Starbucks sees 'light at the end of the tunnel'
Sluggish sales and restructuring costs cut into third-quarter results, but the coffee chain stands by next-year's guidance.
NEW YORK (CNNMoney.com) -- Shares of Starbucks Corp. jumped 4% in after-hours trading after the high-end coffee chain forecast relief down the road from its current slump.
The Seattle-based company said Wednesday it swung to a fiscal third-quarter loss and fell short of analysts' estimates, but it stuck by its 2009 guidance.
Starbucks posted a third-quarter loss of $6.7 million, or 1 cent per share, compared with a profit of $158.3 million, or 21 cents per share in the same period a year ago.
Excluding charges related to its ongoing turnaround efforts, Starbucks reported earnings of 16 cents per share, which fell short of the 18-cent-per-share forecast from analysts polled by Thomson Reuters.
Revenue increased 9% to $2.57 billion during the quarter, missing analyst expectations of $2.61 billion.
The results come one day after Starbucks said it will eliminate 1,000 non-retail jobs as part of its efforts to boost profits by cutting costs. The company also previously announced it's closing 600 underperforming stores with the first 50 being shuttered this month.
"We've made the right choices and we see the light at the end of the tunnel," CEO Howard Schultz told analysts in a conference call Wednesday.
Shultz acknowledged that Starbucks faces "economic headwinds" but argued that the company's efforts to adjust to those challenges will ultimately lead to "significant improvement in our long-term financial performance."
Starbucks (SBUX, Fortune 500) also lowered its full-year earnings guidance Wednesday, citing reduced traffic and increased cost pressures.
The company now expects full-year fiscal 2008 earnings per share in the "mid-seventy-cent range." Wall Street analysts are forecasting full-year earnings of 81 cents pre share.
Starbucks anticipates total net revenue growth of about 11% in fiscal year 2008. That's down from the 13% to 14% growth the company forecasted last quarter.
The company lowered its U.S. store opening targets for fiscal 2008 to approximately 900 net new stores.
"We knew this would be a quarter with a lot of moving parts," said Lawrence Miller, an analysts with RBC capital markets. But he said the company's profit guidance for the fiscal year 2009, which he called "not too far fetched," was a positive surprise.
For fiscal year 2009, however, Starbucks held firm to its previous forecast of a profit between 90 cents to $1 per share. That news is what sent shares up 4% after-hours, according to Sharon Zackfia, an analyst with William Blair & Company.
"The closures and head-count reductions are going to save them money next year," she said.
Starbucks also discussed plans to introduce new food items next year, as well as, an enhanced version of its Starbucks card.
The company did not provide details on the "new food platform" it has in store, but Schultz said it will take advantage of customer demand for "whole grains" and "more lean options."
Schultz also addressed recent reports about Starbucks' foray into the realm of breakfast sandwiches.
"We are working to adjust the recipe so that the odor does not interfere with the coffee aroma," he said. He added that Starbucks is working to make sure its food items "meet high quality standards."
Starbucks plans to promote an enhanced version of its Starbucks card for the holidays, Schultz said, though he did not provide details of the enhancement.
The Starbucks card has been a "hidden asset," that has enjoyed "strong customer loyalty" despite a prolonged slowdown in consumer spending, he said. 
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