Starbucks Delivery Is Coming; Sales Rise 10%
Coffeehouse Chain Gives Weaker-Than-Expected Forecast
Starbucks recently said it plans to open 100 specialty Starbucks stores selling only its small-batch ‘reserve’ coffees. AFP/GETTY IMAGES
Starbucks Corp. said revenue rose 10% in the fiscal fourth quarter, thanks to a steady increase in new stores and its continuing efforts to woo a growing crowd of coffee aficionados.
But the coffee chain gave a weaker-than-expected outlook for its current quarter, which includes the holiday season, and its recently started new year.
The company on Thursday also said delivery is in the offing. In the second half of next year, customers in certain markets will be able to use the mobile ordering and payment app to have food and drinks delivered.
“Imagine the ability to create a standing order of Starbucks delivered hot to your desk daily,” Starbucks Chief ExecutiveHoward Schultz told investors on Thursday’s earnings call. “That’s our version of e-commerce on steroids.”
It raised prices earlier this year on some packaged coffee and in-store beverages in response to a jump in coffee costs, but that hasn’t appeared to hurt sales.Starbucks recently unveiled efforts to attract consumers seeking more upscale brews. It introduced anew line of single-origin coffees for those customers interested in where their coffee is grown. The Seattle-based coffeehouse chain also plans to open 100 specialty Starbucks stores selling only its small-batch Reserve brand coffees.
Sales at company-owned stores open at least 13 months rose 5% in the September quarter. By region, sales rose 5% in the Americas, China and Asia, and Europe, Middle East and Africa as well.
Starbucks has been diversifying in recent years from its traditional coffee business by adding more packaged products and food and has expanded rapidly. It opened 503 net new stores globally, ending the September quarter with 21,366 stores across 65 countries.
Overall, Starbucks reported a profit for the period ended Sept. 28 of $587.9 million, or 77 cents a share, compared with a loss of $1.23 billion, or $1.64 a share, in the year-earlier period when the company notched a $2.8 billion litigation charge tied to a dispute with Kraft Foods .
Late last year an arbitrator handed Starbucks a defeat in its three-year fight with Kraft, saying the coffee giant must pay nearly $2.8 billion for ending a failed partnership.
The dispute centered on an agreement Starbucks entered with Kraft in 1998 to distribute and market Starbucks brand coffee in U.S. grocery stores—and, later, in overseas markets.
Excluding special items, earnings rose to 74 cents a share from 60 cents, in line with the company’s expectation of 73 cents to 75 cents a share.
Revenue increased to $4.18 billion, missing the estimate of $4.23 billion from analysts polled by Thomson Reuters. Wall Street was disappointed, having hoped for faster revenue growth. Starbucks shares fell 4% in after-hours trading.
For the quarter ending in December, Starbucks forecast per-share earnings of 79 cents to 81 cents, below the 83 cents expected on Wall Street.
For the year, Starbucks raised its revenue guidance, partly tied to its plan to take full ownership of its Japanese operations, guiding for 16% to 18% growth, versus its previous call for at least a 10% increase.
As for the bottom line, Starbucks narrowed its outlook, projecting earnings of $3.08 to $3.13 a share, an increase of 16% to 18%. The company had previously guided for 15% to 20% growth. Analysts, though, projected $3.16 a share.
