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Starbucks Sweetens Its Outlook

The coffee giant posts better-than-expected earnings and strong January sales.
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posted 20% first-quarter earnings growth and strong January sales, leading the coffee behemoth to boost its 2006 forecast.

For the first quarter ended Jan.1, the company earned $174.2 million, or 22 cents a share, including 2 cents a share in restructuring charges. Analysts polled by Thomson First Call expected earnings of 20 cents a share. A year earlier, Starbucks' earnings totaled $144.7 million, or 17 cents a share.

Starbucks' first-quarter revenue rose to $1.93 billion from $1.59 billion, matching Wall Street's target.

"Our core beverages, coupled with a strong holiday promotion, drove results in our retail stores, while solid growth in licensed locations led to the increase in our specialty business revenues," said Chairman Howard Schultz in a statement.

The Seattle-based company, noting strength in the activation of gift cards from the holiday season, also reported 10% same-store sales growth for January, exceeding its target for a 3% to 7% rise. Total revenue for the month increased 23%.

Looking ahead, Starbucks expects 20% revenue growth on a both quarterly and yearly basis. The company also maintained its 3% to 7% monthly same-store sales growth projection.

Starbucks raised its full-year earnings target to 68 cents to 70 cents a share from its previous range of 63 cents to 65 cents. Both estimates include about 9 cents a share in stock-compensation expenses. Analysts, on average, expect earnings of 66 cents a share, including the 9 cents in option costs.

The company anticipates earnings of 14 cents a share in the second quarter, and 16 cents to 17 cents a share for each of the third and fourth quarters. Analysts target earnings per share of 13 cents for the second quarter, 17 cents for the third and 16 cents for the fourth.

Starbucks shares gained $1.63, or 5.2%, to $32.99 in after-hours trading.