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TheStreet Open House

Starbucks Pops: What Wall Street's Saying

NEW YORK (TheStreet) - Starbucks (SBUX) reported fiscal second-quarter earnings last night that were largely in line with what Wall Street was expecting. However, it was CEO Howard Schultz's conference call comments, chock full of growth initiatives, that continually sets this company apart from others in the food and beverage industries.

The Seattle-based company said after the markets closed on Thursday that quarterly net income attributable to Starbucks rose 9.4% to $427 million, or 56 cents a share, for the March 30-ending quarter. Starbucks had guided in its first-quarter earnings for the second quarter EPS to be in the range of 54 to 55 cents a share. Beating the weather pessimists, Starbucks also reported same-store sales of 6% above consensus expectations of 5.4%. The company said operating margin rose 130 basis points, primarily from "lower commodity costs and sales leverage."

During the conference call, Schultz, who in January ceded daily operations oversight to COO Troy Alstead, in order to focus on strategies to continue the company's growth trajectory, named a host of upcoming initiatives, from drive-through stores to new products such as Fizzio, a cold carbonated beverage, to possibly licensing its digital platform

Schultz said that "major tech companies" and "national retailers" have contacted the coffee chain asking if the company would be "willing to license or white label" its technology and mobile platforms.

While Schultz didn't name names on the call, it's clear the company is considering it.

Schultz reiterated in the call that approximately 14% of Starbucks' tender sales come from mobile payments rising 75% from just one year ago. More than 10 million Starbucks customers are actively using its mobile platform. "Most national retailers did not invest ahead of the growth curve ... to execute this and to fully understand it," he said, adding that technology companies don't have the consumer interface to execute a platform. "We are in a very unique position. ... We strongly believe there is an opportunity" to monetize the platform that will complement Starbucks' business.

"We have not made a decision as to what we will do, but I can share with you we are actively pursuing a number of conversations," he added. "We are in the sweet spot to take advantage" of the situation.

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