Starbucks Profit Beats Expectations on Rise in U.S. Sales

Starbucks has reported a jump in profit during its fiscal fourth quarter, helped by improvement in sales in its largest market.

The world No. 1 coffee-shop operator reported on Thursday that its profit surged 23 percent in the quarter, slightly beating Wall Street expectations. This made it raise dividends to be paid to its shareholders.

The company posted $801 million, or 54 cents a share, in net income for the quarter. Adjusted profit was 56 cents a share, compared to 55 cents per share that had been predicted by analysts.

Starbucks said sales at established stores in the Americas region, which includes its largest market, the U.S., gained 5 percent in the fourth quarter. Analysts had expected a rise of 4.9 percent in the region.

Global sales at established stores rose 4 percent, coming in below the 4.9 percent gain forecast by analysts. Sales were up 1 percent in China and the Asia Pacific area, while they slipped 1 percent at stores in Europe, the Middle East and Africa.

Revenue jumped 16 percent to $5.71 billion, beating the $5.69 billion predicted by analysts.

“There was some thought that they might not be able to perform as well as they did in the quarter,” Jack Russo, an Edward Jones analyst, said. “Some other really high-profile consumer companies have been reporting some slowing down.”

The expectations-beating results were driven by proactive measures taken by Starbucks to boost sales. It has introduced new food items and stepped up mobile ordering, which speeds up the pace of service at the coffee-shop operator’s cafes. These especially proved helpful to sales in its largest market, where the restaurant industry is experiencing a slowdown.

Starbucks has added new drinks such as cold-brew beverages and coconut-milk mocha macchiatos, while also working to expand its food selections. It plans to add ready-to-drink Teavana beverages in the U.S. market next year.

Chief Operating Officer Kevin Johnson said mobile payments were used for around 25 percent of transactions in the U.S., where the latte seller has almost 13,000 stores. They had accounted for 20 percent of domestic transactions a year ago.

Chief Executive Officer Howard Schulz gave uncertainty over the coming U.S. presidential election as one of the factors that are working against sales.

“Wherever we have been,” the Starbucks CEO said on a conference call to investors. “I don’t think we’ve ever witnessed such concern about what could happen in the U.S. as a result of the election.”

Schulz said the growing popularity of online shopping has also impacted sales, with more and more people choosing to shop from the comfort of their homes.

Starbucks is giving more to its shareholders as a result of the estimate-beating results. Quarterly dividends to be paid next month have been improved to 25 cents per share, up from 20 cents.

Its shares gained 33 cents to reach $52.10 after the close of market on Thursday, according to the Associated Press. They are down about 14 percent this year.

The coffee-shop operator said it expects earnings for the 2017 fiscal year to fall in the range $2.12 to $2.14 a share, lower than $2.16 a share forecast by analysts.

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