Business
5:15 pm
Thu November 1, 2012

Starbucks raises profit outlook for next year, will open 1,300 stores

Starbucks is continuing to thrive despite a lackluster economy. The coffee giant is raising its profit target for the coming fiscal year and says it plans to add 1,300 new stores around the world. 

People may be feeling strapped these days, but they’re still indulging in lattes at Starbucks. The company says sales climbed 11 percent in the most recent quarter, and Starbucks expects revenue to grow as much as 13 percent next year.

R.J. Hottovy is an analyst for Morningstar who covers Starbucks.

"The Starbucks brand is still resonating with consumers, even though it’s still a difficult environment," Hottovy said.

He says sales growth in Asia is particularly impressive. Starbucks now has 700 stores in China and will add another 300 or so in the coming year. Hottovy says the growing middle class in China is becoming more brand conscious and Starbucks is benefiting from that.

"You do have this lower to middle income consumer that is finding themselves with a lot more discretionary spending power in China based on state-mandated wage increases," Hottovy said.

Why is Starbucks thriving and Tully’s had to file for bankruptcy? Hottovy says Starbucks picks good locations and renegotiated many of its leases. And because the company is so huge, it can extract lower prices from its suppliers.