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Starbucks: Rising coffee prices will not hurt earnings

Starbucks Corp. said rising coffee commodity prices would not impact projected earnings for next year, in part because of the company’s longtime practice of buying from multiple coffee regions.

The statement issued Tuesday follows reports that the prices for raw coffee beans began to rise last month and that wheat futures spiked to their highest level in two years. Though the restaurant industry has enjoyed favorable year-over-year commodity pricing over the past year and a half, the expected modest food inflation in coming months is likely to be a challenge.

Starbucks, however, pointed to its “deep expertise” in managing fluctuations of green coffee prices.

“For many years, Starbucks has diversified its coffee procurement into multiple coffee growing regions, and we remain confident in our ability to manage this dynamic effectively for our customers while continue to build and maintain long-term value for shareholders,” the company said in a statement.

The company reiterated its outlook for fiscal 2011 of earnings ranging from $1.36 to $1.41 per share, which were projected in July.

Starbucks expects to absorb about 4 cents per share in additional commodity costs, “primarily related to the higher coffee prices, but also reflecting our ability to effectively mitigate a portion of the relative short-term fluctuations inherent in today’s coffee market,” the company's statement said.

For its most recent 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. Same-store sales rose 9 percent. Click here for Starbucks' latest results.

Contact Lisa Jennings at [email protected].

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