Starbucks Corp. (SBUX) on Wednesday reported a 31 percent increase in quarterly net income and raised its earnings forecast for the year on strong sales of holiday products like Christmas Blend (search) coffee beans.

The results beat Wall Street analysts' average estimate by a penny but sent the coffee shop chain's stock down 2.7 percent in after-hours trading on investor disappointment that the earnings were not higher, analysts said.

Starbucks, meanwhile, stuck to its moderate growth forecast for same-store sales, despite double-digit increases in recent months.

"We can have a very healthy growing business in that range," Chief Financial Officer Michael Casey told analysts on a conference call to discuss the results. "To predict higher I think would be foolhardy."

Net income for the first quarter ended Jan. 2 rose to $145 million, or 35 cents per share, from $110 million, or 27 cents per share, a year ago.

Wall Street analysts, on average, had expected earnings of 34 cents per share, according to Reuters Estimates.

Net revenue rose 24 percent to $1.6 billion.

"Some quarters they had beaten by a wider margin," said McAdams Wright Ragen (search) analyst Dan Geiman, who has a "buy" rating on Starbucks shares and owns none. "Expectations have gotten extremely high."

Starbucks raised its earnings forecast for fiscal 2005 to between $1.15 per share and $1.17 per share, excluding any impact from expensing stock options. The Seattle company had previously forecast earnings of between $1.12 per share and $1.15 per share.

Analysts had been expecting earnings of $1.17 per share for the year, according to Reuters Estimates.

Starbucks said it expects monthly increases in sales at its coffee shops open at least 13 months at the upper end of its long-term goal of between 3 percent and 7 percent for the rest of the year, with some "monthly anomalies."

Increases in Starbucks' same-store sales, a key retail measure, have been in the double digits for 9 of the past 12 months, but in that time executives have staunchly reiterated their adherence to the long-term target of 3 to 7 percent.

Starbucks' explosive growth over more than a decade and more than 52 percent run-up in its share price in the last year has made some investors wary that its stock may be too pricey.

"That has been an issue in some investors' minds ... there is a big premium there," Geiman said. "It's a momentum stock."

Starbucks shares trade at about 46 times its projected 2005 earnings, Geiman said. That's well above the average valuation of less than 20 times estimated 2005 earnings for other restaurant industry stocks.

Starbucks' outgoing chief executive, Orin Smith, addressed wary Wall Street analysts directly on the conference call, the last before his March 31 retirement.

"For those of you who have hesitated in the face of our P/E multiple, may our history and prospects give you courage," he said.

Starbucks maintained its second- and third-quarter forecasts but raised its fourth-quarter estimate to 28 cents to 29 cents per share.

Starbucks expects to earn in a range of 23 cents to 24 cents per share for the second quarter and between 29 cents and 30 cents per share for the third quarter.

Following the announcement, Starbucks shares fell to $53.85 in after-hours trading on the Inet electronic brokerage from their Nasdaq close of $55.34.