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Starbucks reaffirms profit outlook despite rising dairy costs

SEATTLE Starbucks Corp. recorded an 8.8-percent year-to-year jump in profit for its third quarter on a 20.1-percent increase in total revenue, reflecting the opening of 668 new locations during the quarter.

The company, which operates or licenses 14,396 coffee outlets worldwide, also reiterated its full-year profit outlook despite talk of margin-squeezing dairy costs and slowed sales in the Unites States. Starbucks raised the prices of its beverages this week by an average of 9 cents, after hiking prices last October. Company officials said the price increase should help alleviate cost pressures and should not lessen consumer traffic.

Earnings for the 13 weeks ended July 1 totaled $158.3 million, or 21 cents per share, up from profit of $145.5 million, or 18 cents per share, for the third quarter in fiscal 2006. Latest-quarter revenues totaled $2.36 billion.

Same-store stores rose 4 percent, the company reported, which reflected a 3-percent increase in the average price per transaction and a 1-percent increase in the number of transactions.

Quarterly cost of sales increased to 42.6 percent of total revenues, compared with 41 percent in the year-ago quarter, mostly because of higher-cost products, increases in dairy costs and higher rent expense, the company said.

For the full year, Starbucks expects to earn between 87 cents per share and 89 cents per share on revenue growth from a year ago of 20 percent. Same-store sales are expected to rise between 3 percent and 7 percent, Starbucks reported. The company also said it is “evaluating a range of alternatives” for raising long-term financing, including a long-term bond financing or an interim credit facility, in order to pay down debt and fund share repurchases.

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