Seattle-based coffee giant Starbucks announced Thursday that the company’s stock earnings for the second quarter are on track with analysts’ expectations. Those who monitor the company are reporting that while earnings are heating up, overall revenue of the coffee chain did cool down in the last quarter.
Following the announcement, Starbucks shares rose at about one percent posting fiscal second-quarter earnings of 56 cents per share over $3.95 billion in revenue. With this announcement, Starbucks is expecting earnings for the year 2014 to fall between $2.62 and $2.68. This is up from the previous range of $2.59 to $2.67. In after-hours trading on Thursday, Starbucks shares rose further to 1.4 percent, peaking at $72.10 a share.
In a statement, Starbucks CEO Howard Schultz, who has seen the company go through a series of fiscal ups and downs over the years, says that the outstanding second quarter performance proves that the efforts to build a different kind of company while driving shareholder value and profits have been successful.
While Starbucks stock percolates with this positive news, many in the fast-food industry believe the second quarter jolt Starbucks has experienced was the result of the extreme winter weather. As consumers had to endure harsh temperatures, many turned to the coffee house in search of heating up.
To further up its marketability, Starbucks is expected to concentrate on incorporating more specialty teas into its business since acquiring Teavana back in 2012 for $620 million. The latest move in that direction involves partnering with business mogul Oprah Winfrey, creating a specialty tea in her honor which Winfrey had a personal hand in developing with teaologists at Teavana. The Oprah Winfrey Chai Tea is expected to hit stores by month’s end. In other partnership ventures, a multi-year agreement was locked down between the coffee house and Keurig Green Mountain, which will entail Starbucks widening its range of K-cup options for Keurig’s single serve machines.
On the food end, the company is looking to continue to roll out its breakfast offerings in light of competitors like Taco Bell and McDonalds upping their efforts to lure more customers into their stores during the morning hours. While Starbucks has had to shutter many of its poor performing locations during the past recession, they have been busy in the last quarter, opening 335 new stores globally, surpassing 20,000 outlets.
While Starbucks is seeing profits, the price of coffee is on the rise due to the recent drought in Brazil, where the commodity is grown and harvested. Over the past three months, coffee futures have risen by as much as 80 percent. The drought is also to blame for the lack of condiments that consumers like to add to their coffee. The USDA is reporting that the cost of dairy products and the price of sugar will increase due to the recent droughts. If Starbucks wants to continue brewing their stock, the coffee company knows they will have to be as strategic as possible in raising prices so as not to heat up and drive away loyal customers who rely so heavily on their neighborhood coffee shop.
By Hal Banfield