Starbucks (SBUX) posts weak earnings, but in line with expectations

Posted Apr 30th 2008 5:05PM by Michael Fowlkes
Filed under: Earnings Reports, Starbucks (SBUX)

As I discussed in my earnings preview last night, Wall Street was expecting a weak quarter from Starbucks (NASDAQ: SBUX) this afternoon, and that is exactly what it was served up.

Shortly after the market closed today, Starbucks released its fiscal second quarter earnings figures, and the company posted earnings for the quarter of 15 cents per share, which was in line with analyst estimates. The company reported that its second quarter profit numbers were down 28% year-over-year, as the company continued to struggle in the current financial environment.

The income figures were definitely nothing to cheer about. During its second quarter last year, the company had net income of $150.8 million, but that number was slashed this quarter, as the beloved coffee chain was only able to come through with $108.7 million. Revenues actually were higher this year, rising 12% in the quarter on a year over year basis, still they came in slightly below expectations. Analysts had been hoping to see revenues of $2.55 billion, while the actual number was a bit shy of this, at $2.5 billion.

I noted in my earnings preview that one thing I wanted to look at this quarter was the company's same-store sales figures. With rising energy costs and the ever increasing credit crunch, consumers have been cutting back on their discretionary spending, and that has definitely impacted traffic at Starbucks' American stores. During the quarter, its same-store sales fell mid single digits.

The company also slashed its estimates for the number of new stores that it plans to open this year. Its new estimated number of store openings is 1,020, 155 less than it had previously projected opening this year.

All in all, some pretty discouraging news. But as I mentioned yesterday, the stock may be able to get away with the poor numbers and not see shares take too bad of a beating. Since most of the bad news was expected and already priced into the stock, there was nothing really too dramatic in today's earnings announcement.

That is pretty much the reaction that after-hours traders have taken so far. Immediately following the earnings announcement the stock shot up about 1%, but has given that back, and is currently fluctuating between -0.2% and +0.2%. We will have to see just how good Wall Street treats the stock tomorrow when trading resumes.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.

Tags: earnings, featured, sbux, starbucks