Starbucks tops expectations as profits rise by more than 10pc

Nassos Stylianou
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Starbucks is optimistic that a US price hike will not hurt sales (Source: Getty)

Global coffee giant Starbucks topped Wall Street expectations once again.

The Seattle coffee chain reported earnings per share of $0.67 for the quarter ended in June, compared to $0.66 forecast by analysts.

Starbucks, which has stores in 63 countries and over 200 stores in London, said revenue rose by more than 10 per cent to reach $4.15 billion, against $4.14 billion expected.

Profits surged 22 per cent to $513m as same-store sales increased by six per cent globally, with Asia and the United States its best performing markets.

But the largest coffee chain has demonstrated its continuing ability to attract customers to its shops for products other than coffee. A new roll out of breakfast and lunch sandwiches in its US shops to attract people beyond the morning rush-hour has given sales a boost, as did a new tea blend called Oprah chai, designed and promoted by television presenter Oprah Winfrey and launched in April this year.

The results represented "another quarter of outstanding operating performance in which each of our segments contributed to record results", according to chief executive Howard Schultz.

This is the fifth consecutive three-month period that earnings have matched or topped Wall Street's earnings targets, but more importantly perhaps given Starbucks' recent announcement of an impending price hike in some drinks offered in its US shops for the first time in four years, the outlook for next year was positive.

In its earnings report for the second quarter, Starbucks forecast that sales will shoot up by 10 per cent in its next financial year beginning in October, taking an optimistic view of the price increase, which the company said would affect only one fifth of its customers in the country. The company will also raise prices on its own brand of packaged coffee on sale in supermarkets and other retail stores.

Earnings per share for the next year will climb approximately 15 to 20 per cent, the firm anticipates.

Earlier this year, Starbucks announced that it was moving its European head office to London before the end of 2014, meaning it will pay more tax in the UK.

The company had come under fire from British lawmakers for its low tax contributions in the country. The relocation of its European HQ comes after it abandoned its agreement with the authorities in the Netherlands that gave the company the ability to reduce its tax liability by having its European subsidiaries pay large royalties to the Dutch unit for using the Starbucks brand.

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