Reporting healthy increases in traffic in both U.S. and international locations, Starbucks Corp. said profit rose more than 20 percent in its second quarter.
For the quarter ended April 3, the Seattle-based coffeehouse giant recorded better-than-expected net income of $261.6 million, or 34 cents per share, compared with $217.3 million, or 28 cents per share, for the same quarter a year ago.
Starbucks officials had earlier projected earnings between 32 cents and 33 cents per share for the second quarter.
Starbucks, which has 16,863 locations worldwide, said revenue rose 10 percent to $2.8 billion for the quarter. The company credited the increase to a 7-percent jump in global same-store sales, driven by a 6-percent increase in traffic and a 1-percent increase in average ticket.
Troy Alstead, Starbucks’ chief financial officer, said the results demonstrate the “underlying health of our business has never been better,” especially given investments the company made during the quarter and charges related to the closure of Seattle’s Best Coffee locations that were located in the bankrupt Borders bookstore chain.
During the quarter, Starbucks assumed control of its packaged coffee business, breaking away from longtime licensing partner Kraft Foods. The company also announced a strategic relationship with Green Mountain Coffee Roasters for the manufacturing, marketing, distribution and sale of Starbucks coffee and Tazo tea in single-serve K-Cup portion packs, which are used with the Keurig brewing system.
“Starbucks’ record fiscal second quarter results reflect solid performance and execution across all of our businesses,” Howard Schultz, Starbucks chairman, president and chief executive, said in a statement. “Our sales, traffic and customer trends all point to the expanding power of the Starbucks business and brand.”
Among Starbucks’ 10,930 locations in the U.S., revenue rose 6 percent to $1.9 billion, primarily due to a 7-percent increase in same-store sales. Traffic at U.S. locations rose 6 percent, while average checks were up 1 percent.
The chain’s 5,933 international locations recorded revenue of $609.8 million, up 15 percent over the prior year, in part because of favorable foreign currency exchanges. A 4-percent increase in same-store sales contributed, as did an increase in licensed stores revenue.
Starbucks’ Consumer Products Group saw revenue increase 30 percent over the prior year to $204.7 million, which was attributed to the transition of the packaged coffee and tea business to a direct model, and the continued expansion of the Via Ready Brew instant coffee product.
For the year, Starbucks is targeting high-single-digit revenue growth, driven by same-store sales growth in the mid-single digits. Earnings for the 52-week year are projected to range from $1.46 to $1.48 per share. Starbucks recorded earnings of $1.24 per share in its last fiscal year, which had 53 weeks.
Company officials, however, expect commodity costs, such as higher dairy and fuel costs, to have an unfavorable impact of about 22 cents per share for the full fiscal year.
Contact Lisa Jennings at [email protected].