Updated from July 21

Starbucks' ( SBUX) third-quarter earnings rose 44% from a year ago, reflecting the coffee chain's breakneck expansion campaign and cost controls.

Seattle-based Starbucks earned $98.1 million, or 24 cents a share, in the three months to June 27, up from $68.4 million, or 17 cents a share, last year. Net revenue rose 27% to $1.32 billion.

Analysts had been forecasting third-quarter earnings of 22 cents a share on revenue of $1.30 billion. Looking ahead, Starbucks raised its full-year earnings guidance to 94 cents or 95 cents a share; the Thomson First Call consensus was for 92 cents a share. The company reiterated that it expects 2004 sales to rise 25% to 30% from the previous year.

The company expects to earn $1.12 to $1.15 a share in 2005. Wall Street was looking for $1.08 a share.

Sales at Starbucks' company-owned stores rose 26% from a year ago to $1.1 billion, primarily due to the opening of 651 company-operated retail stores over the past 12 months. Same-store sales rose 11% in the third quarter over last year.

Starbucks' specialty revenue rose 32% to $211 million in the quarter, while licensing revenue rose 33% to $139 million. Seven hundred twenty-seven licensed Starbucks retail stores were opened over the last 12 months.

On the expense side, cost of sales and occupancy costs were unchanged at 41.1% of total net revenue in the quarter, while store operating expenses fell to 40.4% of retail revenue from 40.9% in the year-ago quarter. Higher dairy and coffee commodity costs were offset by efficiencies in supply chain distribution operations and leverage gained on fixed occupancy costs distributed over an expanded revenue base.

Starbucks' shares closed at $45.65 Wednesday, roughly 48 times the high end of its 2004 guidance. The stock moved up 66 cents, or 1.5%, to $46.30 in Thursday's premarket. The 52-week high is $47.17.

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