Starbucks quarterly earnings rise 18 percent

Starbucks Corp. said Wednesday its fiscal first-quarter profit climbed nearly 18 percent on a record number of store openings and ramped-up breakfast and lunch offerings.

Investors appeared to shrug off concerns about costs, particularly in raises for North American retail employees, and pushed the stock slightly higher in after-hours trading.

For the 13 weeks ended Dec. 31, the world’s largest specialty coffee retailer posted net earnings of $205 million, or 26 cents a share, compared with $174 million, or 22 cents a share, for the same period a year ago.

Analysts polled by Thomson Financial were expecting profit of $202.6 million, or 26 cents per share.

The Seattle-based company said comparable-store sales, those at stores open at least a year, grew 6 percent for the quarter, which includes the holiday sales period.

Starbucks also said it opened 728 retail stores, a quarterly record, and it reaffirmed its fiscal-year target of at least 2,400 more stores around the world.

“The record number of store openings during the period puts our aggressive 2007 store opening target well within reach,” company President and Chief Executive Jim Donald said in a statement.

Starbucks’ net revenue for the quarter was about $2.35 billion, in line with analysts’ estimates and up from $1.9 billion in the prior year’s quarter.

Starbucks shares rose 38 cents, or 1.1 percent, to close at $34.94 on the Nasdaq Stock Market before climbing an additional 31 cents to $35.25 in after-hours trading. The stock has traded in a 52-week range of $28.72 to 40.01.

“It was an in-line quarter overall — with some moving parts,” particularly on costs, said Analyst Dan Geiman with McAdams Wright Ragen.

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Retail operating expenses as a percentage of sales were up slightly from the year-ago period, mostly due to an hourly wage increase for retail employees in the U.S. and Canada.

In a conference call with analysts, Chief Financial Officer Michael Casey said the raises were mostly covered during the first quarter by an October increase in Starbucks’ retail coffee prices.

But he said Starbucks also would cancel its planned 2007 global leadership conference to help offset the higher wages in the second quarter.

Donald said Starbucks continues to boost the number of U.S. stores offering both lunch and breakfast. Oven-warmed breakfast sandwiches alone were offered in nearly 1,200 stores during the first quarter, compared with about 225 a year ago. Some 200 of those new locations were in New York, he said.

“We have aggressive plans to again continue rolling out our warming platform over the next few years,” Donald said.

Starbucks said its holiday season was highlighted by activation of some 20 million Starbucks cards, worth about $290 million in eventual sales — an increase of about 30 percent from a year ago.

The company also reinforced its guidance for the full fiscal year: net revenue growth of about 20 percent, comparable-store sales growth of 3 percent to 7 percent, and earnings of between 87 cents and 89 cents per share.