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Last Updated: Wednesday, 27 April, 2005, 22:30 GMT 23:30 UK
Starbucks higher on new outlets
Starbucks Frappuccino
Frappuccinos got more expensive in October, boosting margins
US coffee chain Starbucks saw its profits for the three months to 3 April rise on the popularity of a new chocolate drink and more cafe openings.

Its profits soared 27% to $100.5m (52.8m), up from $78.9m a year ago.

Sales beat expectations, helped by 669 new store openings in the past 12 months. Second-quarter sales rose 22% to $1.52bn from the year-ago quarter.

The company raised its forecast for the year and Starbucks shares rose $1.29, or 2.8%, to $48 in after-hours trading.

China connection

We take a long-term view on coffee... we probably have inventory for 20 months
James Donald, chief executive officer of Starbucks

Excluding an extra week in 2004, analysts expect revenue for the year to grow about 20% to $6.38bn, from last year's $5.29bn

The company plans to open about 1,500 new stores in its 2005 financial year, with 550 new cafes and 525 licensed cafes opening in the US alone.

It also plans to expand in China where it already has 300 cafes.

Starbucks, not known for low prices, increased its operating margins by raising prices on speciality drinks like cappuccinos and frappuccinos in October.

It added new caramel drinks and desserts as well as its Chantico chocolate drink.

The company said it was not worried about high futures prices for coffee, implying that coffee bean costs will go up.

"We take a long-term view on coffee. We probably have inventory for 20 months," said James Donald, chief executive officer of Starbucks.

He told Bloomberg TV he was "mindful of the competition" from companies like McDonald's, which are trying to improve their coffee.

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