The Seattle-based chain reported a stronger quarterly profit Thursday as global sales at established locations rose 6 percent, including in its flagship U.S. market. Operating margin improved as a result of lower costs for ingredients, and the company raised its profit outlook for the year.
CEO Howard Schultz also noted in a conference call that there's plenty of runway for the company to open more stores, even in the U.S. where it has more than 11,000 cafes.
"We are significantly under-stored in many markets, including North America," Schultz said, pointing out that is drive-thru locations offered particular promise. This year, Starbucks plans to add another 1,500 locations, including 600 in the Americas.
The plans come as Starbucks Corp. continues to report healthy sales gains, even as others in the fast-food space have struggled. Its strategies have included price hikes, getting people to sign up for its loyalty program and the rollout of new breakfast sandwiches, salads, and bottled juices. Later this year, it plans to introduce its made-to-order soda offerings at 3,000 U.S. locations, as well in overseas markets including South Korea and China.
Back in the U.S., Chief Operating Officer Troy Alstead noted that Starbucks delivered the stronger sales in the quarter despite severe weather, which has been cited by companies including Dunkin' Brands and McDonald's Corp. for weak sales.
Alstead stressed the popularity of Starbucks' new La Boulange bakery items in helping boost average checks during the quarter. He downplayed a recent hiccup when the company decided to bring back pumpkin and lemon loaves after customers complained.
"Oh, tweaks are always happening," Alstead explained.
After seeing through the rollout of the baked goods, Alstead said Starbucks will move on to refining its lunch options. He said the company is already testing some items.
Schultz also said during the conference call that the company has been approached by technology companies and national retailers about the licensing of its technology for its popular mobile app. He noted that licensing could bring in considerable additional revenue.
"We have not made the decision as to what we will do," he said.
During the first three months of the year, sales at established locations also rose 6 percent in the unit encompassing Europe, the Middle East and Africa, where Starbucks has struggled to compete against local cafes. The figure rose 7 percent in Asia.
For the quarter, Starbucks earned $427 million, or 56 cents per share, in line with expectations. A year ago, it earned $390.4 million, or 51 cents per share.
Revenue rose to $3.87 billion, but was short of the $3.96 billion analysts expected.
The company, which has more than 20,000 locations globally, stood by its outlook for comparable sales to be up mid-single digits for the year. It now expects to earn between $2.62 and $2.68 per share, up from its previous guidance of $2.59 and $2.67 per share.
Its stock rose $1.10 to $72.19 in after-market trading.