By Julie Jargon
Starbucks Corp. reported Thursday a sharp jump in quarterly
sales and profits driven in part by digital initiatives and new
menu offerings.
Global same-store sales for the cafe giant rose 7% in the
quarter that ended June 28--driven by a 4% increase in customer
visits--beating analysts' expectations of a 6.2% increase. In its
biggest division, the Americas, Starbucks posted 8% same-store
sales growth, beating estimates of 6.3%. Total net profit in the
period jumped 22%.
In the U.S., digital initiatives are helping attract new
customers, Chief Executive Howard Schultz said in an interview. The
number of active users in the company's loyalty program in the U.S.
grew 28% from a year ago to 10.4 million, and 20% of U.S.
transactions now are made using mobile devices, up from 9% two
years ago.
The growth of the company's loyalty program "continues to be our
most important business driver," Mr. Schultz said.
Starbucks has been teaming up with other companies to grow its
customer base, including ride-sharing service Lyft Inc. and
music-streaming service Spotify. Those companies are offering their
customers a chance to earn Starbucks "stars" that can be redeemed
at Starbucks cafes.
Starbucks customers long have been able to pay for purchases
with their mobile devices, but in December the company began
testing an app that allows customers to order and pay for their
drinks ahead of time so that they can bypass store lines. Chief
Operating Officer Kevin Johnson declined to provide specific usage
details for that mobile service, but said adoption of the
technology has increased with every new market to which it has been
introduced.
The mobile ordering-and-pay service is now available at 4,000
company-operated stores in the U.S. Starbucks plans to expand it to
all 7,400 of its U.S. company-owned stores before the winter
holidays. Mr. Schultz said the company plans to eventually expand
mobile order and pay overseas.
The app has "helped us increase transactions and handle demand
during peak hours," Mr. Johnson said in an interview. But so far,
he said, the app hasn't resulted in higher spending per
transaction, as some analysts have suggested.
Chief Financial Officer Scott Maw said he expects the app to
boost the average check size when a feature starts later this year
that suggests additional purchases to users.
Total revenue in the latest quarter rose 18% from a year earlier
to $4.9 billion, while net profit rose to $627 million, or $0.41 a
share, from $513 million, or $0.34 a share, a year ago. Both
measures were in line with expectations. Results were helped by
Starbucks' taking full ownership of its former joint venture in
Japan late last year.
Starbucks shares, which already had gained about 38% this year,
rose 3.4% in after-hours trading Thursday following the
results.
New breakfast sandwiches, better staffing and procedures
intended to improve workers' efficiency helped increase sales
during the morning peak, even before mobile order and pay became
available, Mr. Maw said.
Starbucks also has been trying to give customers reasons to come
in during off-peak hours, with new bistro boxes, snacks, iced tea
drinks and Frappuccinos aimed at afternoon and evening visits. Food
sales in the U.S. grew nearly 20% in the quarter versus the prior
year.
Starbucks also announced on Thursday that it and PepsiCo Inc.
reached an agreement for the marketing, sales and distribution of
Starbucks ready-to-drink coffee and energy products in Latin
America.
Starbucks said it expects fourth-quarter earnings per share of
$0.38 or $0.39 and full year earnings per share of $1.77 or $1.78,
a slight change from its previous guidance of $1.77 to $1.79. The
company said it now expects full year revenue growth to be in the
low end of its previously stated 16% to 18% range. Global
same-store sales growth for the year is still expected to be in the
mid-single digits.
Also on Thursday, Starbucks announced that its board authorized
it to repurchase another 50 million shares of its stock, in
addition to the 11 million shares that remained available for
repurchase under an existing authorization.
Write to Julie Jargon at julie.jargon@wsj.com
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