Tags: starbucks | profit | sales | europe

Starbucks Profit Hit by Weak European Sales

Thursday, 26 Jul 2012 04:42 PM

Starbucks Corp., the world’s largest coffee-shop chain, reported third-quarter profit that rose less than analysts estimated amid weak demand in Europe. The report, issued after the end of regular stock-market trading, sent Starbucks shares down more than 10%.

Chief Executive Officer Howard Schultz has sought to turn around the company’s European business with television advertisements and new drink recipes as governments impose austerity programs amid a flagging economy. Sales at stores open at least 13 months in Europe, the Middle East and Africa were unchanged in the quarter, Starbucks said Thursday in a statement.

“Europe continues to be our most challenged part of the world by far,” Chief Financial Officer Troy Alstead said in an interview. The European economy is “extremely challenging and perhaps worsened during the quarter, he said.

Net income advanced 19 percent to $333.1 million, or 43 cents a share, from $279.1 million, or 36 cents, a year earlier, the Seattle-based company said today in a statement. Analysts projected 45 cents, the average of 27 estimates compiled by Bloomberg.

The company lowered its forecast for fourth-quarter profit to as much as 45 cents a share from a previous projection for as much as 47 cents. Analysts estimated 48 cents, on average.

Global same-store sales rose 6 percent, less than the 6.1 percent average estimate of analysts surveyed by Consensus Metrix, a researcher owned by Wayne, New Jersey-based Kaul Advisory Group.

‘Feeling It’

At U.S. cafes, sales growth began to slow in June from earlier this year, Alstead said.

‘‘The overhang of challenged consumer sentiment and housing and unemployment, I think the consumer is feeling it,’’ he said.

Same-store sales increased 7 percent in the Americas and rose 12 percent in China and Asia Pacific. Analysts estimated growth of 6.4 percent and 13 percent, respectively. Comparable- store sales are considered an indicator of a retailer’s growth because they include only older locations.

In June, Starbucks bought San Francisco-based Bay Bread LLC, giving it access to higher-quality food and a chain of bakeries, to help it compete with restaurants such as Panera Bread Co. The coffee brewer gets about 75 percent of its revenue from the Americas, which includes the U.S., Canada and Latin America.

Starbucks forecast fiscal 2013 profit of as much as $2.14 a share. Analysts estimate $2.28, on average.

Revenue advanced 13 percent to $3.3 billion during the quarter, compared with analysts’ average estimate of $3.32 billion.

Starbucks has more than 17,400 locations worldwide including about 10,800 in the U.S. and 740 in the U.K., its largest market in Europe.

In aftermarket trading Thursday, Starbucks shares were down 11 percent at $46.50, after rising 4 percent in regular trading. The shares gained 14 percent this year through the close of regular trading.

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