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Starbucks profit soars as customers come back

By Hibah Yousuf, staff reporter


NEW YORK (CNNMoney.com) -- There may not be a Starbucks on every corner any more, but Americans are finding their way back into the upscale coffee retailer's stores.

Starbucks' profit surged in the quarter ended March 28, topping Wall Street forecasts and prompting the coffee retailer to boost its forecast for 2010.

The world's largest coffee chain reported earnings of $217.3 million, or 28 cents per share. Stripping out restructuring charges, Starbucks posted an adjusted profit of 29 cents per share. Analysts polled by Thomson Reuters, who typically exclude one-time items from their forecast, were looking for earnings of 25 cents per share.

Sales jumped 9% to $2.5 billion, beating analysts' expectations of $2.4 billion.

Starbucks (SBUX, Fortune 500)' shares rose nearly 2% on the news in aftermarket trading, after rising 0.5% during regular hours.

Over the past two years, Starbucks cut costs by closing hundreds of stores, trimming its workforce, overhauling its food menu and adjusting drink prices. The changes finally took hold last quarter, when the company reported a profit that quadrupled its earnings from a year earlier.

Since then, Starbucks has teamed up with Burger King to serve Seattle's Best Coffee and announced it will pay out dividends to shareholders for the first time ever beginning Friday.

Same-store sales, which measure sales at stores open at least a year and are a key gauge of customer traffic, climbed 7% in both the United States and international markets.

U.S. growth was driven by a 5% rise in spending and a 3% uptick in traffic, marking the first increase in more than three years. "An important milestone" for the company, said chief financial officer Troy Alstead.

"Clearly, customers are opening up their wallets and coming back to the brand," said Bart Glenn, analyst at D.A. Davidson.

With business reinvigorated in the United States, Alstead said Starbucks' "best days lie ahead of us." He expects the lion's share of growth for the company to be in opening more stores overseas, with China being the largest market.

Starbucks raised its outlook and said it expects to earn between $1.19 and $1.22 per share for the full year. In its last forecast, the company said it expected to earn up to $1.09 per share in 2010.

The company also said it is on track to open 100 stores in the United States and 200 in international markets this year, as announced last fall.  To top of page

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