Starbucks posts higher quarterly revenue, issues cautious forecast

Thu Nov 3, 2016 7:46pm EDT
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By Lisa Baertlein and Arathy S Nair

(Reuters) - Starbucks Corp (SBUX.O: Quote) reported better-than-expected quarterly results on Thursday, as sales in the U.S.-dominated Americas region soothed concerns that the world's biggest coffee seller had succumbed to a broader restaurant slump.

Starbucks gets the bulk of its sales from the United States, where it and other chains have been battling heady competition and unusually low grocery prices. The company signaled that sales at established U.S. cafes were strengthening slightly, outweighing disappointing profit outlooks for its traditionally robust holiday quarter and the full year.

"I think they are just playing cautious right now," said Edward Jones analyst Jack Russo. He said the company's fiscal 2017 earnings guidance showed Starbucks being careful in a tough economic and competitive environment.

Starbucks forecast a double-digit rise for fiscal 2017 revenue. Even a 10 percent rise from 2016, would slightly top Wall Street's target of $23.1 billion. The company also forecast 2017 earnings of $2.12 to $2.14 per share, excluding items, which is short of analysts' estimate of $2.16 per share.

Same-store sales in the U.S.-led Americas region, which produces the lion's share of Starbucks revenue, rose 5 percent for the fiscal fourth-quarter that ended Oct. 2, matching estimates from Consensus Metrix.

Still, some analysts worry that Starbucks' growth trends are moving in the wrong direction.

"Same-store sales have cooled, due to a shift in its loyalty program and a prolonged period of raising prices aggressively," Hedgeye Risk Management analyst Howard Penney said.

Chief Operating Officer Kevin Johnson told Reuters that sales at Starbucks cafes open at least 13 months accelerated a bit from the third quarter, although traffic numbers were again down due to the company's recent change to its loyalty program that assigns rewards based on dollars spent rather than transactions.   Continued...

A Starbucks store is seen inside the Tom Bradley terminal at LAX airport in Los Angeles, California, United States on October 27, 2015.   REUTERS/Lucy Nicholson/File Photo