Judging by the stock's jump today, many investors enjoyed a serious espresso buzz after Starbucks
Starbucks' net income came in at $151.5 million, or $0.20 per share. Analysts had expected earnings of $0.19 per share. Last year this time, Starbucks had reported a third-quarter loss of $6.7 million, or $0.01 per share, so the company is certainly moving in the right direction.
However, Starbucks' quarterly profit owed greatly to cost-cutting, since customer traffic was still lackluster. Sales fell 6.6%, to $2.40 billion, and same-store sales dropped by 5%. Starbucks' traffic trends improved from last quarter's 8% decline, but the 5% comps decrease it posted this time around remains far from inspiring.
The ugly economic environment is making life tough for Starbucks, even as champions of cheap such as McDonald's
Unfortunately, the customer-focused initiatives Starbucks has been testing to reverse this slump may risk tarnishing its brand, especially as it struggles to compete with McDonald's and more similar rivals Peet's Coffee and Tea
As a shareholder, I can't say I'm dismayed to see the stock up more than 17% the last time I checked. Still, investors might want to temper their caffeinated euphoria, especially when sales could still use a jolt. I'm still hanging on to the stock, but I can't underestimate the challenges the company faces. The frothy economic environment that helped Starbucks brew up so much of its previous success has been drained to its last dregs, and the company faces much grittier times ahead.
Pour yourself some related caffeinated Foolishness:
Alyce Lomax owns shares of Starbucks. The Fool has a disclosure policy.