Starbucks profit falls less than expected

By Lisa Baertlein

LOS ANGELES (Reuters) - Starbucks Corp (SBUX.O) on Wednesday posted slightly better-than-expected quarterly profit as cost savings helped offset an 8 percent drop in same-store sales.

The coffee chain, which has been slashing costs to compensate for dwindling customer visits, had announced plans to close almost 1,000 stores around the world as the worst recession in decades drove consumers to tighten their belts.

During the second quarter, Starbucks said it cut costs by $120 million, better than its target of $100 million, and that sales at restaurants open at least 13 months declined at a slower pace than the 9 percent drop recorded in the first quarter.

"Folks might be a little disappointed that there wasn't more improvement" in sales since comparisons from a year ago were easier, and the company has been closing poorly performing stores, said Edward Jones analyst Jack Russo, who does not own Starbucks shares and has a "hold" rating on the stock.

Many investors also wonder what impact McDonald's Corp's (MCD.N) coffee roll-out is having on Starbucks sales.

NET PROFIT DROPS

Net income for its fiscal second quarter, ended March 29, fell 77 percent to $25 million, or 3 cents per share. A year earlier, the Seattle-based company reported a profit of $108.7 million, or 15 cents per share.

Excluding restructuring charges, Starbucks earned 16 cents a share in the most recent quarter, compared with the 15 cents a share analysts, on average, expected, according to Reuters Estimates.