Tags: starbucks | earnings | profit | coffee

Starbucks Surges After Food Menu, Mobile App Help Propel Sales

Thursday, 23 April 2015 09:50 PM

Starbucks Corp., the world’s biggest coffee- shop chain, jumped as much as 6.4 percent in late trading after sales topped estimates, fueled by an expanded menu and its increasingly popular mobile-phone app.

Revenue gained 18 percent to $4.56 billion in the second quarter, the Seattle-based company reported Thursday. Analysts had estimated $4.53 billion on average, according to data compiled by Bloomberg. The company also gave an optimistic view for the rest of the year, helping send the shares up as high as $52.57 in extended trading.

The quarter was “definitely above expectations,” said Peter Saleh, an analyst at Telsey Advisory Group. “Consumers are purchasing more expensive beverages, and they’re purchasing more food.”

Chief Executive Officer Howard Schultz has focused on expanding the company’s digital services, including mobile ordering, which allows diners to transmit their requests before visiting a store. Starbucks also is going to test delivery in Seattle and New York’s Empire State Building, letting customers get their coffees sent right to their offices.

“Innovation is the force that will continue to drive our business and enable us to expand and increase revenues and profits,” Schultz said in the statement.

Even before the after-hours gain, the shares were up 20 percent this year, outpacing the 2.6 percent rise of the Standard & Poor’s 500 Index.

Food Offerings

Starbucks reiterated its full-year forecast for 16 percent to 18 percent revenue growth, saying investments in stores and its workforce would fuel its expansion. Its third-quarter earnings will be 40 cents to 41 cents a share, excluding some items. Analysts had predicted 40 cents.

U.S. sales were helped by the company’s food business, which attracts more customers outside of the morning hours. Starbucks is trying to double its food revenue to more than $4 billion in the next five years, the company said in December.

Breakfast sandwiches, Flat White espresso drinks and Teavana teas all helped drive second-quarter sales, Chief Financial Officer Scott Maw said in an interview.

The Starbucks mobile-phone app accounted for 19 percent of total U.S. payments in the quarter, up from 16 percent in the previous period, he said. The company also is seeing “very strong early results” from its new mobile-ordering service, Maw said.

Reserve Coffee

Starbucks also plans to open new coffee bars that tout its Reserve line, which is prepared in small batches. Starbucks will open 500 of the bars worldwide, highlighting premium coffees and the newest brewing methods, Schultz said on a conference call.

Globally, sales at stores open at least 13 months rose 7 percent in the quarter, which ended March 29. Analysts estimated 5 percent on average, according to Consensus Metrix. The sales also climbed 7 percent in the company’s Americas region, which includes the U.S., Canada and Latin America. That topped projections as well.

Excluding some items, earnings amounted to 33 cents, matching analysts’ estimates.

The company reiterated its plan to open 1,650 new cafes, net of closures, this fiscal year. That includes 850 locations in the China and Asia Pacific region, where the chain has been ramping up growth. Starbucks recently opened pour-over coffee bars in China and is trying to sell more food there.

In January, Starbucks named former Juniper Networks Inc. CEO Kevin R. Johnson as chief operating officer, underscoring the role technology now plays at the coffee chain. Johnson took over for Troy Alstead last month.

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Starbucks Corp., the world's biggest coffee- shop chain, jumped as much as 6.4 percent in late trading after sales topped estimates, fueled by an expanded menu and its increasingly popular mobile-phone app.Revenue gained 18 percent to $4.56 billion in the second quarter,...
starbucks, earnings, profit, coffee
Thursday, 23 April 2015 09:50 PM
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