Digital Transactions Authoritative, insightful and timely information for payments professionals
Investors gave Starbucks Corp. the cold shoulder Friday morning on news that despite a record $6.1 billion in quarterly revenues, growth is slowing in the United States. But the coffee giant’s payments business has several initiatives brewing, executives reported late Thursday.
A leader in closed-loop prepaid cards and mobile payments linked to those cards, the Starbucks Card accounted for 42% of transactions at company-operated U.S. and Canadian stores in the first quarter of fiscal 2018 ended Dec. 31, up from 40% a year earlier. Seattle-based Starbucks said in its earnings release that it added 1.4 million active members to its Starbucks Rewards loyalty program in the first quarter, boosting total active U.S. membership by 11% to 14.2 million. Member spend represented 37% of sales at company-operated U.S. stores.
The company’s popular Mobile Order and Pay service, which has caused congestion at some stores as customers come in to get items they purchased earlier, represented 11% of transactions at U.S. company-operated stores, up from 7% in the year-earlier period.
Starbucks this month began testing a cashless store in Seattle that accepts only cards and mobile-phone payments, and more could be on the way, president and chief executive Kevin Johnson told analysts on a conference call Thursday.
“The ubiquity of mobile and credit card payment is enabling us to begin an exploration of cashless stores in the U.S.,” said Johnson, according to a SeekingAlpha.com transcript. He added that mobile payments have grown to more than 30% of U.S. total tender.
Part of Starbucks’ payment strategy consists of expanding beyond its private-label offerings, in addition to making Mobile Order and Pay available to customers who don’t belong to the loyalty program beginning in March. Next month the company will launch a cobranded Visa credit card issued by JPMorgan Chase & Co., Johnson said. Cardholders will earn loyalty points, dubbed stars, at an accelerated rate for Starbucks purchases, and they’ll also get stars for non-Starbucks transactions.
In April, Starbucks plans to roll out a Chase-issued prepaid Visa card for customers who don’t want or don’t qualify for a credit card. Cardholders will earn stars with their purchases, according to Johnson.
Down the road could be blockchain-based payments, although Starbucks has nothing specific planned at the moment. But it looks like the company isn’t interested in Bitcoin, the original but highly volatile cryptocurrency that runs on blockchain technology.
“I don’t believe that Bitcoin is going to be a currency today or in the future,” Howard Schultz, Starbucks’ executive chairman and former CEO, said on the call.
Schultz, however, went on to say that “I’m not bringing this up because Starbucks is announcing that we are forming a digital currency or we’re investing in this,” according to SeekingAlpha. “I’m bringing this up because as we think about the future of our company and the future of consumer behavior, I personally believe that there is going to be a one or a few legitimate trusted digital currencies off of the blockchain technology … and I believe that Starbucks is in a unique position to take advantage of that.”
Starbucks reported total first-quarter revenues of $6.07 billion, up 6% from $5.73 billion a year earlier, and net income of $2.25 billion, triple the prior-year quarter’s $751.8 million. But revenues grew only 2% in the Americas, short of the 3% analysts expected. In contrast, revenues from China jumped 30%. Starbucks’ share price was down about 5% late Friday morning from Thursday’s close.
