Starbucks falls short of analysts’ estimates

Investing in technology, employee benefits hurt chain’s forecasted earnings

Starbucks Corp., the world’s biggest coffee-shop chain, delivered a firstquarter forecast that missed analysts’ estimates, hurt by mounting costs for labour and technology.

Earnings in the period will be 44 cents to 45 cents a share, the Seattlebased company said in a statement Thursday. Analysts estimated 47 cents on average for the quarter, which ends in December.

Chief executive officer Howard Schultz has been focused on improving the company’s technology, aiming to speed up service and attract more customers. It rolled out mobile ordering in the U.S. in September and then brought the program to Canada this month. Starbucks also has been spending more money on employees, doling out college-tuition benefits and a wage boost.

“We know that these investments are paying off — they’re critical to the business,” chief financial officer Scott Maw said in an interview.

The company will increase its spending on employees and technology next year by between $100 million and $125 million (U.S.), he said. The costs totalled about $145 million in fiscal 2015.

Through Thursday’s close, Starbucks had gained 52 per cent this year.

Starbucks’ mobile-payments system, which lets customers pay with their smartphones, now makes up about 21 per cent of U.S. store transactions. The company also is rolling out mobile ordering to locations in the U.K.

“Technology is what’s driving their business, so they need to continue to invest in it,” said Peter Saleh, an analyst at BTIG.

“I think that’s hands down a great investment.”

Fourth-quarter profit was 43 cents a share, excluding some items, matching analysts’ average estimate. Net income rose 11 per cent to $652.5 million, and sales increased 18 per cent to $4.91billion, just beating analysts’ $4.9 billion average projection.