Profits surge at Starbucks

Marion Dakers
COFFEE giant Starbucks posted a 35 per cent rise in operating income yesterday, which nevertheless fell short of analyst forecasts for the full-year as the rising cost of coffee continued to dent margins.

The world’s largest coffee chain has seen wholesale coffee prices increase by nearly three-quarters since last summer – due to poor weather, fears over crop failure and rising global demand.

The firm reported an operating income of $501.9m (£315m) for the three months to 2 January, up from $370.9m a year earlier.

Earnings per share stood at 45 cents, compared with 33 cents last year.

Christmas trading, traditionally a strong period for Starbucks, saw a five per cent rise in international sales. The firm hopes to continue its aggressive expansion by opening 500 new stores in 2011, 400 of which will be outside the US.

Starbucks shares, which have risen 47 per cent in the last year, lost two per cent in after-hours trading following the results announcement after the New York closing bell.

“The strong momentum in our global business in fiscal 2011 positions us to deliver 15 to 20 per cent earnings per share growth compared to last year’s results, and to reaffirm our 2011 guidance despite dramatically higher coffee costs,” said chief financial officer Troy Alstead.

Chief executive Howard Schultz credited some of the earnings jump to Starbucks’ foray into pre-packaged instant coffee, which grew 12 per cent in the period and now makes up six per cent of revenue.