Starbucks Profit Rises 25 percent, Shares Hit All-Time Highs

Joe Goldman |

Starbucks (SBUX)  shares hit new all-time highs Thursday afternoon after the company beat earnings expectations, raised its full-year outlook, and posted its best overall third quarter results ever.

Starbucks reported a profit of $417.8 million, or $0.55 per share, versus the $333.1 million, or $0.43 per share, from the same period a year ago. Revenue for the quarter was $3.74 billion, as compared to $3.30 billion from the previous year. Analysts were expecting a profit of $0.53 per share on revenues of $3.72 billion.

“Our more than 19,000 store global footprint, our fast-growing [consumer products group] presence and our best-in-class digital, card, loyalty and mobile capabilities are creating a ‘flywheel’ effect elevating the relevancy of all things Starbucks, and driving profitability,” said CEO Howard Schultz, who called the quarter “the best across-the-board third-quarter performance in our 42-year history.”

Starbucks also impressed investors with 8 percent global same-store sales growth, including 9 percent comparable growth in both China/Asia Pacific (CAP) and the Americas. Hoping to capitalize on this success, Starbucks plans to open 600 new stores in the Americas and 700 in CAP during 2014.

“Our powerful Q3 results reflect the outstanding success of our growth platforms both in the U.S. and globally, with all regions delivering an acceleration in comparable store sales and operating margin versus Q2,” said CFO Troy Alstead in the conference call. The company’s executives heralded China and other Asian countries as enormous opportunities with “significant growth ahead.”

Driven by strong growth in the Americas and CAP, Starbucks raised its full-year guidance. The company expects to earn $2.22-$2.23 per share on revenue growth of 10 to 13 percent. Analysts had predicted $2.18 per share on 12 percent revenue growth. The company also expects operating margin to improve by 1.5-2 percent.

As expected, Europe, Middle East, and Africa (EMEA) was Starbucks’ weakest performer for the quarter. Because same-store sales only grew 2 percent in the region, the company plans to open around 100 stores in the region during 2014. Although this pales in comparison to its results and projected store openings in the Americas and Asia, the company’s business in the region is, nonetheless, growing.

The Seattle-based company also cited recent acquisitions as drivers for growth in the long-term. The company was especially excited about the great initial response to La Boulange, a bakery that Starbucks acquired in 2012, and the company is “on the road to a fantastic food program,” it said in the conference call.

The coffee maker was also positive about Evolution Fresh, a fruit juice company that Starbucks acquired in 2011. With Evolution Fresh replacing Naked Juice on shelves, Starbucks experienced a significant lift in sales. The company is also beginning to ship Evolution Juice into supermarkets nationwide, including a major deal with Whole Foods (WFM) . Starbucks also claimed positive reception to newly-opened drive-throughs.

On the blowout earnings report and bullish conference call, Starbucks shares popped 6.4 percent during after-hours trading to $72.51, racing past previous all-time highs. Shares are up 31 percent year-over-year.

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Companies

Symbol Name Price Change % Volume
SBUX Starbucks Corporation 58.65 -0.11 -0.19 7,971,381
WFM Whole Foods Market Inc. 31.70 0.67 2.16 4,444,390
FDTC Fnds3000 0.00 0.00 0.00 0

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