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Starbucks’ 1Q profit rises on holiday sales

Record domestic sales drive 44% jump in net income

Starbucks reported a 44-percent jump in first-quarter profit Wednesday, saying strong holiday sales and operational improvements helped offset skyrocketing coffee costs.

For the first quarter ended Jan. 2, Starbucks reported net income $346.6 million, or 45 cents per share, compared with $241.5 million, or 32 cents per share, for the first quarter a year ago. Analysts had projected earnings of 39 cents per share, according to Thomson Financial.

Revenue for the 17,009-unit chain grew by 8 percent to $3 billion, Starbucks said. Systemwide same-store sales increased 7 percent, which reflected a 5-percent increase in traffic and a 2-percent increase in average check.

Starbucks said revenue from domestic locations reached a record $2.1 billion for the quarter, driven by an 8-percent increase in same-store sales. Traffic was up 6 percent at the chain’s domestic coffeehouses, while the average check rose 2 percent.

“Our holiday lineup, bolstered by Christmas Blend and Starbucks Christmas VIA, along with the world-class service of our partners, resonated well with customers and led to record results for the quarter,” said Howard Schultz, chairman, president and chief executive of Seattle-based Starbucks.

Revenue from Starbucks’ 5,851 international locations grew 9 percent to $640 million. Same-store sales for international units rose 5 percent, reflecting 2-percent upticks in both traffic and average ticket.

Revenue from the consumer products division increased 12 percent to $195.2 million during the quarter, primarily due to increased sales of packaged coffee and Starbucks’ VIA Ready Brew instant coffee.

For the full fiscal year, Starbucks slightly upgraded its earnings projections to between $1.44 to $1.47, though higher coffee costs are expected to have an unfavorable impact of about 20 cents per share. The company had previously projected 2011 earnings between $1.41 and $1.47, with the negative impact from commodity costs ranging between 8 cents to 10 cents per share.

Starbucks said earnings are expected to range between 32 cents and 33 cents per share for the second and third quarters, and about 35 cents per share for the fourth quarter.

Starbucks said it plans to open about 500 new stores globally this year, including 100 in the United States. Most of the 400 international units expected to open this year will be licensed locations, the company said.

Troy Alstead, Starbucks chief financial officer, said, “Strong momentum in our global business in fiscal 2011 positions us to deliver 15 percent to 20 percent EPS growth compared to last year’s results, and to affirm our 2011 guidance, despite dramatically higher coffee costs.

“Through the strength of our global retail business and the exciting future growth opportunities in consumer products and Seattle’s Best Coffee,” he added, “we are on track with our plans to grow and diversify Starbucks and pursue a larger share of global coffee consumption.”

Contact Lisa Jennings at [email protected].

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