Starbucks comeback hits a snag
SAN FRANCISCO (MarketWatch) -- The impressive comeback staged by
On Thursday, Starbucks (SBUX) disappointed itself.
At 43 cents a share, its fiscal-third quarter profit was 2-3 cents less than it had expected. The coffee retailer also cooled its forecast for its current quarter and issued a fiscal 2013 outlook well below Wall Street's targets.
Starbucks shares tumbled 10% to $47 in after-hours trade.
Western Europe emerged as a problem earlier this year, prompting CEO Howard Schultz to dispatch two of his top executives to fix the company's business in the region. Starbucks said Thursday it would close an unspecified number of its unprofitable European stores, a strategy it employed four years ago to revive its U.S. operations.
"We have great confidence we will turn Europe around," Schultz said in a conference call."It won't be a sprint. It will be a long slog."
Looking at the numbers, there's plenty of work to be done.
For the period ended July 1, operating profit for the company's business unit that encompasses Europe, Russia, Middle East and Africa was $2.6 million. Operating margin was a mere 0.9%, while same-store sales were flat.
While better than the $5.5 million operating loss reported during the April quarter, that performance fell far short of the $19.8 million profit the unit made in the quarter ended Jan. 1.
Europe and slowing U.S. sales growth mark a fresh challenge for Starbucks, which has been charging along after engineering a remarkable turnaround that sent its shares to a record high of $62 in mid-April.
Overall, Starbucks reported its third-quarter profit rose 19% to $333.1 million from last year's same period. Revenue climbed 13% to $3.3 billion.
In the U.S., same-store sales grew 7% in the recent quarter but it slowed in June and July, CFO Alstead said in a conference call.
For its September quarter, Starbucks now projects a profit of 44 cents to 45 cents a share. For fiscal 2013, it put earnings at $2.04 to $2.14 a share. Prior to this latest update, analysts had been estimating full-year earnings of $2.28 a share, according to FactSet.
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