Starbucks beats first-quarter profit forecasts
The Starbucks logo is seen at one of the company's coffee shops in downtown Chicago, Saturday, May 31, 2014. (AP / Gene J. Puskar, File)
The Associated Press
Published Thursday, January 21, 2016 4:37PM EST
Last Updated Thursday, January 21, 2016 6:56PM EST
SEATTLE -- An alleged war on Christmas by Starbucks apparently didn't dampen the chain's holiday sales, but its outlook going forward fell short of Wall Street expectations.
The Seattle-based company says sales rose 9 per cent in its flagship U.S. market and 8 per cent globally during the final three months of the year. The increase at home and abroad was the result of a mix of higher customer traffic and increased spending.
Over the holidays, the company said $1.9 billion was loaded onto Starbucks gift cards. It said 1 in 6 American adults received a Starbucks gift card over the holidays, up from 1 in 7 a year ago, and 1 in 8 two years ago.
The strong results came despite an online backlash from some corners when Starbucks unveiled its minimalist red cups bearing only its logo for the holidays. That was a change from past years, when the company's holiday cups were decorated with reindeer, snowflakes and Christmas ornaments.
Its performance overseas wasn't as strong, slowing in the units encompassing Asia and Europe. In the unit that includes Europe, the Middle East and Africa, Starbucks said sales rose 1 per cent at established locations, down from 5 per cent in the prior quarter. The company noted there was a "dramatic decline in consumer and tourist activity across Western Europe" after the terrorist attacks in Paris in November.
"We have quite recently begun to see the effects of that region's resilience and recovery," the company said in an email.
For its Asia region, Starbucks said sales rose 5 per cent, down from 6 per cent the previous quarter. The company said it did not expect a material impact from the attacks this month in Indonesia that resulted in temporary store closures.
During a conference call with analysts Thursday, Starbucks CEO Howard Schultz also expressed confidence in the company's long-term investment in China, where it already has about 2,000 stores and plans to have 3,400 by 2019.
Back at home in the U.S., Starbucks has been pushing up sales by rolling out pricier drinks like the "Flat White" and more food options. It said sales of breakfast sandwiches were up 40 per cent during the quarter from a year ago.
The company apparently wasn't affected by the warm weather, which hurt retailers that sell items such as winter coats and boats. Starbucks sells both hot drinks and cold drinks like Frappuccinos.
For the current quarter ending in April, Starbucks expects its per-share earnings to range from 38 cents to 39 cents. That's below the average analyst estimate of 40 cents per share, according to FactSet. The company expects full-year earnings in the range of $1.87 to $1.89 per share, compared with the FactSet estimate of $1.89 per share.
Shares of Starbucks fell 4.7 per cent to $56.25 in after-hours trading.
For the quarter ended Dec. 27, the company earned $687.6 million, or 46 cents per share. That was a penny more than Wall Street expected.
Total revenue was $5.37 billion, short of the $5.38 billion analysts had forecast, according to Zacks Investment Research.