Starbucks sees lower profit forecast for 2014

Starbucks Corp conservatively forecast its 2014 profit below Wall Street's expectations, despite fourth quarter profits that jumped 34 percent on strong traffic gains and an increase in spending by its customers, Reuters reported Wednesday (US time).

Starbucks on Wednesday repeated its forecast for fiscal 2014 earnings in the range of $2.55 to $2.65 per share. Analysts' average estimates had called for a full-year profit of $2.67 per share, according to Thomson Reuters.

"We are more optimistic about our future than ever before and at the same time we are realistic and practical in our expectations and I would encourage you to be as well," Chief Financial Officer Troy Alstead told analysts on a conference call.

Given the company's "stunning" growth in recent quarters and the inherent challenge associated with topping that performance, "it would be unreasonable to plan for or to set expectations any higher," Alstead said.

On Wednesday, the Seattle-based company reported that profit increased to $481.1 million, for the fiscal fourth quarter ended September 29, from $359 million a year earlier.

Starbucks' consolidated operating margin expanded 220 basis points to 17.6 percent during the fourth quarter, with increases from every operating unit.

As for the entire China and Asia-Pacific segment, the company's operating margin in the quarter increased to 37.5 percent from 33.1 percent over the same period in 2012.

Some analysts predicted in an earlier interview with the Global Times that the future prospects of Starbucks in China is still bright due to a lack of competitive local coffee brands, though the company has come under fire in the market as China Central Television on October 20 criticized it for selling products at higher prices in China than in other markets.

Following the allegations, a PR representative told the Global Times that the operation costs in China are higher than in the US because the business scale in China is much smaller and still at the primary stage.

"It would be inaccurate to draw conclusions about one market based on the prices in a different market," said Starbucks in an earlier e-mail to the Global Times.

Starbucks opened 558 new stores in the quarter, including the 1,000th one in China.

Global sales at Starbucks cafes open at least 13 months were up 7 percent in the latest quarter, driven by a 5 percent increase in traffic.

That figure included a stronger-than-expected 8 percent rise for the US-dominated Americas region that contributes nearly three-fourth of Starbucks revenue. Seasonal pumpkin spice drinks, new pastries from La Boulange and cold-pressed drinks from Evolution Fresh contributed to the rise in US sales, executives said.

Chief Executive Howard Schultz scolded analysts for pressing the company to set ever-loftier targets for same-store sales growth.

"It's not going to happen," he said. "The guidance we're giving is the most responsible guidance we could possibly provide you, especially when you consider the maturation of our store base and the number of stores."