Starbucks profit up, but Europe is a challenge

Thu Apr 26, 2012 7:24pm EDT
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By Lisa Baertlein

(Reuters) - Starbucks Corp reported better-than-expected quarterly profit but global sales at established coffee shops fell short of analysts' estimates due to weakness in Europe, sending its shares down five percent in after-hours trade on Thursday.

Sales from cafes open at least 13 months fell 1 percent in the Europe, the Middle East and Africa (EMEA) region during the latest quarter. Analysts polled by Consensus Metrix had expected a 2.2 percent rise in EMEA same-store sales.

Executives attributed the drop to weakness in Europe, which suffered its first decline in same-store sales since 2009.

Sales fell in Ireland and Germany during the fiscal second quarter and were up just slightly in France and the United Kingdom, Starbucks Chief Financial Officer Troy Alstead said.

Europe has been a weak spot for the world's biggest coffee chain. The region is grappling with debt woes and austerity measures and, earlier this week, Britain said its economy had fallen into its second recession since the financial crisis.

"The situation is very, very tough," Chief Executive Howard Schultz said of Europe's economy.

"We will turn the Europe business around in the same way we turned the U.S. business around," Schultz told analysts on a conference call.

Starbucks has tasked Michelle Gass, a veteran Starbucks executive who was a leader in the U.S. turnaround, with reviving the Europe business.   Continued...

The Starbucks logo is seen outside the new Starbucks cafe in Warsaw March 6, 2011. REUTERS/Kacper Pempel