Yesterday, I skipped what has been fast becoming my one-per-day latte habit, and, boy, did I regret it. (Yep, they've got me hooked, too.) Speaking of, Starbucks (Nasdaq: SBUX) did it again last night, reporting a 44% rise in its fiscal third-quarter profits and ratcheting up its earnings-per-share estimate for the year. What was that about being hooked?
Starbucks' net earnings increased to $98 million, or $0.24 per diluted share, beating analysts' estimates. (Keep in mind analysts were expecting $0.22 per share, and some were pointing out how Starbucks tends to beat by a penny). Net revenues increased 27% to $1.32 billion.
It's yet another one of "those" quarters. (Sigh.) Even though it's summer and the company recently released a new frozen drink to court the weight-conscious, this is one steamy quarter. Well... just like Starbucks has been consistently delivering for quite some time.
Further, the company increased its EPS guidance for the year to the $0.94-$0.95-per-share range, from $0.90 to $0.91; note that Starbucks has already upped its guidance once this year, originally calling for earnings of $0.83 to $0.85 per share in fiscal 2004. That's not all. The company also lifted its estimates for fiscal 2005 as well, citing present trends.
Starbucks still targets revenue growth for the year at 25% to 30%, and while it said that same-store sales growth is still appropriately targeted at 3% to 7%, it's likely to continue to exceed that range.
What's on the horizon, other than the hypergrowth? Starbucks will continue to sink money into expanding its interesting new business platform, spearheaded by its HearMusic unit, in the fourth quarter. One of the company's new initiatives is to give its customers the ability to download music and create CDs in Starbucks outlets.
Meanwhile, Starbucks admitted to a possible, though not definite, hike in drink prices in 2005, citing rising commodity and labor costs. We all know its specialty coffee drinks have a reputation for being expensive -- many like to compare them to the cheap-jolt cup o' joe you can get at McDonald's (NYSE: MCD) or 7-Eleven (NYSE: SE). However, as I've said before, it seems consumers love their Starbucks so much that a few cents more just wouldn't drive them elsewhere.
As always, Starbucks is trading at what sounds like a rich 49 times forward earnings. Starbucks is one company, however, that no one's been able to prove overvalued, given its continued breakneck growth and unflagging popularity among consumers. So far, there's nobody stopping Starbucks.
Talk about all things Starbucks with the kind folks on the Starbucks discussion board.
Alyce Lomax does not own shares of any companies mentioned.
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