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Starbucks Surge Continues

The coffee giant's earnings beat by a penny amid record store openings.
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posted a 21% rise in fourth-quarter earnings amid improvements in both revenue and margins, and the company said it is on track to have record store openings in the coming year.

The coffee purveyor's net income rose to $124 million, or 16 cents a share, beating Thomson First Call's mean analyst estimate by a penny. The company earned $103 million, or 12 cents a share, a year earlier, when the period contained one additional week.

Total revenue for the quarter ended Oct. 2 increased to $1.7 billion from $1.5 billion a year earlier. When calculated comparing an equal number of weeks, revenue rose 23%. Same-store sales, or sales at stores open at least a year, rose 8% amid a 4% increase in both the average value per transaction and the number of customer transactions.

Starbucks also benefited from an improved operating margin, which increased to 11.8% of total revenue from 10.7% last year. The company attributed the improvement to lower cost of sales, offset in part by higher general and administrative and other operating expenses.

Starbucks reiterated its fiscal 2006 earnings forecast of 63 cents to 65 cents a share, including about 9 cents in costs from expensing stock-compensation expenses. Analysts predict fiscal 2006 earnings of 74 cents a share, excluding these costs.

Starbucks expects fiscal 2006 revenue growth of 20% and same-store sales growth of 3% to 7%. The targeted revenue growth implies fiscal 2006 revenue of $7.64 billion. Analysts predict revenue of $7.63 billion.

The ever-expanding company plans to add 1,800 stores globally in fiscal 2006. The plans would surpass this year's record of 1,672 new store openings.

Starbucks shares recently fell 26 cents, or 0.8%, to $30.96 in after-hours trading.