SBUX – BETTER THAN MY EXPECTATIONS

11/05/09 04:49PM EST

Positive takeaways following my initial read through of 4Q09 results:

Earnings came in at $0.24 per share, higher than both my $0.22 EPS estimate and the street at $0.21.

U.S. same-store sales growth improved to -1% from -6% in Q3, better than my -3% estimate.  Trends continued to improve on a 2-year average basis as well.

Consolidated same-store sales came in -1% relative to -5% in Q3.

SBUX raised its fiscal 2010 EPS guidance range to up 15%-20% from its prior range of 13%-18%.

This guidance assumes “modestly positive comparable store sales.”  As I outlined yesterday in my earnings preview, I thought guidance above -1% would be a positive catalyst for the stock.

Management also raised its margin growth guidance for the U.S. to up 200-250 bps, from its initial expectation of 150-200 bps of improvement.

SBUX expects to generate free cash flow of $900 million in fiscal 2010, in line with its fiscal 2009 level (came in above the company ‘s free cash flow goal of $500 million).

The company exceeded its Q4 cost savings initiatives of $180 million in the quarter by $30 million.

U.S. operating margins of 12% in Q4 were in line with my expectations, up 760 bps YOY.

International operating margins grew 470 bps YOY to 8.8%.

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