Thursday, July 28, 2011

Starbucks Corp. (NASDAQ: SBUX): Q3 Earnings Preview 2011

Starbucks Corp. (NASDAQ: SBUX), the world's largest specialty coffee retailer, is scheduled to release fiscal third-quarter earnings after the closing bell on Thursday, July 28, 2011. Analysts, on average, expect the company to report earnings of 34 cents a share on revenue of $2.85 billion. In the year ago quarter, the company reported earnings of 29 cents per share on revenue of $2.61 billion.

Starbucks Corporation, together with its subsidiaries is the roaster and retailer of specialty coffee. It purchases and roasts whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a range of food items, a selection of premium teas, and beverage-related accessories and equipment, through Company-operated retail stores.

In the preceding fiscal second-quarter, the Seattle, Washington-based company's net income was $261.6 million, or 34 cents a share, compared to a profit of $217.3 million, or 28 cents a share, in the year-ago quarter. Total net revenues increased 10% to $2.8 billion. Analysts, on average, expected the company to report earnings of 34 cents a share on revenue of $2.73 billion.

At its last earnings call in April, the company said that it is now targeting high single-digit revenue growth for its fiscal year 2011, driven by mid single-digit same-store sales growth. Previously, the company targeted mid-to-high single-digit revenue growth, driven by low-to-mid single-digit same-store sales growth. The company also lifted its fiscal 2011 earnings outlook to a range of $1.46 to $1.48 per share from its prior outlook of $1.43 to $1.47 per share. The latest earnings guidance include higher commodity costs, which are now expected to have an unfavorable impact of about $0.22 per share for the full fiscal year. The additional $0.02 per share compared to the company's January guidance reflects expected higher dairy and fuel prices, the company noted.

The company has benefited from better pricing and growth in its consumer products group, which has higher margin levels than the company's retail locations. Starbucks is seeking to bolster sales at supermarkets, expand its Seattle’s Best brand, and open new international stores as part of a push to become a global consumer products giant.

The coffee giant has resumed its expansion in international markets. The company currently generates roughly 20 percent of its revenue from international markets. Starbucks expects its international business to reach sustainable double digit profit margins beginning in its fiscal 2011. In December 2010, the company outlined its multi-channel growth strategy that highlighted initiatives to increase sales through multiple brands and channels as well as increase its focus on large emerging markets such as China and India. The company set a target to open 1,500 stores in China by 2015.

Starbucks plans to initiate about 500 net new stores globally in fiscal 2011; approximately 100 in the U.S. and approximately 400 internationally, the majority of which are expected to be licensed stores. The company assumes capital spending to be approximately $500 million-$600 million in fiscal 2011.

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