Starbucks Croissants, Loyalty Program Lift Profit Forecast

Apr 25, 2014 4:17 pm ET

(Updates with closing share price in seventh paragraph.)

April 25 (Bloomberg) -- Americans are increasingly leaving Starbucks Corp. cafes with more than just their venti lattes in hand.

The world’s biggest coffee-shop chain yesterday raised its forecast for profit this year, helped by a sales boost from new baked sweets, egg sandwiches and a rewards program with about 8 million U.S. members.

Profit in the fiscal year through September will be as much as $2.68 a share, Seattle-based Starbucks said in a statement. That’s higher than its previous forecast of as much as $2.67 a share and tops the $2.66 average projection of 29 analysts compiled by Bloomberg.

Chief Executive Officer Howard Schultz has attracted U.S. customers with non-coffee offerings, such as new breakfast sandwiches, juice and tea. The company also is expanding its evening program, selling beer, wine and small plates of food in the afternoon hours. Starbucks said yesterday that same-store sales rose 6 percent in the U.S. in the quarter that ended March 30, surpassing estimates.

In the U.S., “the single largest contributor to the comparable sales growth in the quarter was food,” Chief Operating Officer Troy Alstead said in an interview. “It resonates with customers.”

The company’s loyalty program also is growing “dramatically,” he said.

Starbucks shares rose 0.5 percent to $71.45 at the close in New York. The stock has lost 8.9 percent this year, while the Standard & Poor’s 500 Index has gained 0.8 percent.

Profit Rises

Net income in the second quarter climbed 9.4 percent to $427 million, or 56 cents a share, from $390.4 million, or 51 cents, a year earlier, the company said. Analysts had projected 56 cents, the average of 27 estimates compiled by Bloomberg.

Revenue rose 9.1 percent to $3.87 billion, while analysts estimated $3.95 billion, on average.

Sales at cafes open 13 months or longer climbed 6 percent worldwide, while analysts projected growth of 5.4 percent, the average of 22 estimates from Consensus Metrix, owned by Kaul Advisory Group in Wayne, New Jersey. Comparable-store sales rose 6 percent in Europe, the Middle East and Africa and 7 percent in China and Asia Pacific.

Starbucks, which has more than 1,000 locations in China, recently introduced gift cards to consumers there. The coffee seller has said the Asian nation is on track to be its biggest market outside the U.S.

Established Locations

Same-store sales are considered an indicator of a retailer’s performance because they only include older, established locations. The company, which plans to open about 1,500 net new locations this fiscal year, has about 20,100 stores globally.

Besides opening more Starbucks cafes, Schultz is adding Teavana tea bars, the first of which debuted in New York City in October. The company also has attracted customers with its growing loyalty and rewards program and will test a new express order-and-pay system in its cafes this year, Alstead said.

If all goes well, the company may introduce it to all U.S. stores in 2015, he said.