Starbucks continues on the road to recovery as sales performance is almost completely back to normal in China; with flat sales in August representing a major improvement from negative 10% sales in July, according to chief financial officer Patrick Grismer who gave an update on the company at the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum.
Starbucks’ U.S. performance, however, has a longer road ahead, and Grismer predicted that it will take six more months to completely recover. Sales incrementally improved from negative 14% in July to negative 11% in August as the company continues to reopen cafes and dining rooms. At this point, about 3% of their stores remain closed, and about half of the stores have seating available. Grismer noted that at cafes that have opened, drive-thrus — which represent about 60% of the company’s portfolio — have boosted sales significantly at a time when food traffic is still low.
“We’ve seen that as we've progressively opened our ordering and sales channels, from drive-thru to entry way pick-up to in-store ordering and seating, sales have improved and they’re continuing on that path,” Grismer said. “Looking ahead, we expect three key initiatives will fuel our future recovery in the US: first, the deployment of handheld POS at the drive-thru; second, the roll-out of curbside pick-up where we have convenient parking; and third, today, the launch of Stars for Everyone.”
Curbside pickup is available in 800 stores right now, but Grismer said that they plan to double that number in the next few months. As customer options for Starbucks experiences continue to grow, including mobile delivery, contactless pickup, as well as drive-thru and café pickups, Grismer called on the second strategy in their three-pronged approach: a handheld POS system.
“We have a significant increase in the average order size and with that very high ticket growth and you saw that in our third quarter results,” Grismer said. “We do expect that that will moderate over time but that does put pressure on the drive-thru experience and so we seek handheld POS as an opportunity to collect orders sooner in the line, so that we can start the production of those handcrafted beverages and be prepared to fulfill those orders more quickly than we are today. […] The last thing we want to have happen is someone drive up to Starbucks, see a long line and continue on their way.”
The third prong is the new Starbucks payment options for their Rewards members, which allows customers to pay with practically any physical or digital payment, instead of a preloaded card.
In China, Starbucks is not only continuing to ramp up recovery, but they also are expanding their store footprint by 500+ units this fiscal year, particularly utilizing new store formats like the grab and go Starbucks Now stores.
Starbucks will report its fourth quarter earnings on October 29.
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