As we noted earlier, Starbucks Corp. (NASDAQ: SBUX) put up solid Q3 earnings this afternoon following the market close. The company matched analyst estimates with 21 cents per share, and boasted a 20% jump in net revenues.The stock has moved strongly higher in after hours trading today. The stock is now trading up X% as investors react to this afternoons news. We are going to be covering this afternoon's call in its entirety, so be sure to refresh your page frequently to make sure you catch all the action of the call.
4:50 pm - tuned into the call and waiting for the action to get started. We should be under way here in about 10 minutes. SBUX is currently trading up 3.1% after hours, and about 15 minutes ago when I was watching the post market trading I saw it get up 6.0% higher at one point.
4:55 pm - About 5 more minutes to go before the call gets started. Tuned in now, listening to a little easy listening music and waiting... shouldn't be too much longer.
5:00 pm - Call getting under way now. Currently just going over the SEC regulations now
5:01 pm - CEO Jim Donald getting started now: Very pleased with this current quarter, and believes fundamentals still strong and looking forward
5:03 pm - opened 668 new stores in the quarter to take the total to 14,396 locations worldwide. Still see substantial oppurtunities for growth internationally
5:06 pm - during the quarter saw net revenue of 2.4 billion , which was up 20%. EPS of 21 cents which was equal with analyst estimates
5:08 pm - International markets continue to perform above expectations, and company continues to see strong growth potential internationally
5:10 pm - Discussing alliance that it has made with Hershey (NYSE HSY) in creating a new chocolate coffee drink. Yet another strategic alliance allowing the store to leverage its brand in areas outside its stores
5:12 pm - Management changes. Over the last year company has been re-alignment management to get company best positioned to help keep the company's goal of doubling its business within the next 4 to 5 years. Management re-alignment that began last year has now been completed
5:13 pm - Martin Cole, President of Starbucks Coffee International taking over call. Very pleased with the recent quarter's performance of the international business
5:15 pm - In record 3rd quarter 28% in international net revenues. Record levels of store openings and sales growth were the drivers for the strong quarter
5:16 pm - International same stores sale grew 7% during the quarter. Opened stores in several new markets. Specifically mentioned new store in Bucharest, Romania (where I am currently located, I think I'll have to pay it a visit to see how things look in this new store)
5:18 pm -decided to not pursue its plan in India at this time, and instead to focus on growth in Asia / Pacific market, but will look to move into the India market in another year or so
5:20 pm - International business still in very early phase, at the end of quarter around 4,000 stores outside American and have a goal of around 20,000 total stores outside the US. Driving success by focusing on core elements : great partners who create a great environment.
5:21 pm - Michael Casey taking over now to talk financials
5:22 pm - Consolidated top line growth was 20%, 4% comparable same stores sales. EPS was 21 cents compared with 18 cents same period last year. Consolidated net income grew 14%. Operating margins declined to 10.4%, down from 10.9% last year, due to higher cost of sales of occupancy
5:24 pm - growth in same store sales driven by 3% growth in average transactions, and 1% increase in foot traffic. Licensing revenues increased 14%
5:26 pm - Cost of goods sold in US market increased due to 3 main factors:
- higher dairy costs
- shift in sales to higher mix of higher cost products
- higher rent expense, mostly due to growth in areas of higher retail cost area markets
5:28 pm - internationally the company had a 7% rise in same stores sales. this 7% was made up of a 5% increase in # of transactions, and a 2% growth in the value per transaction.
~ stock now up 3.7% in after hours trading ~
5:30 pm - repurchased 2.5 million shares of common stock in the quarter. brings total repurchases for the first 3 quarters to 20.3 million shares with a cost of $671 million. the number of shares left available to repurchase was 26 million
5:33 pm - continue to expect comparable same stores growth between 3 to 7% and EPS between 87 and 89 cents, but the 89 cents will be tough to attain, mainly due to the high dairy costs
5:35 pm - in 2008, plan to open 2,600 new stores
moving to question / answer portion of the call
5:36 pm - Jeffery @ Lehman Brothers: Looking at US traffic... where do we see it heading from here.. what impact will price increases have? US traffic was slightly better in Q3 than in Q2 and steady with last year. Increased competitive environment. In all areas, the company still believes it has advantage of being the "coffee experts". Historically, have not had significant decrease in traffic due to price increases initially... but have seen moderate impacts over long term and not something that has been material. This is however, the closest time period between two price raises
5:40 pm - Matthew @ Thomas Weisell: Will lower expenses that the company saw in Q3 come back in Q4? Company is learning how to be more effective and can expect to see similar results looking ahead. question 2 - how fast can we expect to see a 16% margin in the US now that store growth is leveling out? No straight answer on this on
5:45 pm -Larry @ RBC Captial Capital: What will total price increase be Q4. Had a 1.5% increase earlier in the year and 2.5% implemented yesterday.. so 4% year over year.
5:48 pm - David from Robert W Baird : What is effectiveness of changes made in store management: Over the past year, the company feels that through training they have completely solved problems in cold beverage distribution. (im not 100% sure i caught that answer correctly)
5:51 pm - Sharon @ William Blair : How do they try to access what may be self imposed strain verse competition? Store owners offer feedback in this area. See strain when they try to accelerate growth too fast, but company has satisfied the system that it needs to be able to listen to and deal with comments coming from store owners.
5:54 pm - Glenn @ Citigroup - looking at cannibalization again: has the rate this year surprised them? what they are seeing today is that cannibalization today is still about the same as it was several years ago when they were opening only 300 stores a year
5:56 pm - Joe @ Bear Stearns: international company openings are holding stable in 2008, and will need a lot of openings in Q4 2007 to meet this years numbers... what do they think about this? Actually running at all time records internationally. Do not see that changing in 2008, and will actually ramp up in 2008. Building as fast as they can, the right way, into the right markets.
5:59 pm - Andrew with Banc of America : Are their any thoughts in stepping up advertising and marketing in US to help increase foot traffic? Plan to keep it the way it has always been, which is more of a grassroots type of advertising, and allow the stores to speak for themselves. Since the stores offers a completely different experience than any other coffee house the experience itself is the company's main advertising tool
that brings todays call to a close... as of the end of the call shares of SBUX are now trading up 2.6%, just a little bit under the 3.1% that we were seeing as the call got under way.
thanks for joining our liveblog, enjoy the rest of your evening.
