Starbucks Shares Scalded On Disappointing Earnings

Starbucks shares SBUX fell 8 percent following market-close after the company missed earnings, reported flat European sales in the second quarter and guided lower for its fourth-quarter and next year. The company reported earnings of $331.1 million, or 43 cents a share, up 19 percent from $271.1 million, or 36 cents a year earlier. The company missed analyst expectations by 2 cents a share. Revenue rose 13 percent to $3.3 billion, with same-store sales up 6 percent globally, and 7 percent in the U.S. Yet they were flat from the same period last year in Europe, the Middle East and Africa, as the region's economy continues to run on decaf. China continued its strong growth, with Asia Pacific revenue up 31 percent from the year-ago period. Operating margin rose 120 basis points from the same period last year to 14.9 percent, as the company may have benefited from a drop in wholesale coffee prices in the quarter. Yet it slid in EMEA region to 0.9 percent, due to higher costs related to a change in the company's food and dairy distribution in the U.K. “Despite coming in short of our expectations I am pleased with the increasing operating leverage we are seeing,” said CEO Howard Schultz, in a statement. Starbucks lowered fourth-quarter earnings expectations, “to reflect the difficult economic environment all global retailers are confronting today.” It now expects fourth-quarter profit to be as low as 45 cents a share, up 19 to 22 percent from the same period last year. Analysts had been expecting EPS of 48 cents, on average. It also guided its 2013 earnings to a range of $2.04 to $2.14 a share, up 15 to 20 percent from 2012. Analysts had been expecting earnings of $2.28. Starbucks shares last traded at $48.10, down 8 percent, in after hours trading.