This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Starbucks Seeks Overseas Jolt

Updated from 4:46 p.m. EDT

Starbucks (SBUX) is ramping up its international presence after years of rapid growth in the U.S. that is finally starting to level off.

The coffee giant plans to slow down its domestic growth to eliminate the risk of cannibalization, an issue that came up repeatedly on the conference call after its third-quarter report.

Profits for the quarter ended July 1 jumped to $158.3 million, or 21 cents a share, compared with $145.5 million, or 18 cents a share, in the same period last year. That was in line with the average estimate from analysts polled by Thomson Financial.

The Seattle based-chain's revenue climbed to $2.36 billion from $1.96 billion a year earlier, but fell short of analysts' expectations of $2.39 billion. Same-store sales, or sales at stores open at least a year, grew 4% in the third quarter.

President and Chief Executive Jim Donald said that a record number of store openings helped drive the coffee chain's sales growth.

"Despite the difficult operating environment of rising expenses -- particularly higher dairy costs -- we continued to execute on our growth strategy," Donald said in a statement. "We will strive to mitigate the impact of these cost pressures, while remaining focused on delivering legendary service to our customers."

Starbucks plans to maintain its expansion level of 2,400 stores this year. It will open 2,600 stores next year, but the extra 200 will be added to the international market, where the company sees its greatest growth potential.

International sales surged 28% in the third quarter, to $432 million from $337 million last year in the same period. Domestic sales grew by 18% to $1.8 billion from $1.6 billion a year earlier.

"We're still in the very early stages of international growth," Donald said on the conference call, pointing out that Starbucks has less than 1% market share in the international coffee industry.

This week, Starbucks passed through a 9-cent increase on its beverages due to rising dairy costs. Chief Financial Officer Michael Casey said on the call that although historically such price increases have not hurt store traffic, this time it might hurt sales because it comes on the heels of another recent price hike. Still, he emphasized that the company isn't expecting a significant traffic decline.

Starbucks reiterated that it expects fiscal-year earnings of 87 cents to 89 cents a share, bracketing analysts' average target of 88 cents. It expects same-stores sales for the year to range between 3% and 7%, with total revenue rising 20%.

Looking ahead, the company forecast fiscal 2008 earnings-per-share growth of 20% to 22%. Based on its forecast for fiscal 2007, that suggests earnings of $1.04 to $1.09 a share for next year. Wall Street projects earnings of $1.06 a share.

Shares of Starbucks closed Wednesday at $27.20, up 52 cents, or almost 2%. The stock recently was up 57 cents, or 2.1%, in after-hours trading.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs