Starbucks Earnings Surge in Holiday Quarter

By Tess Stynes 

Starbucks Corp. said its earnings surged as the coffee chain reported stronger traffic and sales at its U.S. cafes for the holiday quarter.

Shares rose 3.7% to $85.88 in recent after-hours trading.

Starbucks took steps to attract more customers to its U.S. cafes during the holiday period, in response to Americans increasingly turning to online ordering for holiday gifts, leaving brick-and-mortar retailers suffering--including its cafes.

This year, in an effort to boost traffic during the holiday season, Starbucks offered a chance to win free Starbucks coffee drinks for 30 years to customers who used gift cards.

Chairman and Chief Executive Howard Schultz cited the promotion and its expanded holiday offerings as drivers of customer traffic in the latest quarter.

Sales at company-operated stores in the U.S. open at least 13 months rose 5% during the latest quarter as traffic grew by 2% and the size of the average ticket increased 3%. Overall, Starbucks' comparable sales rose by the same percentage.

The amount of dollars loaded onto Starbucks cards jumped 17% to $1.6 billion. Starbucks said one in seven Americans received a Starbucks gift card in the first quarter, up from one in eight a year ago.

The company recently said Chief Operating Officer Troy Alstead was set to take an indefinite leave of absence, starting March 1. However Starbucks at the time didn't disclose who, if anyone, will fill Mr. Alstead's role as the coffee chain's second in command and when he expects to return. The company didn't provide any additional details in its earnings release Thursday.

For the period ended Dec. 28, Starbucks reported a profit of $983.1 million, or $1.30 a share, up from $540.7 million, or 71 cents a share, a year earlier. Excluding a gain related to its Japan Starbucks deals, earnings were 80 cents a share. The company expected per-share profit of 79 cents to 81 cents.

Revenue increased 13% to $4.8 billion, matching analysts' expectations.

Longer term, Starbucks's efforts to improve its sales include plans aimed at drawing in customers later in the day with other food-and-drink offerings. The company's strategy also includes the addition of more locations domestically and abroad; new categories such as tea stores; and a digital strategy that aims to allow its cafes to handle more customers.

For the year ending in September, Starbucks raised the lower end of its per-share earnings estimate by a penny and now expects a range between $3.09 and $3.13.

For quarter ending in March, the company forecast per-share earnings of 64 cents to 65 cents. Analysts polled by Thomson Reuters expected per-share profit of 68 cents.

Write to Tess Stynes at [e-mail]

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