Starbucks reported in its third quarter earnings results on Tuesday (July 28) that the ranks of its 90-day active Starbucks Rewards members dropped 5 percent year over year in the U.S. to 16.3 million because of “reduced customer frequency” mainly attributed to temporary store closures and other pandemic-related effects.
The company reported that global comparable store sales plummeted by 40 percent, fueled by a 51 percent drop in comparable transactions. On a call with analysts, Starbucks President and CEO Kevin Johnson acknowledged the “headwind” of disruption to weekday morning routines such as commuting to work and school amid the pandemic.
However, Johnson reported that Starbucks experienced a “significant acceleration” in the number of customers who downloaded the company’s app and joined Starbucks Rewards, arriving at 3 million in the quarter and up 17 percent from the second quarter.
Starbucks Rewards as a percentage of tender in the third quarter rose to 46 percent, a four-percentage-point increase from a year prior, according to Johnson.
“Customers are seeking safe, familiar and convenient experiences in many aspects of their lives. And, in that regard, our digital assets have proven to be a competitive advantage,” Johnson said, addressing the chain’s digital strengths in a quarter that began with just 44 percent of stores open. By the end of the quarter, however, 96 percent of its stores were open.
“We continue to see improvements in the morning peak period, as well as some customer occasions shifting to later in the morning day part,” Johnson said. “As we see customer visits shifting from urban cafes to suburban drive-thrus, customers are also purchasing multiple beverages and food items on a single order.”
Johnson said the company will debut a new pay-as-you-go option in the fall for Starbucks Rewards members in the U.S. and Canada.
“This significant new addition will open up an invitation to join Starbucks Rewards to a much wider audience,” Johnson said.
The coffee chain said July 21 that customers who use the app to place orders at locations operated by the company won’t need to pay for their purchases via app to earn Rewards stars. Instead, customers will have the ability to use cash, cards or mobile wallets.
Digital Innovations in China
In China, Johnson reported that the company finished out the quarter with 99 percent of stores reopened, with roughly 90 percent having regular operating hours and more than 70 percent having full seating. In May, Starbucks rolled out a new WeChat Mini program in the country, and in June, the company bolstered its Rewards program.
The upgrades in China included a multi-tiered redemption system, which Johnson said on the call was similar to what the company launched in the United States in 2019. The company had rolled out new redemption options starting in April 2019 in the U.S., with customers able to redeem various amounts of “stars” for different rewards (i.e. 25 points for a dairy substitute).
As for its overall results, Starbucks reported a non-GAAP loss per share of 46 cents on consolidated net revenues of $4.2 billion for the third quarter. Those results came out ahead of analysts’ estimates of a loss of 59 cents per share on $4.07 billion in revenue.