Starbucks profit up 20 pct, chain raises '06 view

[caudio51]

I have to admit I do buy coffee from them.

Starbucks

UPDATE 4-Starbucks profit up 20 pct, chain raises '06 view
Wed Feb 1, 2006 7:45 PM ET

(Recasts first paragraph, adds byline, analyst and executive comments, background, updates share activity)
By Nichola Groom
LOS ANGELES, Feb 1 (Reuters) - Starbucks Corp. <SBUX.O> on Wednesday posted a 20 percent rise in quarterly earnings and raised its profit outlook for the year as holiday demand for gift cards pushed January same-store sales past estimates.
The news sent the coffee shop chain's stock up 5.2 percent in after-hours trade.
Sales at Starbucks stores open at least 13 months, or same-store sales, rose 10 percent in January, marking just the second time in the last 12 months the chain has posted a double-digit increase in the key retail measure.
The strong January results "got some investors fired up," said Mike Koskuba, a portfolio manager with Victory Capital Management, which owns about 875,000 Starbucks shares. Analysts had been expecting a rise in the high single-digits, he said.
Net income for the first quarter, ended Jan. 1, rose to $174.2 million, or 22 cents per share, from $144.7 million, or 17 cents per share, a year earlier.
Excluding stock-based compensation costs, earnings were 24 cents per share, topping the Wall Street consensus by 2 cents per share, according to Reuters Estimates.
Sales of holiday drinks like eggnog- and gingerbread-flavored lattes helped drive quarterly sales up 22 percent to $1.9 billion. One analyst attributed the better-than-expected profits, however, to higher operating profit margins as occupancy and store operating costs fell.
"The difference really was margins, which were at a record level in the company's history," said McAdams Wright Ragen analyst Dan Geiman, who has a "buy" rating on Starbucks.
Starbucks has been working to drive sales momentum in its flagship U.S. business by adding lunch items like sandwiches and salads. As of Wednesday, Starbucks also said it had added hot breakfast sandwiches to stores in Portland, Oregon, and would expand them to Chicago and San Francisco this year.
The company has also benefited from the growth of its small but profitable entertainment unit with sales of exclusive CDs by well-known artists like Bob Dylan and Ray Charles.
It also announced in January that it would enter the movie business by promoting the upcoming Lionsgate <LGF.N> <LGF.TO> low-budget film "Akeelah and the Bee" in its North American stores.
Starbucks Chairman Howard Schultz said its movie promotion deal would be unlike similar marketing efforts by fast-food companies because the coffee shop chain is not paying for the right to market the film.
"Fast-food purveyors have paid for product placement. ... We are not paying anything," Schultz said in an interview. "We are being paid because of the halo of the brand."
The company is also in talks to enter the digital music download arena, though Schultz did not give a specific timing for an announcement.
For fiscal 2006, Starbucks raised its outlook by five cents per share to a range of 68 cents to 70 cents per share, including the impact of stock-based compensation costs.
The company said, however, that January's 10 percent same-store sales rise was "not sustainable" and backed its long-term goal of posting monthly increases of 3 percent to 7 percent, "with monthly anomalies," for the rest of fiscal 2006.
Starbucks, the No. 1 global coffee shop chain, has more than 10,500 outlets worldwide. The company has been pushing hard into China, and Schultz said on Wednesday it was looking more closely at entering Russia, Brazil and India.
Starbucks shares rose to $33 on the Inet electronic brokerage from their Nasdaq close of $31.36. (Additional reporting by Alexandria Sage and Peter Henderson)

 

[cvm4]

Good for them...Haven't bought coffee from them in a while. It's almost too sweet for me. Although I haven't tried everything, that could be expensive :scratchhe

 

[thebigo]

They have some damn good coffee.

 

[jasontp]

Makes me sad. . . I guess I should be happy that more people are getting into coffee though. . . now if they can just make the connection that Starbucks coffee is burned and stale. . .

 

[thebigo]

well when that burned coffee is strained out in my press...it brews to a nice burnt black taste. mmmmmm....I have some smaller company blends that I love so much more though. Some great key west blends.

 

[tobby4]

Whether we like their coffee or not they have done a DAMN good job in marketing and thier overall business strategy......

but i still dont like the coffee

 

[KingofVagabonds]

I'm lucky to have other quality local options. I do what I can to prevent further suburbanization of my city. It's nice to have mom and pop places around, though they are disappearing fast.

 

[MichiganM]

I'm not the aficionado with coffee that I am with cigars. I really can't tell alot of taste difference between a Starbucks caramel latte and a caramel latte from somewhere else. They really all taste the same to me. I just buy from whoever is cheapest.

 

[tobby4]

Oh on the coffee drinks i really cannot tell at all either... but on a black cup of coffee I can tell most of the time..

 

[MichiganM]

Yeah i didn't think about it that way. I've always preferred sweet over bitter, so I've never had black. But in that instance I suppose it would be alot easier to tell the difference of coffees.

 

[thebigo]

Oh on the coffee drinks i really cannot tell at all either... but on a black cup of coffee I can tell most of the time..

A good cup of coffee is better than a quad dipped purple strawberry caramel mocha latte. Simple.

 

[caudio51]

If I had my choice of a dunkin donuts cup of coffee and a starbucks cup, I'd choose the Starbucks. I wish there were more smaller shops near me like Jason's that roasted a good bean and made a nice cup.

 

[Wasch_24]

Starbucks tastes burnt to me. :dunno:

 

[jasontp]

Starbucks tastes burnt to me. :dunno:

I could go off on why that is, but it's easier to just say, that's because it is burnt.

I agree with Clay though, from a business standpoint you can't knock them at all. I can't even blame anyone for working for them because from what I hear they treat their employees well. . . just hate their coffee

 

[Black Dog]

I don't care for their coffee beans anymore but I used to like them quite a bit. For me they were the only game in town other than buying the stale gak at the grocery store. Starbucks brought specialty coffee to the masses. Without their proliferation of stores many people who now drink specialty coffee on a regular basis would never have tried sinlge origin coffees, espresso or double shot mocha raspberry twist frappalatte's. They've become kind of the McDonald's of the coffee world now but I believe that's the result of having become so huge. They have to maintain continuity at all of their stores so a latte in Chicago has to taste just like one in New York or Jipip. That requires automation and takes out the skill of the barista. Also, with the volume of beans they move their dark roast (burnt) profile helps insure that continuity as well as covers up the staleness of the beans.