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02/02/2022

Starbucks Earnings: From Coffee Sit-Down to Caffeine Pickup?

Liz Dominguez
Managing Editor
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Starbucks

Starbucks’ recent earnings call provides a glimpse that not even brands known for their in-person, community-driven atmosphere can bypass the winds of change brought on by an ongoing health crisis. 

According to the company, the recent omicron variant amplified staffing shortages at the company’s supply chain, leading to increased distribution and transportation costs. 

[See more: Agility Isn’t Enough: Supply Chain Survival Strategies]

Amid these inflation concerns, rising costs, and worker shortages, the coffee giant fell short on its quarterly earnings predictions, reporting revenue of $8.05 billion for the first quarter ended Jan. 2, as well as 72 cents adjusted for earnings per share. 

A Focus On Digital Experiences

Segments of the business that are keeping the coffee brewing hot despite these challenges, however, are socially distant-friendly initiatives now common across the retail space: mobile order and pay, drive-thru, and delivery services.

“Between MOP, drive-thru and delivery, that accounted for over 70% of our sales in the quarter,” said John Culver, Starbucks group president of North America and chief operating officer, during the call. 

He added that the brand would continue to leverage these offerings to “meet the changing customer needs to drive transaction growth going forward.”

While the company said it continues to provide a safe in-store experience amid COVID, taking temperatures and enforcing mask wearing, continued investment into its digital offerings have supplied Starbucks with additional growth opportunities. 

According to the earnings call, digital ordering grew to a Q1 record of 38% of sales. 

“This is a result of our work over the past year to expand digital customer relationships, introduce new beverage offerings, and provide a safe, familiar, and convenient experience for our customers,” said Kevin Johnson, president and chief executive officer of Starbucks. 

Rewards Program Sees Continued Growth 

These efforts are clearly paying off in retention as Starbucks customers are largely remaining loyal to the brand. The company saw a 21% YoY increase in Starbucks Rewards 90-day active members in the U.S. — bringing the total up to 26.4 million.

In fact, rewards growth is faster than traffic at the moment, now representing 53% of all spending in Starbucks stores, according to Culver — an all-time high. Rewards members even visit the store three times more often than non-members, the company said. 

[See more: Starbucks Exploring Blockchain for Cross-Retailer Rewards]

While the future of COVID remains unclear, the company said it is well positioned to address the industry challenges and operating environment. 

As COVID-spikes continue to emerge, prompting expanded isolation benefits for sick staff and increased training expenses as a result, a continued focus on the consumer experience is key. Whether the focus will be on in-store experiences or mobile pick-up remains to be seen.

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