(Updated with broker action on Starbucks shares.)
shares jumped 4.3% in morning trading Friday after the coffee chain giant beat top- and bottom-line expectations.
S&P restaurant analyst Erik Kolb upgraded his rating on Starbucks to hold, from sell, following the earnings beat, noting its better-than-expected earnings and growth in comparable same-store sales, driven by higher traffic and average ticket price.
Fiscal 2011 guidance gives us greater confidence in the viability of SBUX's turnaround efforts," he noted. "We now see 500 new store openings and slightly higher operating margins leading to continued EPS growth. However, currency is likely to remain a headwind."
The analyst raised his fiscal 2011 earnings per share estimate by 3 cents to $1.45, and lifted his 12-month target price to $32, from $20, on his updated peer price-to-earnings analysis.
Starbucks said late Thursday its quarterly earnings jumped 8.9% to $278.9 million, or 37 cents per share, topping estimates for earnings of $243.4 million, or 32 cents per share.
Starbucks said quarterly revenue grew 17.2% to $2.8 billion, slightly higher than the $2.77 billion analysts were looking for.
Global comparable same-store sales, or sales at stores open at least one year, grew 8%. Global traffic increased 5%.
Operating margins pushed sharply higher to 17.3% in the U.S. and 13.8% internationally.
Starbucks reiterated its fiscal 2011 targets introduced over the summer for net new store growth of 500, including 100 in the U.S. and 400 internationally, the majority of which are expected to be licensed stores. It also targeted mid-to-high single-digit revenue growth based on a 52-week comparable year, driven by low-to-mid single-digit comparable store sales growth.
The coffee chain raised its fiscal 2011 EPS guidance to a range of $1.41 to $1.47 per share.
Starbucks maintained its 13-cent dividend, to be paid next on Dec. 3 to shareholders of record on Nov. 18.
Hours after its earnings release, Starbucks put out another public statement regarding the termination of its agreement with
Starbucks told Kraft a month ago it wanted to end the deal under which Kraft distributes packaged Starbucks coffee through various retail outlets and grocery stores.
Kraft put out a statement, alongside its better-than-expected earnings report, calling its agreement with Starbucks "perpetual" but that "if Starbucks decides to exit its relationship with Kraft Foods, the agreement requires Starbucks to pay Kraft Foods the fair market value of the business plus, in certain instances, a premium."
Kraft also said it intends to keep its talks with Starbucks private.
Starbucks' late-Thursday night response: "We consider it unfortunate that Kraft has chosen to make public statements that we believe mischaracterize the nature of the agreement between our companies, including the term of the agreement. It has been, and continues to be, our intention to keep these conversations private. There is a specific mechanism within the agreement for the resolution of disputes. As we said in our earnings call, we will ensure that our mutual customers remain well-served."
In other Starbucks news,
recently reported that, likely as part of an overall strategy to differentiate itself further from the increasingly popular McCafe offerings at
, Starbucks wants its baristas to slow down, preparing just two drinks at a time at most, and to take more care in preparing each beverage.
Baristas are being asked to steam milk for only one drink at a time instead of a whole pitcher for multiple drinks, as well as rinse pitchers after each use, remain at the espresso bar at all times and use one espresso machine instead of two.
The move sparked a debate among readers of
voted overwhelmingly that they need their coffee as quickly as possible and would stop going to Starbucks altogether if lines get any longer. Just 23.5% of voters said that yes, the Starbucks assembly line gets their order wrong too often and they are willing to wait a little longer for the perfectly prepared mochachino.
Starbucks maintained that its new drink-making protocol will lead to more consistent beverages made in a time-efficient manner, and that the drinks will be fresher and hotter, even if some customers will have to wait longer for certain drinks like no-foam lattes.
In a separate endeavor,
Starbucks is looking to start selling regional wine and beer, and a selection of local cheeses served on China tableware .
More of an all-day café than a traditional Starbucks, Starbucks already outfitted several locations -- including one on Olive Way in its hometown Seattle's Capitol Hill area. The test store's barista bar was rebuilt so customers can sit at and around it, conversing with the baristas and watching them prepare drinks, much like customers at a traditional bar would do.
The new store was designed to look like it had been a part of the neighborhood for years, with a "green" design and sustainability-minded décor.
If the refurbished location proves successful, Starbucks could make moves to expand the updated concept to other Starbucks locations, according to a report in
It could also help Starbucks tap into the afternoon and evening markets of store traffic, where a customer may come in for a $4 cup of coffee on the way to work in the morning, then stop back for a $9 glass of wine and a cheese plate on the way home.
Starbucks also recently announced that it would raise prices on some of its menu offerings to offset rising commodity costs .
The Seattle-based chain said the increases would be targeted to "certain beverages in certain markets" in response to the recent jump in the price of green arabica coffee, which it said was close to a 13-year high. It also noted volatility in the cost of other key ingredients, such as sugar, dairy products and cocoa, as a factor in its decision.
-- Written by Miriam Marcus Reimer in New York.
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