Starbucks profit, outlook disappoint, shares fall
LOS ANGELES (Reuters) - Starbucks Corp's (SBUX.O) cut its plans for new international coffee shops and effectively lowered its 2009 forecast after posting a steeper-than-expected decline in fourth-quarter profit.
Starbucks shares fell nearly 3 percent after it laid out several scenarios that would result in the company potentially hitting the low end or completely missing its prior forecast for fiscal 2009 adjusted earnings of 90 cents to $1 per share.
Executives said none of the scenarios -- all of which include a drop in same-store sales -- should be taken as a forecast. RBC Capital Markets analyst Larry Miller said in a client note, however, that the company's statements "effectively" lower 2009 guidance.
Chief Executive Howard Schultz said in late October that the company might have hit bottom in the fourth quarter, but in Monday's statement Starbucks offered investors models for what it would earn "if the current environment worsens."
At the same time, Schultz said the company has seen cautious signs of improving same-store sales, a key gauge of retail health.
"It's too early to call a trend, particularly with the important holiday period still in front of us," Schultz said on a conference call where he added that business in October did not deteriorate in terms of comparable store sales or traffic.
The CEO said Starbucks was finished with a restructuring that lowered fixed costs and resulted in many in-store changes that should help the company deliver earnings growth in fiscal 2009, despite a tough economic environment with no immediate signs of improvement.
"We appear to be more resilient than many other premium brands," said Shultz, who did not mention up-and-coming specialty coffee rival McDonald's Corp (MCD.N) during the company's conference call with analysts.
The fast-food chain earlier on Monday reported a 5.3 percent rise in October sales at U.S. stores open at least 13 months. McDonald's is appealing to cash-strapped consumers with its Dollar Menu and is rolling out lattes and other specialty coffee drinks in the United States at prices that undercut Starbucks'.
PROFIT DROPS ON CHARGES
Net profit for the fiscal fourth quarter ended September 28 dropped 97 percent to $5.4 million, after Starbucks took $105.1 million in charges related to its restructuring and turnaround efforts.
"Clearly the business is continuing to struggle," said Morningstar Inc analyst John Owens.
"The numbers they reported were not surprising given the very challenging consumer environment and I would say that the guidance as well looks appropriate given the difficult industry conditions out there."
Investors have been repeatedly jolted by bad news from the Seattle-based coffee chain and digested news last week that Chief Financial Officer Peter Bocian, who as with the company for less than two years, would be leaving the company at month's end to take a job with computer maker Hewlett-Packard Co (HPQ.N). His departure follows those of several other company executives in 2008.
Excluding charges related to restructuring and store closure costs, Starbucks had a per-share profit of 10 cents, missing analysts' average target of 13 cents, according to Reuters Estimates. Continued...
