JS Earnings Call Notes – Starbucks

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Starbucks (SBUX) CEO Howard Schulz said the company is performing well despite numerous macroeconomic challenges

Starbucks Coffee Company is connecting more deeply with more customers across all day parts around the world than ever before and we are delivering quarter-after-quarter of record breaking financial and operating results despite the accelerating shift in consumer behavior away from traditional bricks and mortar retailing and despite challenging macro economic foreign exchange, geopolitical and retail and consumer headwinds that continue to negatively impact many other national and global retailers.”

Starbucks (SBUX) CEO Howard Schulz said the company’s technology offerings are helping to strengthen brand equity

Technology innovation is further strengthening our brand, improving our efficiency and in-store execution, increasing our profitability and most importantly, enabling us to deliver an elevated Starbucks experience to our customers, particularly to Millennials.”

And their doubling down on their China business despite the recent economic slowdown in the region

We are taking a long-term view on how we will build our business in China because despite now having close to 2,000 stores in nearly 100 cities in China and being on track to have 3,400 stores on the mainland by 2019, I am convinced more than ever that Starbucks is just getting started in that important country. And I am equally convinced that, when we fully roll out our digital, mobile, card gifting and loyalty programs across our business in China and CAP overall and expand distribution of our ready-to-drink products later this fiscal year, we will perform at even higher levels than we are today.”

Their Starbucks gift cards continue to gain momentum

Starbucks gift cards once again enabled customers to give the gift of choice. And this year, one in six American adults received a Starbucks gift card, up from one in seven last year and one in eight the year before. And this holiday, $1.9 billion was loaded on cards in the U.S. and Canada in Q1 alone, up 19% over a year ago.”

Starbucks (SBUX) COO Kevin Johnson said one fifth of all Starbucks store purchases are now made through their proprietary mobile phone app

In the quarter, over 21% of total U.S. transactions were paid using the mobile apps with December accelerating to 22%, and we are seeing further acceleration in the month of January. Over 1 million customers in the U.S. used our mobile order and pay capability in the month of December and those customers averaged approximately five mobile orders in the month, driving meaningful revenue growth and incrementally.  In many of our busiest stores where morning peak demand is high, mobile order and pay exceeds 10% of total transactions.”

Starbucks (SBUX) CFO Scott Maw said their stores with the lowest employee turnover often have the best sales

Noteworthy is that while our comp growth overall remains very strong in today’s challenging retail environment, comps are the strongest in stores where partner attrition is the lowest, a function of the deep connection our partners build over time with our customers.”

Starbucks (SBUX) CEO Howard Schulz believes that their Chinese business could one day be bigger than their US business

So if you look at the unit economics in China today, which are incredibly attractive and you lay on the technology we talked about. And then we know the morning ritual is going to come. We are sitting in a business today that, as I said publicly when I was in China last week, that we believe one day could very well be larger than the U.S. business. So anyone on the call who is in any way dissuaded by our commitment or our success in China as a result of a 5% comp in the region is not only mistaken, but you are looking at the wrong metric.”