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Starbucks App Issue Not Likely Affecting Sales: Analyst


The coffee giant is also set to report first-quarter numbers this week.

A report citing security concerns may have prompted Starbucks Corporation (NASDAQ:SBUX) to launch an updated mobile app late last week, but the issue seems unlikely to impact sales, says one analyst.

Although Starbucks shares have enjoyed a 34% bump in the past year, early 2014 has not come without challenges. Last week, Starbucks released an updated version of its mobile app for Apple iOS (NASDAQ:AAPL) with "extra layers of protection" after the company said a research report identified "theoretical vulnerabilities" in the previous version of the app; it reportedly left some personal information vulnerable if a customer's iPhone were to be physically stolen and hacked.

The Starbucks app, which allows customers to scan their smartphone to pay, also works as a reward program, store locator, and menu, and is one of the top free apps on iTunes.

In a statement, Starbucks Chief Information Officer Curt Garner said, "There is no indication that any customer has been impacted by this or that any information has been compromised. Regardless, we take these types of concerns seriously and have added several safeguards to protect the information you share with us."

ITG Investment Research analyst Steve West tells Minyanville that he doesn't think the app issue is affecting sales at all.

But, more broadly, with Starbucks also set to weigh in with its fiscal first-quarter numbers after Thursday's market close, West says he is estimating revenue from the company's Americas region and same-store sales comps to come in approximately 1.5% below Street estimates, based on his firm's proprietary consumer panel data.

"Sales trends started slowing in late Sept.and have continued to slow since," he says. MarketWatch reports that ITG is expecting Starbucks to post same-store sales growth of 5% to 6% for company-owned stores for the quarter ended in December 2013.

In its fiscal 2014 outlook, the company said it is targeting Q1 earnings per share in the range of $0.67 to $0.69, while analysts are reportedly estimating earnings per share to come in at $0.69, up from the year-ago earnings per share of $0.57.

Meanwhile, analysts at Zacks Equity Research are expecting Starbucks to beat estimates in Q1.

"Starbucks has been seeing strong traffic trends in the US due to innovation, enhanced food offerings, and its successful loyalty program. We believe the comps will continue to grow in the US driven by innovative beverages (including handcrafted carbonated beverages), enhanced food offerings, La Boulange's national expansion, and introduction of Teavana tea into stores," say Zacks analysts.

Last quarter, Starbucks reported earnings per share of $0.63, beating estimates and representing a 37% increase in the same quarter of 2012. For the full fiscal 2013, the company posted a 12% increase in total net revenues, and a 26% jump in earnings per share, to $2.26 per share. More than 1,700 new Starbucks stores also opened in fiscal 2013.

As for this fiscal year, Starbucks is targeting revenue growth upwards of 10%, earnings per share in the range of $2.55 to $2.65 per share, and approximately 1,500 new stores, including 600 in the Americas and 750 in Asia.

Twitter: @helenbnichols
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