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Starbucks cafe sales hot, but holiday forecast disappoints

A woman holds a Frappuccino at a Starbucks store inside the Tom Bradley terminal at LAX airport in Los Angeles, California, United States, October 27, 2015. REUTERS/Lucy Nicholson

By Lisa Baertlein

(Reuters) - Starbucks Corp (SBUX.O) delivered a disappointing profit forecast for this holiday quarter on the heels of strong cafe sales and profit growth, sending its shares down as much as 3 percent in after-hours trading.

Starbucks estimated earnings for this fiscal first quarter of 44 cents to 45 cents, excluding items, saying the period would bear the biggest brunt of an expected hit from the strong U.S. dollar. Analysts on average had a target 47 cents for the quarter, the company's biggest for revenue, according to Thomson Reuters I/B/E/S.

The Seattle-based chain's full-year forecast on Thursday also offered little upside for investors who worried that shares of the world's biggest coffee chain are too hot after rallying more than 60 percent over the past year.

Starbucks shares bounced back during executives' call with analysts, many of whom say the company is known to issue conservative forecasts at the start of its fiscal year. The stock was down 10 cents in extended trading, after closing at $62.50.

The company said global sales at cafes open at least 13 months rose 8 percent in the fiscal fourth quarter ended Sept. 27, beating than the 6.9 percent rise expected by analysts polled by research firm Consensus Metrix.

Chief Executive Howard Schultz attributed last quarter's results to several new initiatives at the chain, which recently improved its food and is rolling out new drinks such as the Toasted Graham Latte.

Among other things, Schultz said U.S. cafe service improved and turnover fell after Starbucks raised pay and improved benefits for cafe workers. Convenience also got a boost from new delivery services and the introduction of mobile technology that allows customers to skip lines by ordering and paying for their drinks via mobile devices.

"Starbucks is playing the long game," Schultz said on a call with analysts.

Fourth-quarter net income jumped 11 percent to $652.5 million, or 43 cents per share, matching analysts' average target according to Thomson Reuters I/B/E/S.

Starbucks forecast fiscal 2016 earnings, excluding items, of $1.87 to $1.89 per share, in line with analysts' average call for $1.88 per share.

Starbucks also slightly increased its cafe sales forecast to call for growth "somewhat above" mid-single digit percentages.


(Corrects para 9 to show profit for Q4 not Q3)


(Reporting by Lisa Baertlein in Los Angeles; Editing by Richard Chang)