Shares turn bitter as Starbucks lowers outlook
By Candice Choi ,APNEW YORK -- Starbucks Corp. reported third-quarter net income on Thursday that fell short of Wall Street expectations and cut its outlook for the current quarter, citing the challenging global economy.
July 28, 2012, 12:09 am TWN
Its shares fell 9.6 percent in after-hours trading.
The Seattle-based coffee giant said net income rose 19 percent during the quarter, as global revenue at cafes open at least a year rose 6 percent. The increase in the metric, which is important to retailers because it excludes the effect of recently opened and closed stores, was driven by growth in China and Asia and the Americas. In the European market, where Starbucks has been struggling to turn around its business, the figure was flat.
“Europe has been a challenge for us all year and continues to be,” said Troy Alstead, the company's chief financial officer. But he noted that the flat sales were an improvement from the previous quarter, when the figure slipped 1 percent.
To perk up its business in the region, Starbucks has been instituting measures similar to those it took during the downturn in the U.S. a few years ago, such as introducing loyalty programs and improving service. CEO Howard Schultz has said he's confident the measures will prove successful.
Still, the company says its store expansions next year will be focused in the United States and the fast-growing China market.
For the three months ended July 1, the company said it earned US$333.1 million, or 43 cents per share. That's compared with US$279.1 million, or 36 cents per share, a year ago.
Total revenue rose 13 percent to US$3.3 billion.
Analysts on average expected a profit of 45 cents per share on revenue of US$3.34 billion.
Starbucks said the higher revenue was the result of increased customer traffic and customers spending more per visit.
For the current quarter, Starbucks cut its profit outlook to 44 cents to 45 cents per share from a range of 46 cents to 47 cents per share. Analysts were predicting 48 cents per share.
In this July 12 photo, a cup of Starbucks coffee sits outside a shop in Cambridge, Massachusetts. Starbucks Corp. reported third-quarter net income on Thursday, July 26 that fell ...