By Ilan Brat
Starbucks Corp. reported stronger sales and sharply higher
profit in its latest quarter, an early indication that its
financial results may emerge unscathed from the social-media-fueled
backlash to its efforts to spur conversations on race
relations.
Chief Financial Officer Scott Maw pinpointed several factors
that drove the company's performance in the period, including 3%
growth in traffic world-wide, continued expansion in China and a 4%
increase in the overall size of customer purchases. More buyers
traded up to premium foods and beverages, including Starbucks's new
flat white coffee drink, he said.
Net income climbed 16% in the fiscal second quarter ended March
29, and revenue increased 18%--both about in line with analyst
expectations. Sales at stores open at least a year climbed 7%
world-wide. Mr. Maw said the quarterly results would have been
stronger without a 2% drag on revenue and earnings from the effect
of converting foreign currencies to a U.S. dollar that is much
stronger than a year ago.
"The core business is really firing on all cylinders," he
said.
Shares, up 20.5% this year to $49.43 through Thursday's close,
jumped 5.5% in after-hours trading.
The quarter covered only a couple of weeks of Starbucks's "Race
Together" initiative to encourage conversations about U.S. race
relations, begun in mid-March, but there was no indication that the
move to wade into the complex and divisive issue hurt sales.
While some consumers and pundits applauded the Race Together
effort, some critics said it was trying to capitalize on recent
racially charged controversies in the country. Others said that
trying to inject race into the rapid-fire buying and selling of
coffee and pastries was ham-handed.
In late March, Starbucks Chief Executive Howard Schultz, in a
letter to employees, said, "I know this hasn't been easy for any of
you--let me assure you that we didn't expect universal praise,"
adding that "starting this dialogue is what matters most. We are
learning a lot. And will always aim high in our efforts to make a
difference on the issues that matter most."
Mr. Schultz has said he intends to continue the Race Together
campaign and focus on building new Starbucks stores in relatively
low-income areas. In a speech on Wednesday, he said he would open a
store in Ferguson, Mo., the site of protests last year after a
police officer killed an unarmed African-American man.
On Thursday, in a statement, Mr. Schultz nodded at the Race
Together campaign and other politically sensitive efforts the
company has undertaken in the U.S. in recent years, including
saying guns would no longer be welcome in Starbucks stores in the
U.S. He said he aimed to continue to boost profit "always through
the lens of humanity."
For the period ended in March, Starbucks reported a profit of
$495 million, or 33 cents a share, up from $427 million, or 28
cents a share, a year earlier. The result was in line with analyst
predictions. Revenue increased 18% to $4.56 billion, slightly above
analyst expectations of $4.53 billion.
Sales at company-operated stores open at least 13 months in the
Americas region, which includes the U.S., rose 7% during the latest
quarter as traffic grew by 2%. Starbucks's comparable sales
world-wide also rose 7%, with a 3% traffic increase.
Angela Chen contributed to this article.
Write to Ilan Brat at ilan.brat@wsj.com
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