Starbucks Earnings Call Nuggets: La Boulange Debut and Earnings Guidance

Starbucks Corporation (NASDAQ:SBUX) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

La Boulange Debut

Michael Kelter – Goldman Sachs: Can you guys talk a little more about your early experience rolling out La Boulange in the stores and that where do you use, because the lift was encouraging. I was hoping you could help us with what exactly encouraging then and then maybe in your answer you could touch upon the impact to traffic versus ticket and whether you are getting a lift in coffee or just food?

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Cliff Burrows – President, Americas: Thanks for the question. It’s Cliff here. The reason I said encouraging we are in 150 stores with any track record and we’ve been working live with this in refining the products as we’ve gone along. We are now in a meaningful 439 stores, so it will be much more meaningful when we report the next quarter and the coming quarters. I am firstly encouraged by the pride our partners in the stores have in sharing and serving and enjoying this food, the reaction of the customers, especially to the (lemon and sage) croissant, (indiscernible) and almond croissant which are the signature products of La Boulange. With any change, it takes (mindful) people customers to get used to new products, ourselves to get confident with those products and obviously we’ve got a new routine with warming in stores. I am encouraged by the progress we’re making, encouraged by the reaction. And again, as I said I look forward to sharing more of that in the coming quarters.

Earnings Guidance

John Glass – Morgan Stanley: On the earnings guidance I guess just a couple of questions. One is why are you raising it now, with suggested an acceleration of earnings growth from 20% range in the first half to 25%. So what are the components that drive that first? Secondly does it include that $0.03 and where is that $0.03, I can’t find it, what segment is that in?

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Troy Alstead – CFO and Chief Administrative Officer: We are raising because, first of all, we are halfway through the year. So we now have half the year in the bank. We have been able to see two quarters worth of great top line growth and great earnings growth and that gives us increased confidence in our expectations for the balance of the year. I will also point out that we are just that much closer now to new product launch as we move through the balance of the year, how the seasons are trending, our ability to drive flow-through on incremental sales, all of that now halfway through the year has just increased in confidence and allows us to increase our guidance for the balance of the year and for the full year. Specifically to your second part of your question, yes, all the year-to-date results are reflected in that full year guidance so the $0.03 of the Mexico gain is included into that new $2.12 to $2.18 range that we put out there today. That is reported in interest income and other expense. So you need to look at the consolidated P&L and you will see a year-over-year change there. There is a number of things going on in that category but there is a big driver of this Mexico gain that shows up in that line.

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