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Starbucks 3Q profit up, co. lifts outlook

The launch of customizable Frappuccinos and sales of Via instant coffee and Seattle’s Best Coffee helped boost Starbucks Corp.’s third-quarter performance, continuing the turnaround that began a year ago, the company said Wednesday.

After reporting a 37-percent increase in profit, Seattle-based Starbucks chief executive Howard Schultz increased the company’s outlook for the rest of the year and into 2011.

For the quarter ended June 27, Starbucks reported a profit of $207.9 million, or 27 cents per share, compared with $151.5 million, or 20 cents per share, in the year-ago third quarter.

Latest-quarter revenue increased 9 percent to $2.6 billion, including domestic revenues of $1.9 billion, an increase of 7 percent.

At the end of the third quarter, Starbucks operated or licensed 16,737 stores, including 11,131 in the United States, after it had closed 144 underperforming company stores in the past year.

Third-quarter same-store sales increased 9 percent, reflecting a 6-percent increase in traffic and a 3-percent increase in average ticket, the company said. International same-store sales rose 6 percent, driven by a 4-percent increase in traffic and a 2-percent increase in average ticket.

Schultz said the results reflect “a continuation of the strong performance and momentum we have been driving across our businesses around the world.”

He added that he was particularly pleased to report the increases in store traffic, given the challenging global economic environment.

The new instant coffee, dubbed VIA Ready Brew, is now available in grocery stores across the country, and, once launched in the United Kingdom and Japan as planned, the product will reach 37,000 distribution points, Schultz said.

Added to the VIA boost was expanded sales from Starbucks’ secondary brand, Seattle’s Best Coffee, which is sold in Subway and soon in Burger King units, as well as in grocery stores.

Schultz also credited the renewal of the $2 billion Frappuccino beverage platform, which was tweaked earlier this year to allow guests to customize their drinks with decaf, sugar substitutes or other options.

For the remainder of the year, Starbucks plans to open about 250 new coffeehouses globally, through mostly licensed locations.

The company said it now expects per-share earnings for the year to totally between $1.22 and $1.23, excluding about 4 cents of expected restructuring charges and about 5 cents from an extra week in the fiscal fourth quarter. A year-ago, Starbucks earned 80 cents per share.

For 2011, the company said it planned to open 500 mostly licensed stores around the world, including about 100 locations in the United States.

In 2011, same-store growth is expected to total in the “mid-single-digits,” and the company is predicting earnings of between $1.36 and $1.41 per share with no restructuring charges expected.

Contact Lisa Jennings at [email protected].

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