Starbucks Edges Past Estimates

Starbucks (SBUX Quote - Cramer on SBUX - Stock Picks) beat Wall Street's third-quarter earnings expectations by a penny, and the coffee chain said it should finish the 2002 fiscal year by meeting analysts' profit expectations.

For the third quarter ended June 30, the company earned $56.2 million, or 14 cents a share, compared with $46.8 million, or 12 cents a share, in the year-earlier period. Analysts polled by First Call were expecting 13 cents a share.

The company said after the close Thursday that retail revenue increased 27% to $712 million and comparable-store sales increased 8% from the third quarter of 2001. Revenue was up, in part, because of an increase in sales of high-end items. Consolidated net revenue increased 26% to $835 million.

Additionally, Starbucks said it plans to keep putting up new locations. Starbucks raised its long-term target to 25,000 stores worldwide from its prior goal of 20,000 locations, but the company didn't give any specific timeline. The company did stick by its hope to have more than 10,000 stores by the end of fiscal 2005.

"We believe the key to building shareholder value is continued rapid growth coupled with solid financial results," Howard Schultz, Starbucks' chairman and chief global strategist, said in a press release.

Starbucks said it still plans to open at least 1,200 new stores in fiscal 2002 and intends to achieve same-store growth of 3% to 7%.

As for earnings, the company expects to reach its fiscal 2002 profit goal of 54 cents a share. The target had been 53 cents to 54 cents, which excludes one-time charges and capital gains. Analysts are expecting 54 cents a share.

Starbucks is also planning to open at least 1,200 more stores in fiscal 2003 and said it will aim to earn 64 cents to 66 cents a share in the next fiscal year.

On a conference call after the company released its earnings, Starbucks officials said they had no plans to include employee stock options as an expense item as some companies have, but they will continue to note stock options in footnotes. They also said they didn't thinking rising green coffee costs would be a significant factor for the rest of this fiscal year.

Starbucks closed down more than 5% at $20.01 in regular trading. But after the close, Starbucks gained 6.4% to $21.30 on the Instinet platform.