Starbucks’ 1Q profits soar on strong sales, traffic
In this Nov. 24, 2014 photo, barista Jay Rapp prepares a Chestnut Praline Latte at a Starbucks store in Seattle. Starbucks reports quarterly financial results on Thursday, Jan. 22, 2015. AP
NEW YORK — Starbucks Corp.’s fiscal first-quarter earnings soared 82 percent as the coffee chain attracted more customers around the globe who snapped up an expanded offering of food and drinks over the holidays.
Starbucks has enjoyed healthy sales growth, but is seeking to keep its momentum going by expanding on a number of fronts.
To convince more customers to get something to eat with their drinks, the Seattle-based company has been introducing new and revamped baked goods, sandwiches and salads and wants to become more of a destination for grabbing a quick lunch.
In the evenings, it plans to offer beer and wine in a quarter of its U.S. stores over the next five years. The idea is to drive up sales throughout the day, not just during the morning rush when people are getting their caffeine fixes.
Another way it’s driving sales is through its mobile app and loyalty program, which help get customers in the habit of visiting Starbucks rather than its competitors.
The company said Thursday it’s expanding its program that allows shoppers to order ahead on their smart phones, a move that should help shrink lines. Starbucks began the program in 150 stores in Portland, Oregon, in December and has been well received, the company told investors on a conference call Thursday. It’s now expanding the program to 600 stores in the Pacific Northwest in the months ahead and will be rolling it out nationwide later this year.
“Operationally, we delivered the best in-store experiences to customers in our history,” Howard Schultz, the company’s chairman and CEO told investors.
As it seeks to transform itself, Starbucks is undergoing a major change at the top. The company on Thursday named board member Kevin Johnson as president and chief operating officer. He will assume the role March 1. Johnson had been the president of computer networking equipment maker Juniper Networks from September 2008 through December 2013.
The appointment comes after Starbucks’ chief operating officer, Troy Alstead, said earlier this month he plans to take an “extended unpaid leave” after 23 years with the company. The company said it was a personal decision by Alstead, who wanted to spend more time with his family.
Johnson’s technology background will help propel the company to expand its mobile initiatives and other innovations, Schultz said.
Starbucks said it earned $983.1 million in the quarter ended Dec. 28, or $1.30 per share. That compared with $540.7 million or 71 cents per share, a year earlier.
On a per-share basis, Starbucks said it had profit of $1.30. Earnings, adjusted for non-recurring gains, were 80 cents per share.
The results met Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was also for earnings of 80 cents per share.
The coffee chain posted revenue of $4.8 billion in the period, beating Street forecasts. Analysts expected $4.79 billion, according to Zacks.
Globally, revenue at its stores open at least a year rose 5 percent. Customer traffic was up 2 percent in the quarter, compared with 1 percent in the previous period. That was the same pace as the U.S.
Schultz singled out Starbucks’ new holiday drink chestnut praline latte as a big hit. And he noted that its expanded collection of Starbucks gift cards also helped to drive sales. This holiday season, one in seven American adults received a Starbucks gift card, up from one in eight last year. Roughly, 2.6 million Starbucks cards were activated on Dec. 23 alone and $1.6 billion was loaded on cards in the U.S. and Canada in the first quarter, up 17 percent from a year ago.
For the current quarter ending in March, Starbucks expects its per-share earnings to range from 64 cents to 65 cents. The company expects full-year earnings in the range of $3.09 to $3.13 per share.
Analysts are expecting 68 cents a share in the current quarter and $3.13 a share for the full year, according to Fact Set.
Shares of Starbucks rose $3.27, or nearly 4 percent, to $86.01 in extended trading after the report was released.
