(Corrects degree of sales forecast cut in para 7 to ... "by 2.5 percent"..., not "by 4 percent")
TOKYO, Oct 15 (Reuters) - Starbucks Coffee Japan raised its full-year profit forecast by 50 percent as cost cutting and higher sales of locally developed drinks helped it boost margins even in the face of slumping sales.
The company, which is 40 percent owned by the Seattle-based coffee chain giant Starbucks Corp, has been revamping its cost structure since last year, when the world's second-largest economy slipped into recession.
Starbucks Japan, which runs 875 stores, said profits have been boosted by strong sales of items developed specifically for the local market, such as Coffee Jelly Frappuccino and Creme Brulee Macchiato.
"In addition to the fact that locally developed menus fit our customers here, by developing our own items, we can better control costs and the level of raw material stocks," said Norio Adachi, a spokesman at Starbucks Japan.
In contrast, products that are common globally require buying ingredients in bulk and often far in advance of sales. For the company, this raises the risk of a build-up of inventories if demand does not materialise as planned.
It now forecasts a net profit of 2.7 billion yen ($30 million) for the year to March, up 50 percent from its prior estimate and roughly in line with the average forecast of 2.8 billion yen from two analysts polled by Thomson Reuters I/B/E/S.
But the company lowered its annual revenue forecast by 2.5 percent to 94.6 billion yen and cut its estimate for same-store sales in the October-March second-half to a decline of 7 percent from a fall of 5 percent.
In addition to sluggish consumer spending, Starbucks Japan faces tough competition from Tully's Coffee Japan, Doutor Nichires Holdings and McDonald's Holdings Co Japan. ($1=89.43 Yen) (Reporting by Taiga Uranaka; Editing by Joseph Radford)