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Starbucks raises 2013 forecast, defies industry trend

The Starbucks logo is seen outside the new Starbucks cafe in Warsaw March 6, 2011. REUTERS/Kacper Pempel
The Starbucks logo is seen outside the new Starbucks cafe in Warsaw March 6, 2011. REUTERS/Kacper Pempel

By Lisa Baertlein

(Reuters) - Starbucks Corp raised its profit forecast for the current fiscal year after sales in its top market of the United States topped expectations, giving the company optimism that has eluded much of the U.S. restaurant industry in recent months.

Shares of the world's biggest coffee chain jumped 7 percent to $49.90 in extended trading on Thursday.

The better-than-expected quarterly results from the company known for its lattes and frappuccinos followed a string of earnings disappointments and downsized forecasts from some of the sector's top performers, who are grappling with the still weak economy and increasing competition from resurgent rivals.

Two weeks ago McDonald's Corp posted its worst quarterly restaurant sales growth performance in nine years and investor darling Chipotle Mexican Grill Inc said the pace of its restaurant sales growth could cool in 2013.

"Starbucks' solid Q4 performance has ideally positioned us to go into the holiday with strong momentum," Chief Executive Howard Schultz said on a conference call with analysts.

The Seattle-based chain set its new earnings per share forecast for fiscal 2013 at $2.06 to $2.15, up from $2.04 to $2.14 per share, previously. It also raised its target for global net new stores to 1,300 from 1,200 on accelerated development plans for China.

Net income for the fourth quarter ended September 30 inched up 0.1 percent to $359 million, or 46 cents per share, topping analysts' average forecast by a penny, according to Thomson Reuters I/B/E/S.

Overall revenue rose 11 percent to $3.36 billion.

Global sales at stores open at least 13 months were up 6 percent, helped by a 5 percent increase in traffic and a 1 percent rise in average spending per visit. That topped the 4.97 percent rise analysts polled by Consensus Metrix had expected.

Same-store sales rose 7 percent in the U.S.-dominated Americas region, topping analysts' estimate of 5.10 percent.

"Those Americas comps were stronger than their Komodo dark roast. A big surprise to everyone, especially given the slowdown at Chipotle and many others in last part of September," Investment Technology Group restaurant analyst Steve West said.

In the coming months, Starbucks is counting on newer products like Evolution Fresh juices and lightly caffeinated, low calorie fruit-flavored Refreshers drinks to keep boosting sales. The company has also recently begun selling its Verismo single-serving brewer and coffee and milk pods to be used in the machine.

Starbucks' current holiday quarter is its most important for sales. Asked if those results would be hurt by Hurricane Sandy, Chief Financial Officer Troy Alstead said: "Over the course of the quarter no, it will not be a meaningful impact to us."

Starbucks has reopened most of the 1,000 stores that it shuttered as the super storm approached, Alstead said.

Separately, Starbucks defended its tax strategy in the UK and other parts of Europe.

In October, Reuters revealed that Starbucks had paid only 8.6 million pounds of income taxes on 3.1 billion pounds of sales since 1998, by reporting consistent losses, even as it told investors the UK was a profitable market. And, in a new report on Thursday, Reuters found the company's German and French units employed a similar tax strategy.

There is no evidence that Starbucks has broken tax rules in any of the countries where it operates.

"We feel 100 percent assured that we are well within the law, and we feel once we're able to tell our story, all of this will be rectified," Schultz told CNBC.

(Reporting By Lisa Baertlein in Los Angeles and Brad Dorfman in Chicago; Editing by Bernard Orr)

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