Starbucks Corp ground out an expectations-topping profit on Tuesday as the coffee chain began reaping rewards from slashing costs and closing stores, and its shares gained 9.9 percent.

Starbucks started the restructuring after Chief Executive Howard Schultz retook the helm in early 2008, and the latest results may finally signal a turn-around for a company that hurt its own profits by building too many stores.

It seems like everything is really starting to click for them in a way that we haven't seen in over 18 months, said William Blair & Co analyst Sharon Zackfia, who added that she saw improvement across the board, including on profitability.

Net income for its fiscal third quarter ended June 28 was $151.5 million, or 20 cents per share. A year earlier, Starbucks reported a net loss of $6.7 million, or 1 cent per share -- its first quarterly net loss as a public company.

Excluding restructuring charges, Starbucks earned 24 cents a share in the latest quarter, besting analysts' average forecast of 19 cents, according to Reuters Estimates.

The results were helped by cost cuts, eliminating unproductive stores, lower tax rates and higher interest income, Edward Jones analyst Jack Russo said.

One quarter is not a trend, but to me it could be perceived as an inflection point by investors who want to get in early, said Greg Schroeder, analyst at Wisco Research LLC, an independent research firm.

For fiscal 2010, Starbucks expects earnings per share to grow 13 to 18 percent, excluding restructuring charges, which equates to earnings of 84 to 89 cents per share, RBC Capital Markets analyst Larry Miller said.

Chief Financial Officer Troy Alstead, in an interview with Reuters Television, forecast fourth-quarter earnings of 19 to 20 cents per share, excluding items.

Russo, of Edward Jones, said the forecast for the current quarter was roughly in line with expectations.

The guidance for next year was a little a bit above where most consensus estimates were, but not that much, Russo said.

THE MCDONALD'S EFFECT

As Starbucks scrambled to shrink its overbuilt U.S. store base, rivals like McDonald's Corp and Dunkin' Donuts targeted its customers with lattes and other fancy coffee drinks.

Despite significant concerns among some analysts, Starbucks is not seeing its market share dented by lower-cost rivals such as fast-food giant McDonald's, Chief Executive Howard Schultz said on a conference call with analysts.

The advertising blitz around the official launch of coffee drinks at McDonald's created unprecedented awareness for the coffee category overall and has actually had a positive result on Starbucks' business, Schultz said.

But sales growth at Starbucks and many other restaurant chains has remained elusive during a long recession that is expected to eventually send U.S. unemployment over 10 percent.

While executives said same-store sales improved each month during the third quarter, Alstead declined to say when sales at established restaurants would turn positive compared with the previous year, adding that he expects the economy will take a long time to recover.

We're not prepared to make that projection yet ... it's still a very, very uncertain economy. Consumers are having a difficult time, unemployment continues to rise, Alstead told Reuters Television.

During the third quarter, total revenue fell to $2.4 billion from $2.6 billion the year earlier.

Starbucks global same-store sales were down 5 percent after sales at restaurants open at least 13 months dropped 6 percent in the United States and slipped 2 percent internationally.

The chain has selectively lowered prices to attract and retain consumers in the lingering recession. It also plans to introduce its new Via instant coffee nationwide in the coming months.

Starbucks shares jumped $1.46 to $16.15 after closing down 1.5 percent at $14.69 in the Nasdaq regular session.

(Reporting by Lisa Baertlein; Additional reporting by Martinne Geller and Carrie Lee in New York; Editing by Bernard Orr, Gary Hill)

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