Skift Take
Once again, Starbucks quieted naysayers wondering if the company can withstand the pressure from market rivals. Long-term success is now pinned to its ever-growing digital prowess.
— Danni Santana
Starbucks reported fiscal second quarter earnings Thursday that pleased investors as it continues to fend off pressure from local rivals in its two largest markets — the U.S. and China.
The Seattle-based chain remains on a mission to rapidly grow its loyalty program and the number of cities where it offers delivery via third parties, CEO Kevin Johnson told analysts. Both digital initiatives represent major sales boost opportunities for the company going forward, it said.
Last month, the coffee maker introduced a new version of its heralded rewards program, which caters better to consumers that enjoy spending points or “stars” as they earn them. The program’s remodel is also intended to entice more customers to sign up. Roughly 41 percent of Starbucks’ U.S. store sales in the second quarter came from active loyalty members, according to Chief Operating Officer Rosalind Brewer. Total Membership for Starbucks Rewards increased by 13 percent in the quarter to 16.8 million.
“The program and the vision for the program is to really provide more access to potential members,” said Brewer, adding that current users can also redeem points across more tiers and items like merchandise and at-home coffee. “it’s a much broader expanded program for us,” she added.
On the delivery front, Starbucks Delivers in the U.S. grew to almost 1,600 stores in seven cities last quarter through Uber Eats. Delivery in China, powered by e-commerce giant Alibaba, also expanded to 2,100 stores across 35 cities. The coffee giant plans to make delivery available in 3,000 stores across 50 cities across the country by the end of the year.
Earnings Results
Starbucks reported 3 percent global comparable-store sales growth in its second quarter, fueled by higher average tickets in the Americas and China. Revenue additionally increased 9 percent over the period to $703 million, according to the company.
Company earnings were additionally amplified by the chain’s commitment to increasing its store footprint outside of the U.S. in the quarter. Overall global net store growth increased 7 percent, led by 17 percent growth in China, or 553 new stores. Starbucks has been involved in an ongoing arms race with Chinese upstart Luckin Coffee in recent months to see which company can grow the fastest in the region.
“This performance is especially noteworthy when you consider the intensity of competition from discounting in China as well as our aggressive pace of new store development,” said Johnson, reiterating that the company will reach 6,000 net stores in China by 2022. “This development program is fundamental to our strategy of building the category-leading concept in the world’s fastest-growing major economy.”
