U.S. Demand Drives Profit -- WSJ
April 22 2016 - 3:03AM
Dow Jones News
By Julie Jargon and Lisa Beilfuss
Starbucks Corp. said profit in its latest quarter increased 16%
as the coffee chain drew in more mobile users in the U.S.
But the company missed sales expectations, sending shares down
5.3% in after-hours trading.
Sales at shops open at least a year rose 6% in the latest
period, but slightly missed the 6.7% rise analysts anticipated.
Domestic sales drove the increase, with sales at U.S. locations
rising 7%. That helped to offset slower growth in Europe, where the
company's business has been hurt by terror attacks in Paris and
Brussels and where the strong dollar continues to make its drinks
and snacks more expensive in foreign currencies. Same-store sales
in the Europe, Middle East and Africa division rose a
smaller-than-expected 1% in the quarter.
But Starbucks Chief Operating Officer Kevin Johnson said that
because 72% of the Starbucks stores in that market are now licensed
to other operators, their results don't figure into the same-store
sales figure, which includes just company-operated stores.
Systemwide sales in EMEA, which include both licensed and
company-operated stores, grew 4% in the quarter. That view may have
accounted for the share price decline in after-hours trading,
because analysts were expecting the EMEA segment to post 3.4%
growth. "We need the investment community to think about system
sales in EMEA," Mr. Johnson said.
The company continues to grow internationally, on Thursday
opening its first store in South Africa -- long seen as a gateway
to African markets. Worldwide, Starbucks counted nearly 24,000
shops at the end of March, up 8.3% from a year earlier. Chief
Executive Howard Schultz on Thursday highlighted transaction growth
in China, which rose 5%. The company grew its store base across
Asia by 18% in the latest quarter. Starbucks plans to open a
Starbucks at the entrance to the new Shanghai Disneyland, scheduled
to open this summer. Mr. Schultz told investors that it is likely
to become the highest-grossing Starbucks in the world.
Starbucks has worked to diversify beyond its coffee roots and is
in the midst of a five-year plan to double its U.S. food revenue.
Digital initiatives such as a new mobile app have also helped cafes
operate more efficiently, in turn boosting sales.
Starbucks said mobile order and usage doubled year over year,
with the company processing 8 million mobile order and pay
transactions a month. According to analysts at RBC, users of the
mobile app spend three times more than the average customer.
The company recently changed its loyalty program to reward
customers for how much they spend rather than how often they visit.
The number of active rewards members in the U.S. now totals 12
million, up 16% from a year ago. Last week alone, Mr. Johnson said
in the interview, 280,000 new members signed up for the loyalty
program.
Starbucks reported a profit of $575.1 million, or 39 cents a
share, up from $494.9 million, or 33 cents a share a year earlier.
Revenue increased 9.4% to $4.99 billion from $4.56 billion a year
earlier.
Write to Julie Jargon at julie.jargon@wsj.com and Lisa Beilfuss
at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
April 22, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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