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Starbucks' 1Q profit soars, beats forecasts

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ASHLEY M. HEHER | January 20, 2010 06:51 PM EST | AP

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CHICAGO — Caffeine lovers visited Starbucks Corp. more often – and spent more money when they did – during its fiscal first quarter, the world's largest coffee chain said Wednesday, more than tripling its profit.

The Seattle company that made grande and venti household words earned $241.5 million, or 32 cents per share, for the three months that ended in late December. During the same period last year, when the recession was in full force and Starbucks was closing stores and laying off workers to cut its costs, its profit was $64.3 million, or 9 cents per share.

Starbucks' revenue rose 4 percent to $2.72 billion, up from $2.62 billion.

"Despite our strong showing, we have much more work to do," CEO and Chairman Howard Schultz said on a conference call with investors.

Analysts surveyed by Thomson Reuters expected Starbucks to earn 28 cents per share on revenue of $2.65 billion.

R.W. Baird analyst David Tarantino told investors he thought Wednesday's results were "incrementally positive" as they solidly beat forecasts.

Meanwhile, during its most recent quarter, Starbucks said its sales in stores open at least a year, considered a key restaurant measure, rose 4 percent for the quarter after two years of steady declines.

Part of the gain came from stronger sales of the company's single-serve instant coffee. The company also saw a 30 percent boost in sales of its holiday drinks, like the popular eggnog latte.

Now Starbucks executives plan to turn their attention to the company's overseas business, where it plans several changes, including returning to a focus on customer service that was lost when the chain was at the height of its rapid expansion.

"The pace of growth was too much for us to do ... and do it at the level of standards we had defined for ourselves," CFO Troy Alstead told The Associated Press in an interview. "That's really what broke down."

In the coming year it plans to open about 100 new U.S. locations and 200 international sites. It has more than 16,000 locations around the globe.

Also Wednesday, Starbucks raised its full-year forecast saying it now expects to earn an adjusted profit of $1.05 per share to $1.08 per share, with revenue revenue climbing by the mid-single digit percentages. In November, it expected an adjust profit of up to 96 cents per share on lesser revenue gains.

Analysts expect Starbucks to earn $1.02 per share with revenue of $10.07 billion – a 3 percent increase.

Starbucks shares climbed in after-hours trading after the results were released, rising 79 cents, or 3.4 percent, to $24.08. Its stock closed at $23.29 in regular trading.