discuss Kraft's earnings, Kraft CFO Tim McLevish said Starbucks hadn't given formal notice of its decision, but he said Starbucks "has expressed their desire to control their strategic brands."
McLevish said Kraft's distribution of Starbucks' Seattle's Best brand coffee has grown from $50 million in sales to $500 million, and he said the Northfield, Ill., company respects Starbucks' decision.
The companies issued brief dueling press releases on the matter late Thursday, each noting its intention to keep the talks private. Kraft said the companies' pact requires Starbucks to pay Kraft to exit the business. Starbucks said two hours later that it was "unfortunate" Kraft had chosen to "mischaracterize" the distribution agreement.
Starbucks: 4th-quarter net income nearly doubles - Yahoo! News
"People who love to eat are always the BEST people."
Originally Posted by sharkey360
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