A Lesson From Starbucks

Although the controversial Luckin Coffee Inc LKNCY did shake its ground in China, there isn't another retail chain anywhere the size of Starbucks that only focuses on beverages. Both Dunkin' and McDonald's trail behind Starbucks in sales and Luckin is still grappling with a fraud controversy despite its stock surge.

The right "recipe"

Since COVID-19 started its relentless march across the globe, Starbucks aggressively defended its top position by opening more drive-thrus, giving salespeople point-of-sale devices for quick transactions, and focusing on suburban store openings. Last week, it announced it is raising wages for its baristas of at least 10% starting December 14^th. Starbucks is already known for giving its workers more generous benefits and pay compared to its peers in the restaurant industry.

The secret weapon – the mobile app

In September, the coffee giant launched a new loyalty program in September that offers an enhanced shopping experience as well as rewards for members. Those same members that account for a large chunk of sales.

It's been five years since Starbucks rolled out the ability to place orders using its mobile app. Customers are loving this feature as it is as good as it gets to benefit from the customized Starbucks experience. The company rolled out mobile payments already in 2011, letting customers link a Starbucks card to the app to pay for their orders. This ended up being a brilliant strategy that more than paid off during the pandemic which demanded a ‘contactless' service. Moreover, it made Starbucks's app the most popular mobile payment processor as it's sometimes even more used than Apple Inc. AAPL ApplePay, according to e-Marketer. Starbucks revealed that almost one quarter of total orders in its stores come from the mobile app.

Results

Despite the difficult environment, the coffee giant managed to exceed expectations with its last reported quarter largely because of a decision it made years ago. Analysts had expected Starbucks to earn $6.06 billion, but despite the pandemic having reduced its customer traffic, revenue for the quarter ended up being $6.2 billion. Adjusted EPS of 51 cents also exceeded Bloomberg's estimate of 31 cents.

While the pandemic is still raging over many parts of the globe, Starbucks has see a 9% revenue drop in the fourth quarter ended on September 30^th. Still, it's been improving quarter to quarter while topping estimates every time.

Due to the global health and consequent economic crisis, Starbucks has seen its revenues fall 11% YoY to $23.5 billion during FY 2020 that ended in September. But, it managed to beat earnings expectations with EPS of $0.79 while reporting a cash inflow of $1.6 billion from operating activities.

FY 2021

Starbucks is forecasting double-digit growth in fiscal 2021 as it aims to regain everything it lost in 2020 while moving forward. Earnings were already positive in the fourth quarter and sales are already positive in its second fastest-growing market- China. Trefis expects Starbucks' revenues to recover after this unprecedented year and rise by 21%, in the range between $28 billion to $29 billion. Its net income is likely to follow the positive trend of recovery as it is estimated at $3.7 billion, with the expected EPS of $3.17.

Outlook

Even the business that were able to stay open during the pandemic felt the pain of those that were forced to close their doors. Everyone who survived had to quickly figure out how to make drastic changes to the way they served their customers while protecting their employees from the virus. Remarkably, Starbucks managed to keep going after a very harsh reality check. Five years after it launched its mobile app, it ended up being ‘saved' by this feature. This story only shows that being focused at constantly improving the customer experience never gets old. The lesson is simple: what was good for the customer ended up being very good for the business.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: contributors@iamnewswire.com

The post A Lesson From Starbucks appeared first on IAM Newswire.