Business World

Monday 5 December 2016

Starbucks plans for a gourmet push as coffee nuts lift profits

Leslie Patton

Published 26/04/2015 | 02:30

Starbucks CEO Howard Schultz has focused on expanding the company's digital services, including mobile ordering, which allows diners to transmit their requests before visiting a store
Starbucks CEO Howard Schultz has focused on expanding the company's digital services, including mobile ordering, which allows diners to transmit their requests before visiting a store

Starbucks, the world's biggest coffee-shop chain, saw shares rise last week after sales topped estimates, fuelled by an expanded menu and its increasingly popular mobile-phone app.

  • Go To

Starbucks first came to Ireland in 2005, opening in the Dundrum Town Centre. It later opened on Dublin's College Green, and has expanded slowly since in Ireland, through brothers Column and Ciaran Butler's franchise group Entertainment Enterprises.

The brothers initially ran 10 Starbucks outlets in Ireland before taking control of another 17, which had been run directly by the US company in 2012.

Revenue at the US group soared 18pc to $4.56bn in the second quarter of 2015, the Seattle-based company said last week. Analysts had estimated $4.53bn on average, according to data compiled by Bloomberg. The company also gave an optimistic view for the rest of the year. The quarter was "definitely above expectations," said one analyst at Telsey Advisory Group.

"Consumers are buying more expensive beverages, and they're also purchasing more food."

Starbucks CEO Howard Schultz has focused on expanding the company's digital services, including mobile ordering, which allows diners to transmit their requests before visiting a store.

Starbucks also is going to test delivery in Seattle and in their outlet at New York's Empire State Building - letting customers get their coffees sent right to their offices.

"Innovation is the force that will continue to drive our business and enable us to expand and increase revenues and profits," Schultz said in the statement. Starbucks shares were up 20pc this year, outpacing the 2.6pc rise of the Standard & Poor's 500 Index.

Starbucks reiterated its full-year forecast for 16pc to 18pc revenue growth, saying investments in stores and its workforce would fuel its expansion. Its Q3 earnings will be 40c to 41c a share, excluding some items. Analysts had predicted 40c.

US sales were helped by the company's food business, which attracts more customers outside of the morning hours.

Starbucks is trying to double its food revenue to more than $4bn in the next five years, the company said in December. Breakfast rolls, flat white drinks and Teavana teas all helped drive second-quarter sales, said group chief financial officer Scott Maw.

The Starbucks mobile-phone app accounted for 19pc of total US payments in the quarter, up from 16pc in the previous period, he said. The company also is seeing "very strong early results" from its new mobile-ordering service.

Starbucks also plans to open new coffee bars that tout a premium 'Reserve' line, which is prepared in small batches. Starbucks will open 500 of the bars worldwide, highlighting premium coffees and the newest brewing methods, Schultz said on a conference call.

Globally, sales at established stores (that is, which have been open for at least 13 months) rose 7pc in the quarter which ended on March 29. Analysts had estimated 5pc on average. The sales also climbed 7pc in the company's Americas region.

Excluding some items, earnings amounted to 33c, matching analysts' estimates. The company reiterated its plan to open 1,650 new cafes, net of closures, this fiscal year. That includes 850 locations in the China and Asia Pacific region, where the chain has been ramping up growth. Starbucks recently opened pour-over coffee bars in China and is trying to sell more food there.

In January, Starbucks named former Juniper Networks boss Kevin R Johnson as their new chief operating officer - underscoring the role technology now plays at the coffee chain.

©Bloomberg

Sunday Indo Business

Read More

Promoted articles

Editors Choice

Also in Business