Starbucks Profit Beats Estimates After Food Menu Boost Sales
Published on Jul 25 2014 8:02 AM in Restaurant
Starbucks Corp., the world’s biggest coffee-shop chain, reported a 23 per cent gain in fiscal third-quarter profit after selling more food in the US, topping analysts’ estimates.
Net income climbed to $512.6 million from $417.8 million a year earlier, the Seattle-based company said today in a statement. Revenue jumped 11 per cent to $4.15 billion in the period, which ended June 29, also surpassing estimates.
Starbucks has been testing new lunch sandwiches at its US locations to attract more customers after the morning rush. It’s also recently started selling Greek-yogurt smoothies and Fizzio sodas in some cafes and added bakery items and breakfast sandwiches. The food expansion contributed to a 6 per cent gain in same-store sales for the Americas region. Analysts had estimated a 5.1 per cent increase, according to Consensus Metrix.
“Food is very, very strong” in the US, Chief Operating Officer Troy Alstead said in a phone interview. “We have undertaken in the last 18 months a whole transformation of our food program.”
In May, Starbucks began selling grilled cheese, beef brisket baguettes and grilled-chicken sandwiches in 178 of its cafes. The chain plans to introduce new lunch fare across the US in fiscal 2015, which starts near the end of September.
The coffee chain revamped its US breakfast lineup earlier this year to better compete in an increasingly crowded morning-food market. Taco Bell in March began selling breakfast fare, including waffle tacos. McDonald’s Corp., meanwhile, recently stepped up marketing of its morning menu and gave away free McCafe coffees.
To cope with higher ingredient costs, Starbucks raised its cafe prices less than 1 per cent and bagged coffee in grocery stores by 8 per cent on average. A drought in Brazil had pushed up the price for coffee. Now heavy rains in the South American country, the world’s top coffee producer and exporter, may reduce 2015’s crop yield.
Starbucks said earlier that it has already bought all of the coffee it needs for this fiscal year and about 40 per cent for 2015. Alstead said today that the amount has reached 50 per cent. Dunkin’ Brands Group Inc. also has said recently it’s recommending a price increase to its franchisees based on the soaring cost for coffee.
Starbucks has been expanding abroad and this month opened its first cafe in Colombia, a three-story store made with local materials. Its Asian unit is also opening more locations in Vietnam, Japan and China.
Bloomberg News, edited by Hospitality Ireland