News

Starbucks: Happy hour, focus on improving digital channels responsible for solid Q4 numbers

November 2, 2018

Starbucks Corporation is enjoying a high this week, and it's not just because of the caffeine. The chain reported Thursday that Q4 global comparable store sales increased 3 percent, driven by a 4 percent increase in both average ticket and the Americas and U.S. comparable store sales.

"Starbucks record Q4 performance reflected meaningful improvement in virtually every critical operating metric compared to Q3," CEO Kevin Johnson said Thursday during an earnings call. "As we enter fiscal 2019, we are executing against a clear growth agenda, with a focus on our long-term growth markets of the U.S. and China."

He said the company improved sequential results in the Americas and China/Asia Pacific segments.

"I'm pleased to highlight that we posted a 4 percent comp in our largest market, the U.S., which was our strongest comp in the past five quarters," he said. "China, our second largest and fastest growing market, drove double-digit growth in total transactions when combining new store growth and total comp sales with the latter improving sequentially to a plus 1 percent year-on-year growth.

The digital experience

Starbucks' focus on improving the customer experience is paying off, COO Rosalind G. Brewer said on the call.

"Last quarter, our stores with drive-thru well outperformed our cafe comp," she said. "And from a U.S. portfolio strategy, more than 80 percent of our new stores in FY 2018 were drive-thru, and this format will be a continued focus into FY 2019."

Additionally, drive-thru, out-the-window and mobile order and pay combined grew to more than 50 percent of the way customers are ordering, up more than 10 percentage points in just two years.

"And although we don't often report on our U.S. licensed store performance, it's worth noting that revenue and operating income grew at double digits in the quarter, the strongest performance we've seen in nearly three years," Brewer said.

Going forward, she said, the company will continue to drive in-store improvements and tangible changes that put customers first.

"We continued to advance our goal of acquiring digital relationships that will allow us to further build customer engagement in the future," she said. "For the quarter, active (Starbucks Rewards) members grew to 15.3 million, up 15 percent versus last year and the strongest growth rate in seven quarters. These customers continue to drive nearly 40 percent of tender in the U.S. with mobile order and pay representing 14 percent of transactions.

Additionally, the chain grew the number of digitally registered customers from 6 million at the end of Q3 to 10 million at the end of Q4.

"We're engaging with these customers directly via email with offers like Happy Hour. But as we get to know who they are and what they want, we'll tailor specific offers with the goal of converting them to our SR program," she said. "We also continue to look for ways to extend the Starbucks digital experience outside our stores as well. We started testing delivery in Miami this summer and the results are promising."

Q4 Fiscal 2018 highlights:

• Global comparable store sales increased 3 percent, driven by a 4 percent increase in average ticket.
  • Americas and U.S. comparable store sales increased 4 percent.
  • CAP and China comparable store sales increased 1 percent.
• Consolidated net revenues of $6.3 billion, up 11 percent over the prior year.
  • Adjusted for an approximately 2 percent net benefit from streamline-driven activities, and approximately 1 percent headwind from unfavorable foreign currency translation, consolidated net revenues grew 9 percent over the prior year
  • Streamline-driven activities include the consolidation of the acquired East China business, partially offset by licensing CPG and foodservice businesses to Nestle following the close of the deal on Aug. 26, 2018, Teavana mall store closures, and the conversion of certain international retail operations from company-owned to licensed models.

Fiscal Year 2018 highlights:

• Global comparable store sales increased 2 percent, driven by a 3 percent increase in average ticket.
• Americas and U.S. comparable store sales increased 2 percent.
• CAP comparable store sales increased 1 percent.
• China comparable store sales increased 2 percent.
• Consolidated net revenues of $24.7 billion, up 10 percent over the prior year.