Starbucks profit tops analysts’ estimates as US sales gain

Business Friday 04/November/2016 14:12 PM
By: Times News Service
Starbucks profit tops analysts’ estimates as US sales gain

Chicago: Starbucks posted earnings that topped analysts’ estimates as new food items and digital efforts like mobile ordering helped its US business defy a restaurant-industry slowdown.
Profit rose to 56 cents a share, excluding some items, in the most recent quarter. That topped analysts’ average prediction of 55 cents.
The world’s largest coffee-shop operator has been fueling sales with technology that speeds service at cafes. Starbucks last year began offering mobile order and pay at its US locations and is expanding that feature to markets abroad, including China. The company also has focused on widening and improving its food selection, getting customers to spend more money per visit. Same-store sales rose 5 per cent in the Americas region, matching the average estimate of analysts polled by Consensus Metrix.
"Food continues to be a big contributor for both traffic and ticket” in the US, Chief Financial Officer Scott Maw said in an interview. New drinks, such as coconut milk mocha macchiatos and cold-brew beverages, fueled sales in the quarter, too, he said.
The company also is funneling more of its cash back to investors. Starbucks raised its quarterly dividend to 25 cents a share from 20 cents. It will be paid on December 2 to shareholders of record as of November 17.
The stock rose 1.3 per cent to $52.45 at 4:54pm in late trading in New York. Through Thursday’s close, Starbucks had lost 14 per cent this year.
Revenue gains
Revenue climbed 16 per cent to $5.71 billion in Starbucks’s fiscal fourth quarter, which ended on October 2, the Seattle-based company said in a statement on Thursday. Analysts estimated $5.69 billion, on average.
Mobile payments accounted for 25 per cent of domestic transactions, up from 20 per cent a year ago, as the company offers new features such as favourite locations and orders, according to Chief Operating Officer Kevin Johnson. Rewards membership also rose from last year.
In the US, where Starbucks has about 12,900 cafes, the latte seller is trying to improve the quality and variety of its food. Earlier this year, the company invested in Italian bakery Princi, which sells pastries, pizza and pasta in Europe. In some locations, the company has partnered with local bakers to make fare such as red-velvet cheesecake brownies in Chicago.
International efforts
Internationally, the company is focused on boosting sales with new locations and enhanced mobile capabilities in China. Starbucks recently promoted Belinda Wong to lead its business in China, where it plans to double its locations to about 5,000 cafes by 2021. Chief Executive Officer Howard Schultz has said Starbucks’ China presence could rival the US over time. Fourth-quarter same-store sales jumped 6 per cent in the Asian nation.
Globally, same-store sales rose 4 per cent. Analysts had projected 4.8 per cent. Sales by that measure increased 1 per cent in the China and Asia Pacific unit, and fell 1 per cent in Europe, the Middle East and Africa. The Asia figure was pulled down by weakness in Japan, Maw said.
Starbucks is going big with its upscale brand, dubbed Reserve, to attract more sophisticated customers and better compete with regional chains. It plans to open as many as 1,000 Reserve cafes globally that will tout small-lot coffee and Princi food.