By Neil J Kanatt
July 29 (Reuters) – Starbucks has raised its annual sales and profit forecasts for the second time, as CEO Brian Niccol’s years-long turnaround efforts reignite demand at the world’s largest coffee chain, sending its shares up 5% in extended trading.
Under Niccol, the company has aimed to improve customer experience through a simplified menu and shortened wait times, fueling four straight quarters of comparable sales growth.
“We have more work to do,” Niccol said in a statement on Wednesday, while finance chief Cathy Smith said the company is focused on what it can control amid a “dynamic operating environment”
The Seattle-based company forecast global same-store sales growth of near 6%, above its prior forecast of about 5% or above. It expects adjusted earnings per share to be between $2.55 and $2.65, compared with its previous forecast of $2.25 to $2.45.
“Starbucks has begun to experience market share stabilization in recent months, most notably with younger diners,” Consumer Edge analyst Michael Gunther said.
“Consumers may be shifting dining dollars toward in-home eating but are leaving room in the budget for daily drink habits,” he added.
The “Back to Starbucks” strategy had been squeezing margins, as it involved heavy investments in staffing and store operations, which the company has looked to tackle with cost cuts through layoffs, office consolidation and streamlining its operations.
The company said refunds received in the quarter “largely offset” tariffs costs incurred so far this fiscal year.
The company’s consolidated quarterly operating margin was 14.4% in the quarter, compared with 10.1% a year earlier. This helped it post adjusted earnings per share of 85 cents, compared with estimates of 66 cents.
Starbucks reported third-quarter global same-store sales growth of 7.9%, which surpassed analysts’ expectations of 5.7%, according to data compiled by LSEG.
(Reporting by Neil J Kanatt in Bengaluru and Waylon Cunningham in New York; Editing by David Gregorio and Sriraj Kalluvila)
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