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Starbucks Corporation (SBUX): Brewing Up Strong Earnings

Starbucks Corporation (NASDAQ:SBUX)Starbucks Corporation (NASDAQ:SBUX) reported its third quarter earnings on July 25. Not only did the earnings beat analysts’ expectations, the company also increased its full year guidance. The Seattle-based company, which has over 19,000 outlets around the world, cited that same stores sales improvement in the US and its expanding consumer packaged goods business fueled its third quarter earnings.

A snapshot of the quarterly earnings report

In the third quarter of fiscal year 2013, Starbucks Corporation (NASDAQ:SBUX) reported revenue of $3.74 billion, up from the $3.3 billion reported last year. Net income increased by 25.4% to $417.8 million from $333 million reported for the same quarter last fiscal year. EPS increased from $0.43 to $0.55, beating analyst’s expectations of $0.53. This was the second highest EPS reported in the company’s history.

Global same-store sales rose 8%, with North America and Asia experiencing an impressive 9% growth. Comparable-store sales in Europe, the Middle East and Africa lagged behind with 2% growth.

Another strong performer was the company’s “channel development” business, which sells coffee, tea and other products in grocery stores, on airlines and elsewhere. Its operating income grew 14% to $96.3 million.

Once a coffee shop, now a cafe!

It appears fancy coffee isn’t the only thing creating long lines at Starbucks Corporation (NASDAQ:SBUX). The company had witnessed tremendous opportunities in food and its food offerings are adding to its excellent growth numbers. Food contributed around 22% of Starbucks Corporation (NASDAQ:SBUX)’s same-store sales growth in the U.S. for this third quarter.

“Starbucks is selling more food with its new menu, and Americans are lured by its digital capabilities – like paying with their mobile phones. These are the really early days for us because, as you can imagine, we’re having to learn the way to operate food within our store environment, and obviously it’s going to complement the coffee, but we want to make sure we do not slow down the speed of service,” CEO Howard Schultz was quoted as saying.

Starbucks Corporation (NASDAQ:SBUX) has been growing through strategic alliances. One successful example is its alliance with Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR). The maker of Keurig K-Cup coffee machines has an agreement with Starbucks to package and distribute the hot beverages in a K-Cup format. Starbucks has been selling the brewing machines in its stores.

Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) recently announced excellent second quarter results. The company reported earnings of $1 billion and a 13.5% increase in its revenue as compared to the same quarter last year. Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) has increased its earnings projection for this full fiscal year and has also announced plans of adding big brands to its K-cup packs.

Starbucks Corporation (NASDAQ:SBUX) has been working on re-inventing its menu and has introduced new items like zesty chicken and black bean salad bowls. The company has also announced its plans to enter into an agreement with Paris-based global dairy giant Danone to develop a line of Greek yogurt products which will be sold in the Starbucks stores. The product line, which will be sold under the brand name “Evolution Fresh, inspired by Dannon” will be ready-to-eat parfait Greek yogurt products.

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