Starbucks 2014 profit forecast falls short, shares drop

Reuters

By Lisa Baertlein

Oct 30 (Reuters) - Starbucks Corp conservativelyforecast 2014 profit below Wall Street's view, despite fourthquarter profits that jumped 34 percent on strong traffic gainsand an increase in spending by its customers.

Shares in the world's biggest coffee chain, one of the economy-defying growth companies such as burrito chain ChipotleMexican Grill and upscale grocer Whole Foods Market Inc, fell 2.5 percent after hours to $78.80.

Expectations run exceedingly high for high-flying companieslike Starbucks, and any perceived stumble is often punished inthe form of a share selloff.

Starbucks on Wednesday repeated its forecast for fiscal 2014earnings in the range of $2.55 to $2.65 per share. Analysts'average estimate had called for a full-year profit of $2.67 pershare, according to Thomson Reuters I/B/E/S.

"We are more optimistic about our future than ever beforeand at the same time we are realistic and practical in ourexpectations and I would encourage you to be as well," ChiefFinancial Officer Troy Alstead told analysts on a conferencecall.

Given the company's "stunning" growth in recent quarters andthe inherent challenge associated with topping that performance,"it would be unreasonable to plan for or to set expectations anyhigher," Alstead said.

On Wednesday, the Seattle-based company reported that profitincreased to $481.1 million, or 63 cents per share, for thefiscal fourth quarter ended Sept. 29, from $359 million, or 46cents per share, a year earlier.

Starbucks' consolidated operating margin expanded 220 basispoints to 17.6 percent during the fourth quarter, with increasesfrom every operating unit.

Global sales at Starbucks cafes open at least 13 months wereup 7 percent during the latest quarter, driven by a 5 percentincrease in traffic.

That figure included a stronger-than-expected 8 percent risefor the U.S.-dominated Americas region that contributes nearlythree-fourth of Starbucks revenue. Seasonal pumpkin spicedrinks, new pastries from La Boulange and cold-pressed drinksfrom Evolution Fresh contributed to the rise in U.S. sales,executives said.

Chief Executive Howard Schultz scolded analysts for pressingthe company to set ever-loftier targets for same-store salesgrowth.

"It's not going to happen," he said. "The guidance we'regiving is the most responsible guidance we could possiblyprovide you, especially when you consider the maturation of ourstore base and the number of stores."

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