Starbucks Posts Higher Profit -- Update

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By Anna Prior

Starbucks Corp. reported fiscal first-quarter earnings that rose 25% as customers continued to shell out for the coffee company's cappuccinos and lattes, though the sales increase was slightly below expectations.

Still, for the recently started fiscal year, Starbucks raised its per-share earnings guidance to $2.59 to $2.67, compared with its October view of $2.55 to $2.65 a share. The company backed its prior view for 10% or greater revenue growth, and for global same-store sales growth in the mid single digits.

Starbucks has recorded stronger sales trends in the U.S. than most of its competitors. The company has noted that the wide adoption of its loyalty program has helped its value perception and driven customer traffic.

In December, Starbucks said it expected record purchases and activations of its Starbucks Cards on the Thursday before Christmas, anticipating a reprise of the previous year, when more than 2 million cards were purchased in the U.S. and Canada on that Thursday.

Global same-store sales grew 5%, below the 5.9% growth projected by analysts polled by Consensus Metrix.

Starbucks has been working to diversify its traditional coffee business by expanding to more packaged products and food, as highlighted by its recent plans to partner with Danone SA to sell Greek yogurt parfaits and other similar items. The company also recently purchased loose-leaf tea retailer Teavana and a San Francisco Bay-area bakery.

The company also has made a push to expand geographically, looking to open thousands of locations in the Americas and China in coming years.

Starbucks said same-store sales for the latest quarter jumped 8% in the company's China and Asia-Pacific businesses, compared with expectations for a 7.7% increase. Same-store sales in the Americas rose 5%, below expectations for 6.4% growth, while Europe, Middle East and Africa sales rose 5%, topping expectations for a 2% increase.

Overall, the company reported a profit of $540.7 million, or 71 cents a share, up from $432.2 million, or 57 cents a share, a year earlier. Starbucks in October had forecast per-share earnings of 67 cents to 69 cents.

Net revenue rose 12% to $4.24 billion.

Analysts polled by Thomson Reuters had forecast revenue of $4.29 billion.

Operating margin widened to 19.2% from 16.6%.

The company reaffirmed its second-quarter outlook from October, and said it expects per-share earnings for the third quarter of 64 cents to 66 cents, and per-share earnings for the fourth quarter of 70 cents to 75 cents. Analysts were looking for 68 cents a share and 72 cents a share for the third and fourth quarters, respectively.

Starbucks stock has fallen about 11% since trading at all-time highs in November. Through Thursday's close, the stock has risen 35% in the last 12 months.

Write to Anna Prior at anna.prior@wsj.com

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Referenced Stocks: SBUX

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