Fewer latte runs sends Starbucks profit down

Jessica Mintz

ap business writer

Starbucks Corp. said Wednesday its fiscal second-quarter profit fell 28 percent as U.S. consumers responded to rising food and gas prices by making fewer latte runs.

The company also gave investors a first look at its expected financial performance through 2011, which calls for substantial profit growth, as well as a peek at some new drinks it hopes will help revive U.S. consumers’ interest.

When the quarter ended, Starbucks’ net income sank to $108.7 million, or 15 cents per share, from $150.8 million, or 19 cents a share in the same period last year.

Revenue rose 12 percent to $2.53 billion from $2.26 billion in the year-ago quarter, a company spokesperson said.

Starbucks warned last week that results would fall short of Wall Street’s expectations. Analysts, on average, had forecast a profit of 21 cents per share on $2.63 billion in sales, according to a Thomson Financial survey.

“We continue to come under very heavy consumer pressure due to the economy,” said Chairman and Chief Executive Officer Howard Schultz in an interview. “Most retailers, restaurants, certainly other premium brands, are facing similar headwinds.”

Charges for closing a few stores and not moving forward with other planned openings, as well as costs associated with Starbucks’ plan to reinvigorate U.S. sales, such as added benefits for loyalty card holders, cut earnings by about 3 cents per share.

Photo by Ben Margot, Associated Press

The newly designed Starbucks cup is seen Wednesday, April 30, 2008, at a Starbucks location in Alameda, Calif. Starbucks Corp. said Wednesday its fiscal second-quarter profit fell 28 percent as U.S. consumers responded to rising food and gas prices by making fewer latte runs.