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Caffeine High: Starbucks Details Brisk Sales, Global Growth, More Baked Goods

Posted by Dale Buss on January 25, 2013 02:15 PM

Starbucks is steering its brand to new heights and growing sales despite a number of global challenges, making its defensive pullback of a few years ago ever more of a distant memory.

Starbucks CEO Howard Schultz described for investors on Thursday advances ranging from an increased U.S. store count to solid customer response in Mumbai, and from a better-than-expected test of La Boulange bakery goods to rapid growth of its digital initiative.

He was bullish on about every count, even though slowing growth in China has hurt many other QSR chains and there were "unusual headwinds" in other markets such as the United States, he said, which was hurt by Super Storm Sandy.

Overall, Starbucks' fourth-quarter sales at same stores improved by 11 percent in China and the Asia-Pacific region, by 7 percent in the Americas and by 6 percent globally as a result of the company's aggressive international expansion and equally determined domestic growth initiatives, Shultz said.

The chain also reported that customers in the United Kingdom had "stayed loyal" during a tax dispute in the country. Starbucks said it would pay 10 million pounds in U.K. corporate taxes in each of the next two years even if it posts a loss, which came after a threatened boycott over what critics described as "immoral" tax practices. (It's also introduced an upbeat discount promotion there on Mondays.)

Here are other brand-focused nuggets from Schultz:

Starbucks' holiday card was "perhaps the nation's single most frequently given hoilday gift" in December, with one in 10 U.S. adults receiving a Starbucks card and $2 million worth of our the company's first-ever steel Starbucks card selling out on Internet luxury-goods retailer Gilt.com in six minutes.

U.S. store additions will number 1,500 over the next five years, and thousands of existing stores will be renovated. (It was just a few years ago that Starbucks was drastically cutting domestic locations that it said were bad sites.) Roughly 60 percent of the new stores will be drive-through locations which "create incremental revenues and profits compared to traditional stores," Schultz said.

La Boulange baked goods are creating "an opportunity to exceed plan and drive incremental food sales" based on testing in 40 Starbucks stores in the San Francisco Bay Area, with plans to introduce La Boulange this fiscal year to Los Angeles, Chicago, New York and Seattle, he said.

China and Asia-Pacific stores will grow to nearly 4,000 this year, including 1,000 in Japan and 500 in Korea.

Four stores in Mumbai have drawn "an overwhelming customer response" to the brand's first foray in one of India's most important cities, Schultz said, "and we're eagerly anticipating the opening of our first store in Delhi next month." Also in February: the first Starbucks in Ho Chi Minh City in Vietnam.

Verismo will become "a multi-billion-dollar premium single-serve platform in the months and years ahead," he said. More than 150,000 machines have sold since launch late last year at select retailers.

Recently acquired Teavana has been integrated into the company, and the expansion of its 300-store footprint from largely mall-based stores to urban street locations will help Starbucks "reinvent the tea category just as we did the coffee category," he said. Schultz called it  a "perfect complement" to Starbucks' current billion-dollar-plus Tazo tea brand.

My Starbucks Reward was named "Mobile Program of the Year" by Mobile Marketer, and Starbucks had 86 percent more customers sign up for a Rewards card in the first quarter of fiscal 2013 than in the firset fiscal quarter of 2012.


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