Thursday, January 24, 2013
Starbucks profit climbs as US cafes thrive
AP
Vote on It:
Average Vote:
[+] Text [-]
 
 

NEW YORK (AP) — Americans still need their Starbucks fix even in the weak economy.

The Seattle-based coffee chain said Thursday its profit rose 13 percent in the latest quarter in line with Wall Street expectations. Results were boosted by a 6 percent increase in global sales at cafes open at least a year, a key metric of health.

The performance reflects the sharp turnaround Starbucks has made since its struggles during the recession. After bringing back founder Howard Schultz as CEO in 2008, the company embarked on a massive restructuring effort that included closing underperforming stores in the U.S. Going forward, Schultz has noted that the company has the flexibility to keep growing even through a turbulent economy because most people see Starbucks as an "affordable luxury."

In the flagship Americas region, Starbucks said sales at stores open at least a rose 7 percent as the Pumpkin Spice Latte once again proved to be a hit. Customers are also buying more food, which helps drive up the amount they spend per visit. About a third of purchases currently include food and Starbucks is betting that its new baked goods — supplied from a San Francisco bakery it purchased last year — will continue to drive up that figure.

Cliff Burrows, who heads the Americas region, said Starbucks will continue growing by improving the speed of service and relationships with customers. For example, baristas across the country should be wearing name tags by the end of this month. Sixty percent of new cafes in the U.S. will also have drive-thru service, which makes the stores more profitable.

The introduction of the Verismo single-serve coffee machine in stores this fall also added 0.5 percent to the sales increase for the region. Starbucks said it sold more than 150,000 of the machines, most of them through specialty retailers. Executives said the machine will continue to be a major revenue driver in the coming months and years.

Operating margin in the U.S. decreased slightly to 20.8 percent, however, as a result of costs related to Superstorm Sandy, litigation charges and the company's leadership conference this past October.

In the China and Asia Pacific region, which is set to surpass Canada as Starbucks second biggest market in the next two years, sales at cafes open at least a year rose 11 percent as traffic increased.

Europe continued to be a weak spot, with sales for broader region encompassing Europe, the Middle East and Africa falling 1 percent." Starbucks executives have said they're working to turnaround their performance in the region, in part by closing underperforming stores, licensing operations to local partners and improving customer service. Although traffic increased in Europe during the period, the amount people spent per visit declined.

Troy Alstead, the company's chief financial officer, said the decline reflected weakness in the broader economy.

"A lot of people were trading down it appears," said Troy Alstead, the company's chief financial officer, noting that fewer purchases included food. Continued...

1 2
| Full Article & Comments | Next >
Share:
Vote on It:
Average Vote:
 

Sign Up to Post Your CommentsSign Up to Post Your Comments
If you are already registered, click here to login. Otherwise, please take a few seconds to register with Townhall.com. Once you sign up, you’ll be able to post your comments immediately, use the action center, get podcasts, and more!
Note: Fields marked with a red asterisk (*) are required.
Salutation:
First Name:
*
Last Name:
*
Email:
*
Nickname:
*
Note: Nick name will be shown when you post comments.
Address 1:
*
Address 2:
City:
*
State:
*
Zip:
*
Phone: