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Fewer latte runs sends Starbucks 2Q profit down 28 percent(AP Online Via Acquire Media NewsEdge) SEATTLE_Starbucks Corp. said Wednesday its fiscal second-quarter profit fell 28 percent as U.S. consumers responded to rising food and gas prices by making fewer latte runs. The company also gave investors a first look at its expected financial performance through 2011, which calls for substantial profit growth, as well as a peek at some new drinks it hopes will help revive U.S. consumers' interest. For the quarter ended March 30, Starbucks' net income sank to $108.7 million, or 15 cents per share, from $150.8 million, or 19 cents a share in the same period last year. Revenue rose 12 percent to $2.53 billion from $2.26 billion in the year-ago quarter, the company said Wednesday. Starbucks warned last week that results would fall short of Wall Street's expectations. Analysts, on average, had forecast a profit of 21 cents per share on $2.63 billion in sales, according to a Thomson Financial survey. "We continue to come under very heavy consumer pressure due to the economy," said Chairman and Chief Executive Officer Howard Schultz in an interview. "Most retailers, restaurants, certainly other premium brands are facing similar headwinds." Charges for closing a few stores and not moving forward with other planned openings, as well as costs associated with Starbucks' plan to reinvigorate U.S. sales, such as added benefits for loyalty card holders, cut earnings by about 3 cents per share. U.S. same-store sales, a key measure of retail health, fell in the mid-single digits as traffic declined. Starbucks' past guidance called for 3 percent to 5 percent growth in same-store sales, or sales at locations open at least a year. Starbucks added 266 U.S. stores in the quarter, and 470 outside the country, bringing the worldwide total to 16,226. In a lengthy conference call after the report was released, Schultz and Chief Financial Officer Pete Bocian focused more on the coming months and years than on quarterly results. Schultz said the company will launch three new types of drinks in the U.S. this summer: a health-conscious smoothie-style line, an icy Italian coffee-based drink and an energy drink that adds extra kick to the existing Starbucks DoubleShot, which is sold in cans, and will also be prepared fresh in stores. The CEO said new health-conscious foods are planned for fall, and that the company will continue to experiment with new menu items through the holidays and into 2009. Looking ahead at financial and operational growth, Starbucks again pared back the number of U.S. store openings planned for this year by 30 and said it would limit new U.S. stores to 250 per year in 2009 through 2011. Bocian said Starbucks assumed continued difficulty in the U.S. economy in the near term as it devised its guidance. International openings will increase at a faster clip, with a projected 1,300 in 2011, as the company increasingly relies on overseas operations to fuel profit and revenue growth. Starbucks expects to have 21,500 stores worldwide by the end of fiscal 2011. For the fiscal year that ends Sept. 30, Starbucks reiterated last week's warning that earnings will fall below last year's 87 cents per share, but issued a forecast for growth going forward. The company predicted earnings from 90 cents to $1 per share in 2009, $1.10 to $1.20 per share in 2010, and $1.35 to $1.50 in 2011. McAdams Wright Ragen analyst Dan Geiman called Starbucks' three-year guidance aggressive, especially given the number of factors the company can't control, including the U.S. economy. "It's obvious there's a lot of moving parts there at this point," Geiman said shortly after the call. Starbucks' shares slipped to $16.16 in after-hours trading, after ending the day up 3 cents at $16.23. Copyright ? 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. |