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Starbucks Earnings Boosted by Increased Number of Stores

Starbucks
AP
Starbucks

Starbucks reported an 18.5% rise in quarterly earnings on Thursday, helped by a larger number of stores and increased sales at older coffee shops.

The company also backed its 2007 earnings forecast and its shares rose 2.7% in extended trading following the announcement.

Second-quarter net income was $150.8 million, or 19 cents a share, compared with $127.3 million, or 16 cents a share, a year ago.

Wall Street analysts, on average, had been expecting the Seattle-based coffee shop chain to earn about 19 cents a share, according to Reuters Estimates.

Revenue was $2.26 billion. Analysts were expecting about $2.3 billion, according to Reuters Estimates.

Same-store sales, a key retail measure that tracks sales at coffee shops open at least 13 months, rose 4%. Starbucks opened 560 stores during the quarter.

Starbucks shares were up 2.7% at $32.48 in after-hours trading after closing at $31.62 on Nasdaq. As of Thursday's close, the stock had dropped 10.7% so far this year, compared with a 5.9% rise in the Dow Jones U.S. restaurants and bars index.

Starbucks' stock has fallen this year in part due to investor concerns about profit margins that have lagged expectations, competition in the coffee market from fast-food companies such as McDonald's Corp. and a high-profile memo in which Chairman Howard Schultz warned of the "commoditization" of Starbucks' iconic brand.

The memo, leaked to the media in February, sparked worries the coffee shop chain might slow down growth and sent its share price tumbling. Management squashed that fear in March by backing its aggressive growth targets at the company's annual meeting. Still, Starbucks shares have gained less than 1% since the March 21 meeting.

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