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Starbucks profit jumps 18%

BY Marianne Wilson

Seattle — Starbucks Corp.’s net income surged a better-than-expected 18% in its fiscal second quarter, as its store traffic increased in most parts of the world. The coffee giant also raised its forecast for the year on the results and said it was accelerating its growth.

For the three months ended April 1, the company earned $309.9 million, compared with a profit of $261.6 million in the year-ago quarter. Revenue rose to $3.2 billion, up from $2.79 billion a year ago. Same-store sales increased 7%.

Starbucks’ same-store sales were strongest in China and Asia Pacific, where sales rose 18%. Same-store sales were up 8% in the Americas but down 1% in the region encompassing Europe, Middle East, Russia and Africa. Starbucks executives attributed the weakness to ongoing economic turmoil in parts of Europe. The company said it is taking similar measures in those markets as it did when it was struggling in the United States, such as introducing loyalty programs and improving service to boost sales. It also is continuing to adapt its offerings to local tastes.

"I will tell you unequivocally that we will turn the European business around in the same way we turned the U.S. business around," company founder and CEO Howard Schultz said in a conference call with investors.

Still, he added that the situation is "very, very tough" and varies greatly by region.

Starbucks, which has more than 17,000 stores globally, said it will accelerate new store growth this year to about 1,000 net new stores around the world. The total includes approximately 500 net new stores in the Americas, with licensed stores comprising approximately one-half of the new additions.

In its most recent quarter, Starbucks opened its 3,000th store in the China/Asia Pacific segment and first store in Norway.

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Walmart expands conservation efforts

BY CSA STAFF

BENTONVILLE, Ark. — Walmart is working hard to improve its image with its latest announcement that its Acres for America program is conserving an additional 300 acres of land to protect and restore wildlife habitats in the heart of U.S. cities, including Bridgeport, Chicago, Portland, San Diego, and Washington, D.C.

"Walmart is proud to help protect and restore important natural habitats in communities that we serve," says Jennifer May-Brust, Walmart VP realty supplier management and compliance. "The Acres for America program exemplifies our commitment to sustainable development as it directly links our land use to land preservation. Our urban restoration projects often times involve volunteers, including our customers and associates, and provide a way for people to connect with and enjoy nature right in their backyard."

In 2011, Walmart expanded its Acres for America investments to include urban conservation projects in New York, Washington, D.C., Chicago and Los Angeles. The awards announced this week will support additional projects in Bridgeport, Chicago, Portland, San Diego, and Washington, D.C.involve community volunteers in enhancing habitat quality in the wetland by restoring native vegetation, which will benefit fish and bird populations in the Tualatin River system.

The 2012 Acres for America urban projects are:

Pequonnock River Fish Passage, Bridgeport, Conn.

Partner: Connecticut Fund for the Environment/Save the Sound

This project in the heart of Bridgeport will install a fish ladder in the Pequonnock River, providing safe passage for river herring, trout, sunfish, eel and perch through a highly urbanized area. It will mitigate the damaging effects of a highway construction project that paved a part of the stream channel.

Eggers Grove Marsh Restoration, Chicago, Ill.

Partner: The Field Museum/Forest Preserve District of Cook County

Volunteers will remove invasive species, sow native plant seeds and maintain trails in Eggers Grove, a 205-acre preserve on the Illinois-Indiana border. The marsh and woodland along Lake Michigan is a rare example of the region’s natural ecosystem and is an important habitat for migratory and nesting birds.

Nyberg Creek Wetland Restoration, Portland, Ore.

Partner: Wetlands Conservancy

The Nyberg Creek Wetland lies along I-5, the major transportation corridor in Oregon. This 13-acre project will involve community volunteers in enhancing habitat quality in the wetland by restoring native vegetation, which will benefit fish and bird populations in the Tualatin River system.

Otay Delta Habitat Restoration, San Diego, Calif.

Partner: River Partners

Located near several trail systems and the Bayshore Bikeway, this project focuses on 65 acres where the Otay River meets San Diego Bay. Community, state, federal and local agencies will collaborate on a restoration of the area that will benefit local residents and four endangered species of birds.

In addition to these four projects, Walmart will award an additional grant to support the Anacostia River Revitalization Fund in Washington, D.C. The Fund supports projects that improve water quality, benefit public health and local economic development, and provide outdoor recreation and volunteer opportunities in the nation’s capital. Partners include the Washington, D.C. Department of the Environment and federal agencies.

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Safeway CEO to analysts: Grocer is not bracing for a buyout

BY CSA STAFF

PLEASANTON, Calif. — Recent events, which have driven Wall Street analysts to speculate that Safeway is a buyout target, are not interrelated, Safeway chairman and CEO Steve Burd assured analysts Thursday morning during the grocer’s first-quarter conference call.

Analysts pointed to the recent promotion of Robert Edwards to president of the company, an uptick in Safeway’s stock buyback activity, the releasing of sales, earning details for Safeway’s Blackhawk Network (a gift card distribution network) and the implementation of a "double-trigger" option, where top executives would be required to stay with the company through a buyout to qualify for fully vested payouts — suggesting that each instance were like bread crumbs all leading to the only logical conclusion that Safeway is gearing for a corporate buyout.

"Everything that you described — even though you pieced them together and tried to do some sort of connection of dots — is happening [as part of a] normal course," Burd said.

During first quarter 2012, Safeway purchased 46 million shares of its common stock at an average cost of $21.70 per share and a total cost of $1 billion (including commissions). "We really believe in our ability to grow top-line sales," Burd said. "It just made so much sense to get aggressive on that stock buyback."

Regarding the double-trigger mechanism, Burd said, "no one should interpret that we did that because we expect a change in control. It’s really just a migration toward increasing better governance conditions."

Burd suggested Edwards’ promotion to president could be interpreted as a sound succession strategy. "Let’s also consider the fact that I’m 62 [years old] and while I’m not planning to go anywhere soon, it does make sense to create some logical succession opportunities," Burd said.

And Burd said shareholders have been requesting details on Blackhawk operations for years. "One way to give people some insight into its independent value was to provide a lot more information so we elected for the first time to show the EBITDA performance of Blackhawk. As you know, it’s a great story," he said.

"None of this is preparation for some other event. We think that all of this is pretty natural behavior," Burd concluded.

Safeway’s identical-store sales (excluding fuel) were flat for the quarter, while total sales increased 2.4% to $10 billion in the first quarter of 2012, primarily due to higher fuel sales, higher revenue from Blackhawk and additional sales from new stores. "We have been effective in passing along inflation and we’ve gotten adequate support from the vendor community," Burd told analysts Thursday morning. "The first quarter looks very much like how we expect the year to be."

"Strong cost controls helped us meet earnings expectations despite a shift in the New Year’s holiday, weather patterns and high gasoline prices which dampened sales," Burd said. "In addition, operating profit in the quarter would have been essentially the same as last year without the holiday shift. In the last eight weeks, identical-store sales have been running at 1%, and we continue to believe sales will grow as our new marketing initiatives take hold."

Meanwhile, Safeway expects to complete its divestiture of Genuardi’s stores in the second quarter. In January, Safeway announced the planned sale or closure of 27 Genuardi’s stores, including the sale of 16 Genuardi’s stores to Giant Food Stores. Safeway closed three of the Genuardi’s stores and expects to complete the disposition of the remaining 24 Genuardi’s stores in 2012.

Safeway’s guidance for 2012 remains at $1.90 to $2.10 per diluted share, nonfuel indentical sales growth of 1% to 2%, operating profit margin change, excluding fuel, of negative 5 basis points to 5 basis points, and free cash flow of $850 million to $950 million.

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