Starbucks Corp.'s popularity with coffee drinkers around the globe helped boost its first-quarter net income nearly 44 percent to beat expectations.
The coffee giant expects its base of customers to keep growing this year but said higher commodity costs could eat into its profit, and it offered a tepid full-year forecast that sent its shares down after hours.
Starbucks reported Wednesday that it earned $346.6 million, or 45 cents per share, for the quarter that ended Jan. 2. That's up from $241.5 million, or 32 cents per share, a year earlier. Its revenue rose nearly 8 percent to $3 billion.
The results beat analysts' average forecast for earnings of 39 cents per share on revenue of $2.93 billion, according to FactSet.
The shares fell 84 cents, or 2.5 percent, to $32.23 in after-hours trading. They had fallen 58 cents, or 1.7 percent, to end regular trading Wednesday at $33.07.
Starbucks says more customers came into its stores during 2010's holiday season and they spent more as the company improved its product lineup and in-store experience.
Company leaders said sales at Starbucks stores open at least one year, a key indicator for the industry because it excludes cafes that recently opened or closed, rose 7 percent. The increase was driven by a 5 percent boost in traffic and 2 percent higher average transaction. The figure rose 8 percent in the U.S and 5 percent abroad.
The company said its improved margins offset the impact of unusually high coffee costs during the quarter. Starbucks said it has locked in its coffee prices for the remainder of the fiscal year. But bean prices remain higher than in 2010, and Starbucks faces higher dairy costs too.
Company leaders said Starbucks plans to rely on its improvements in operating efficiency and its growing sales to make up for these increases. The company also may raise prices on some products in some markets.
Looking forward, Starbucks reaffirmed the high end of its full-year guidance at $1.47 per share and raised the low end of the range to $1.44 to from the $1.41 per share low-end estimate it gave in November. Analysts were hoping for something a bit stronger; their average estimate was $1.49 per share, according to FactSet.
Starbucks leaders said the company still plans to assume control of its distribution from Kraft Foods Inc. on March 1. By contract, Kraft promoted and distributed Starbucks products at grocery stores and other retailers for more than a decade. The companies entered arbitration in November after Starbucks said Kraft failed to perform its duties. The arbitration is continuing.
A hearing on Kraft's request for an injunction to keep Starbucks from ending the deal is set Thursday.