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Starbucks raises targets for unit openings

Starbucks raises targets for unit openings

The company shakes off saturation talk after reporting increased income in the second quarter

Starbucks Corp. is ramping up growth for its coffeehouse locations in the Americas region and China, saying any talk of saturation or the inability to find good real estate should be “taken off the table.”

After reporting an 18-percent increase in net income for its second quarter Thursday and a global same-store sales increase of 7 percent, Starbucks told analysts in a conference call that the company will raise the number of locations it expects to open this year to 1,000 from the previous target of 800.

During fiscal 2012, the company expects to open 500 new units in the region called the Americas, which includes the U.S., Canada and Latin America. At the end of the April 1-ended second quarter, the chain had 12,570 locations within the region, roughly 100 more than the same quarter the prior year.

Through the recession, Starbucks closed close to 1,000 underperforming units across the U.S. as part of the chain’s turnaround. Now, said Howard Schultz, Starbucks’ chair, president and chief executive, the picture looks very different for the coffeehouse brand.

U.S. locations open within the past year are performing “extraordinarily well,” Schultz said.

“So any thought of saturation or inability to find quality real estate and continue to expand in the U.S., or, for that matter, North America, should be taken off the table,” Schultz added. “I can’t envision in the coming years that we’d open less stores than we just announced.”

He added that markets like Brazil, where Starbucks has fewer than 100 units, have room for growth, as well as other countries, like Argentina and Mexico.

Same-store sales for the Americas grew 8 percent during the quarter.

China, however, remains the region where Starbucks sees the most opportunity.

Starbucks said it is adding another 100 planned units to its schedule for the China Asia Pacific region for a total of 400 to open this year. Half of those new units will be in China, where the same-store sales increase for the quarter topped 20 percent for the seventh consecutive quarter.

Europe remains a problem for Starbucks, however. The Europe, Middle East and Africa — or EMEA — region saw same-store sales drop 1 percent during the quarter. Schultz said same-store sales increases in the United Kingdom and France were not enough to compensate for declines in Germany and Ireland.

Fears of a double-dip recession in the U.K. and lingering high unemployment across Europe have dragged down results, Schultz said. But the company is focusing efforts on a turnaround similar to that of the U.S. in recent years.

“We’ve seen this movie before and I’m proud to say it had a positive ending … in the U.S.,” Schultz said. “But this is not going to happen overnight.”

Meanwhile, the company is aggressively growing its channel development division, what used to be known as its consumer products group, or CPG, segment, which includes packaged coffees, single-cup products and bottled beverages.

Schultz said sales of Starbucks’ new Blonde Roast coffees, a lighter roast that debuted in January, have been strong, contributing to a 17-percent increase in packaged coffee sales during the quarter. K-Cup sales also contributed about half of the 57-percent increase in revenue growth for the channel development division.

The company also announced the debut of a new Refreshers energy drink during the quarter, which will be first offered as a handcrafted beverage in stores over the summer, followed by the launch of a bottled version available in retail outlets.

The chain is also rolling out bottled Evolution Fresh juices in Starbucks stores after acquiring the juice maker last year.

Schultz said he sees Evolution Fresh as yet another potential billion-dollar Starbucks brand.

The chain also opened its first Evolution Fresh retail concept in Bellevue, Wash., during the quarter, offering premium juices and healthful foods. More are planned, he hinted, saying the customer response to the concept has been positive.

“We are incorporating the early learnings from the first store into plans for future retail expansion,” Schultz said.

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

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