Skip navigation

Starbucks' 2Q sales lifted by retail presence

Starbucks Corp. is upping the number of new units planned this year and upgraded its earnings outlook after reporting an 18-percent increase in net income for the second quarter on Thursday.

For the April 1-ended second quarter, the Seattle-based company reported net earnings of $309.9 million, or 40 cents per share, compared with $261.6 million, or 34 cents per share, a year ago.

Global revenue increased 15 percent to $3.2 billion on same-store sales that climbed 7 percent, driven by a 6-percent increase in traffic and a 1-percent increase in average check, the company said.

Howard Schultz, Starbucks’ chair, president and chief executive, attributed the quarter’s success to the chain’s expanded retail presence, strong sales growth in China, the introduction of new products like the Refreshers energy drinks and increased efficiencies that “more than offset” high legacy commodity costs.

“I could not be more excited or more optimistic about the future of our company as we pursue disciplined, profitable growth all around the world,” Schultz said.

Troy Alstead, Starbucks chief financial officer, said Starbucks’ revenue growth was driven by strong same-store sales and an increasing contribution from the company’s consumer products segment, which it calls “channel development.”

The chain’s China Asia Pacific region, called CAP, showed the highest same-store sales gains of 18 percent for the quarter, of which 14 percent reflected an increase in transactions, and average check was up 4 percent.

In the Americas, which includes the U.S., Canada and Latin America, same-store sales increased 8 percent, reflecting a 7-percent increase in transactions and a 1-percent increase in check average.

However, a decline in same-store sales of 1 percent was reported in Europe, the Middle East and Africa, a region known as EMEA, the company said.

Revenue from the channel development segment, which includes Starbucks’ packaged coffees and products like VIA Ready Brew, K-Cups and the new Refreshers energy drink line, grew by 57 percent during the quarter to $321.5 million.

The company said the increase was primarily due to sales of K-Cup portion packs and the benefit of revenues from packaged coffee sales under a direct distribution model after splitting from former licensing partner Kraft Foods last year.

During the quarter, Starbucks opened 176 new locations, including 76 in the Americas division.

For 2012, the company has increased its target for new growth globally, with 1,000 expected to open globally. In the Americas, around 500 new units are planned, about half of which will be licensed locations. Previously, 400 new locations were planned for the region.

More stores are also scheduled for China. This year Starbucks expects to open 400 locations. Previously the target for the year was 300. About two-thirds will be licensed, and half of the CAP locations will be in China specifically.

In EMEA, the company is maintaining its previous estimate of 100 new units, about two-thirds of which will be licensed.

For the year, Starbucks is expecting mid-single-digit increases in same-store sales growth.

Commodity inflation is expected to add about $230 million of cost pressure for 2012, but coffee prices are expected to ease in the second half of the year.

Given the strong results, Starbucks raised its earnings expectations to a range of $1.81 to $1.84 per share for the year.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.