Starbucks Profit Up 20% Thanks to Gift Cards

Starbucks Corp. (SBUX) Wednesday posted a 20 percent rise in quarterly earnings, boosted by Starbucks gift cards use, and posted a strong 10 percent rise in January sales at established stores.

The coffee chain also raised its 2006 profit target, helping to send shares up 5 percent.

Mike Koskuba, a portfolio manager with Victory Capital Management, which owns about 875,000 Starbucks shares, said the quarter and outlook were promising. The January results at established stores, called same-store sales, were "quite strong," he added.

"I think it got some investors fired up," he said.

Net income for the first quarter ended Jan. 1 rose to $174.2 million, or 22 cents per share, from $144.7 million, or 17 cents per share, a year ago.

Excluding excluding stock-based compensation, earnings were 24 cents per share, topping the Wall Street consensus by 2 cents per shares, according to Reuters Estimates.

Revenue rose 22 percent to $1.9 billion. In January, same-store sales rose 10 percent.

Starbucks benefited from a record number of its gift cards activated during the holiday season, Starbucks Chief Executive Jim Donald said in a statement.

He added, however, that January's 10-percent comparable store sales increase was "not sustainable" and backed the company's long-term goal of posting monthly same-store sales increases of 3 percent to 7 percent for the rest of fiscal 2006.

For fiscal 2006, Seattle-based Starbucks raised its outlook by five cents per share to a range of 68 cents to 70 cents per share, including the impact of stock-based compensation costs.

Starbucks, the No. 1 global coffee shop chain, has more than 10,500 outlets worldwide.

Starbucks' stock has gained 16.1 percent in the last year, compared with a 12.3 percent increase in the Standard & Poor's restaurants index.

Shares rose to $32.95 on the Inet electronic brokerage following the announcement from their Nasdaq close of $31.36.