Starbucks sees strong sales in 3Q, net income jumps 34 per cent as more customers drop in

PORTLAND, Ore. – Starbucks Corp. brewed up a hot third quarter, reporting Thursday that its profit rose 34 per cent to beat expectations.

The world’s largest coffee retailer said that despite tough economic times, more people are visiting its stores than last year at this time, and they’re spending more. Starbucks raised its full-year forecast based on the strong trends, and its shares rose after hours.

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“The third quarter really continues the trends we’ve seen for some time,” Troy Alstead, chief financial officer at Starbucks, said in an interview with The Associated Press. “It’s even more remarkable in what is a fragile consumer environment.”

Starbucks, based in Seattle, has been a standout recently as consumers have begun spending a bit more on small indulgences and the company’s more aggressive business strategy has paid off.

The company earned $279.1 million, or 36 cents per share, for the quarter that ended July 3. That’s up from $207.9 million, or 27 cents per share, earned in the same quarter last year.

Revenue rose 12 per cent to $2.93 billion.

Analysts on average were expecting earnings of 34 cents per share on revenue of $2.83 billion, according to FactSet.

Starbucks, which has resumed aggressively expanding abroad, said revenue from its U.S. operations rose 9 per cent to $2 billion and revenue from its international business rose 20 per cent to $658.5 million.

The company also reported its first full quarter with complete control over distribution of its consumer products after ending a contract with Kraft Inc. Revenue from that business unit rose more than 25 per cent to $218.4 million as a result of the change.

Starbucks leaders attributed the bulk of the quarter’s success to the company’s work in its stores, where they say they have upgraded the customer experience with new products and improved service.

The company said revenue at stores open at least a year rose 8 per cent in North America and 5 per cent internationally. This comparison is a key measure of a retailer’s performance because it excludes stores that recently opened or closed.

Starbucks also announced it has acquired full ownership of its retail operations in Switzerland and Austria. This follows an agreement in May with joint-venture partner Maxim’s Caterers Ltd. to buy its stores in Central, South and Western China in a broader strategy in which China will be its largest market outside the U.S.

Company leaders said its costs for coffee and other commodities remained “stubbornly” high during the third quarter but have abated some. They said they have secured prices on key items for the year, providing some security.

“Starbucks has never been healthier, more connected to our customers and partners, or better positioned to go after the tremendous business opportunities that lie ahead,” CEO Howard Schultz said during a conference call with investors.

The company raised its 2011 full-year expectations, saying it now expects to earn $1.50 to $1.51 per share, in line with analyst expectations of $1.50, according to FactSet. That’s up from an earlier forecast for earnings of $1.46 to $1.48 per share.

Starbucks also said it plans to add 800 stores in the 2012 fiscal year.

Shares of Starbucks rose 57 cents in after-hours trading to $40.55.