Starbucks loyalty cards load up profits
Starbucks customers loaded an unprecedented $1 billion on loyalty cards over the holidays, a figure CEO Howard Schultz called “stunning and almost unbelievable.” The coffee-shop chain also posted strong first-quarter earnings.
Seattle Times business reporter
Starbucks customers loaded an unprecedented $1 billion on their loyalty cards in the quarter ended Dec. 30.
“It was stunning and almost unbelievable,” CEO Howard Schultz told analysts on a conference call Thursday after the company released its quarterly financial report.
That’s 25 percent more than the previous year and includes new card customers, whose numbers grew by 1.4 million in the quarter, up 86 percent from a year earlier.
“It’s not that these customers didn’t know where to find us last year; it’s that we’re more deeply connected and even more relevant to them than any other time in our history,” Schultz said.
Starbucks card payments account for a quarter of its U.S. in-store transactions. The company does not disclose how many total cardholders it has.
In its earnings report Thursday, Starbucks said profit rose 13 percent to $432.2 million, or 57 cents a share, in line with Wall Street’s expectations. Revenues climbed 11 percent to $3.8 billion.
During the quarter, the first of its fiscal year, the company opened its first stores in India and acquired the Teavana tea-shop chain.
It opened 212 stores during the quarter, bringing its worldwide total to 18,278.
The report showed that growth at stores open at least a year has leveled off a bit after Starbucks emerged from the recession with strong sales-growth figures. Growth of so-called same-store salesfell from 9 percent to 7 percent in the U.S., driven by a decline in traffic-growth rates from 8 percent to 4 percent.
Same-store-sales growth is a closely watched gauge of earnings momentum. It keeps sales bursts at newly opened stores from masking underlying problems.
Before the recession, Starbucks regularly posted same-store sales growth of 7 percent and higher. It dipped into quarterly declines before roaring out of the slump over the past couple of years with growth of 7 percent to 9 percent.
That makes the companywide 6 percent growth of the past three quarters seem lackluster, but it may be the new normal.
“I’m delighted with 7 percent comparable-store growth in the Americas,” Cliff Burrows, president of Starbucks’ shops in the Americas, said in an interview after the conference call.
Starbucks plans to open about 1,300 stores in the fiscal year, which began Oct. 1. About 600 of them are expected in the Americas.
About 60 percent of its new U.S. stores will be drive-thrus, Schultz said on Thursday’s call.
He also said Starbucks is “deeply, deeply committed to becoming the leader in (the single-serve coffee) space domestically and internationally.”
That market is dominated now in the United States by Green Mountain Coffee Roasters and its single-serve Keurig machines. In Europe, Nestle’s Nespresso single-serve machine is the leader.
Starbucks is tackling that market by selling K-Cups for Keurig machines, its own machine called Verismo and the instant coffee Via in single-serve packets.
Starbucks shares climbed 11 cents to $54.57 in regular trading Thursday. Earnings were announced following the bell, after which the stock rose $1.18 to $55.75.
Melissa Allison: 206-464-3312 or firstname.lastname@example.org. Twitter @AllisonSeattle.