Starbucks, Amazon, Microsoft all post strong quarterly profits

FRIDAY, APRIL 25, 2014

Three flagship Seattle-area businesses – Starbucks, Amazon and Microsoft – reported strong profits during the most recent quarter, according to their financial reports.

Starbucks Corp. reported a stronger quarterly profit Thursday as global sales at established locations rose 6 percent, including in the U.S. market. Operating margin improved as a result of lower costs for ingredients, and the company raised its profit outlook for the year.

The coffee chain has continued to report healthy sales gains, even as others in the fast-food sector have struggled. Its strategies have included price hikes, getting people to sign up for its loyalty program and the rollout of an array of new items, including breakfast sandwiches, salads and bottled juices. Later this year, it plans to introduce its made-to-order Fizzio soda offerings at 3,000 U.S. locations.

Starbucks Chief Operating Officer Troy Alstead said that after seeing through the rollout of its new La Boulange baked goods this year, the company will move on to refining its lunch options, with some items already being tested. That would help convince customers to spend even more when they visit, or go to Starbucks during hours they normally wouldn’t.

The company noted that Starbucks delivered stronger sales in the quarter despite severe weather, which has been cited by companies including Dunkin’ Brands and McDonald’s Corp. for weak sales. Alstead downplayed a recent hiccup in its rollout of La Boulange baked goods, when the company brought back pumpkin and lemon loaves after customers complained.

Amazon Inc.’s first-quarter profit rose 18 percent as shoppers continued to flock to the online megaretailer to buy goods.

Still, the company forecasts an operating loss for the second quarter as it continues to invest heavily both internationally and at home.

Amazon has long focused on spending the money it makes to grow its business and expand into new areas, from movie streaming to e-readers and even grocery delivery. On Wednesday, it launched Prime Pantry, a grocery delivery service for Prime members. And earlier this month, it introduced its first set-top video streaming box called Amazon Fire that sells for $99. Rumors of an Amazon phone have been swirling as well, but nothing has materialized.

“We get our energy from inventing on behalf of customers, and 2014 is off to a kinetic start,” CEO Jeff Bezos said.

While investors have largely given Amazon a pass for focusing on growth and investing rather than turning a strong profit, Amazon has been making some moves lately to strengthen its bottom line. It boosted its Prime 2-day shipping membership program annual fee from $79 to $99 in March to offset higher shipping costs.

Results from Microsoft Corp.’s first quarterly earnings released under new CEO Satya Nadella offered fresh justification for his focus on cloud computing.

The Redmond, Wash., firm on Thursday posted net income and revenue that beat Wall Street expectations.

Factoring out special items from a year ago, revenue in the January-March quarter grew 8 percent.

Nadella, who replaced longtime CEO Steve Ballmer in February, touted the fact that revenue from cloud-based Office 365 productivity software more than doubled from commercial customers, while revenue from its cloud computing service Azure grew more than 150 percent.

“This is gold rush time in being able to capitalize on the opportunity,” Nadella said.

The company also benefited from the end of support for its 13-year-old operating system, Windows XP, on April 8. Many companies paid to upgrade computers en masse to make sure they’d continue to receive support from Microsoft, including anti-virus updates.

That transition – which contributed to a 4 percent increase in Windows revenue – helped Microsoft buck a 2 to 4 percent decline in personal computer shipments in the quarter as estimated by market research firms Gartner and IDC.


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