Starbucks 1Q Net Increases 10%

NRN.com|Jan. 26, 2012 6:04 pm EST

Strong holiday sales in December helped drive a 10-percent increase in first-quarter profit for Starbucks Corp., the company said Thursday.

For the quarter ended Jan. 1, net earnings totaled $382.1 million, or 50 cents per share, compared with $346.6 million, or 45 cents per share, in the same quarter the previous year.

Commodity pressures, primarily coffee, continued to negatively impact the chain, resulting in a $105 million hit to operating income in the first quarter, the company reported.

Revenue rose 16 percent to $3.4 billion on a global same-store sales increase of 9 percent, reflecting a 7-percent increase in traffic and a 2-percent increase in average check, the company said.

The Seattle-based company's consumer products group booked a 72-percent increase in revenue during the quarter, fueled by the Nov. 1 launch of Starbucks-branded K-Cup packs and the company's decision last year to take packaged coffee distribution in house following a split from Kraft Foods.

"A very successful holiday season drove strong global same-store sales, which, combined with continued operational efficiencies, delivered record results despite continued commodity cost pressures," Troy Alstead, Starbucks' chief financial officer, said in a statement. "We are well positioned to continue to drive strong revenue and profit growth throughout this year, and in years to come."

Starbucks' first-quarter earnings also marked the first use of a new format that follows the company's reorganized regional segments.

For the division now called the Americas, which includes the United States, Canada and Latin America, same-store sales increased 9 percent, reflecting a 7-percent increase in transactions and a 2-percent increase in average check. Segment revenue totaled $2.6 billion

U.S. locations account for about 90 percent of business in the Americas.

Same-store sales rose 2 percent in Europe, the Middle East and Africa. Revenue totaled $303 million.

The China, Asia, Pacific region, or CAP, showed the strongest results with same-store sales up 20 percent, reflecting a 15-percent increase in traffic, the company said.

Revenue for CAP totaled $166.9 million for the quarter, an increase of 38 percent over the prior year, in part because of the 85 new company-operated locations that opened over the past year.

China is the fastest growing international market, Starbucks said, with more than 500 Starbucks locations on the mainland.

During the quarter, Starbucks opened 241 new stores globally.

The company reiterated growth plans for 2012, which include the opening of 800 stores globally, including about 400 in the Americas, about half of which will be licensed.

About 300 new locations are planned this year for the CAP region, about half of which will be in China.

In Europe, about 100 new units are projected.

The company reiterated its expectations for mid-single-digit same-store sales growth for 2012, with strong growth in consumer products expected to continue.

Contact Lisa Jennings at lisa.jennings@penton.com.
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