By Ilan Brat And Tess Stynes
Starbucks Corp. tapped a longtime technology-industry leader as
its No. 2 executive, reflecting the coffee giant's increasing
emphasis on digital payments and other innovations to drive its
growth.
Kevin Johnson, a former chief executive at Juniper Networks Inc.
and 16-year veteran of Microsoft Corp., will take over as Starbucks
president and chief operating officer on March 1. The company also
reported an 82% jump in earnings in its latest quarter.
Mr. Johnson, who has been a Starbucks board member since 2009,
will succeed current COO Troy Alstead, who Starbucks earlier this
month said is taking an indefinite leave of absence to spend time
with his family after 23 years at the company.
Starbucks Chairman and CEO Howard Schultz will relinquish the
title of president to the 54-year-old Mr. Johnson. Mr. Schultz, 61,
said the appointment wasn't the result of a succession plan.
Mr. Schultz said that as a director Mr. Johnson long had engaged
with the company's digital operations, and in his new position he
would more directly oversee those efforts as well as supervising
information technology and supply chain operations.
"We are so fortunate in a sense to have a No. 1 draft pick" in
Mr. Johnson, Mr. Schultz said on call with analysts.
Starbucks executives have said that the company must adapt to
the shift to online purchasing for everything from food to clothing
by finding new digital strategies to help consumers engage with the
Starbucks brand and buy its products. The company has been ramping
up its use of digital tools like mobile-payment platforms.
In an effort to boost traffic during the holiday season,
Starbucks offered a chance to win free Starbucks coffee drinks for
30 years to customers who used gift cards. And the company began a
pilot project in December that allows customers to place orders on
their mobile phones and pick them up at about 150 Starbucks outlets
in Portland, Ore.
The results from the first two months of the mobile-ordering
project are encouraging, said Chief Financial Officer Scott Maw,
and Starbucks plans to expand it to about 600 outlets in the
Northwest. The company hopes the mobile-ordering initiative will
help boost sales growth at Starbucks outlets much like pairing a
drive-thru with a traditional order-counter store, said Mr. Maw.
"We believe giving (customers) choice actually drives more
traffic," Mr. Maw said. "I think that's what we're going to see in
mobile order and pay."
Starbucks's digital initiatives helped drive fiscal
first-quarter earnings, Mr. Schultz said. For the period ended Dec.
28, Starbucks reported a profit of $983.1 million, or $1.30 a
share, up from $540.7 million, or 71 cents a share, a year earlier.
Excluding a gain related to its Japan Starbucks deals, earnings
were 80 cents a share. The company expected per-share profit of 79
cents to 81 cents.
Revenue increased 13% to $4.8 billion, matching analysts'
expectations.
Sales at company-operated stores in the U.S. open at least 13
months rose 5% during the latest quarter as traffic grew by 2% and
the size of the average ticket increased 3%. Starbucks's comparable
sales world-wide also rose 5%.
The amount of dollars loaded onto Starbucks cards jumped 17% to
$1.6 billion. Starbucks said one in seven Americans received a
Starbucks gift card in the holiday quarter, up from one in eight a
year ago.
Starbucks shares rose about 4% in after-hours trading on
Thursday following the news, after having risen 1.8% in 4 p.m.
trading on the Nasdaq Stock Market to $82.74 each.
Longer term, Starbucks's strategy to improve its sales include
efforts to draw in customers later in the day with other
food-and-drink offerings. It also plans to add more locations
domestically and abroad, including new categories such as tea
stores.
The company reaffirmed many of its financial targets for the
current fiscal year but tweaked its per-share earnings forecast.
For the year ending in September, Starbucks raised the lower end of
its per-share earnings estimate by a penny and now expects a range
between $3.09 and $3.13.
For the quarter ending in March, it is forecasting per-share
earnings of 64 cents to 65 cents. Analysts polled by Thomson
Reuters expected per-share profit of 68 cents.
Write to Ilan Brat at ilan.brat@wsj.com and Tess Stynes at
tess.stynes@wsj.com
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