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Starbucks sees US customers return at a pace 'slightly above' its forecasts

·Former Correspondent
·4-min read
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  • SBUX

Starbucks (SBUX) said on Thursday that it’s already seeing a rebound in U.S. customer visits that are "tracking slightly above" the coffee chain's own forecasts, thanks in part to its popular mobile app that allows for contactless pickup.

Starbucks shuttered more than of its U.S. company-operated stores during the pandemic, causing comparable sales to plunge during that time. It then began reopening its U.S. stores, and expects to have 90% open by June.

Recently, the company began reopening its U.S. stores to foot traffic, and a linchpin of that strategy has been Starbucks beefing up its own technological prowess.

In a letter to employees, CEO Kevin Johnson wrote that “after several weeks of lockdown and sheltering-in-place, consumers will seek experiences that are safe, familiar and convenient. The reopening of our stores in China, the U.S. and elsewhere have confirmed that to be true.”

Over the past week, “we have now regained about 60-65 percent of prior year comparable U.S. store sales while reopening under modified operations and with reduced hours,” Johnson added.

“In China, we have seen progress as well and our comparable store sales have reached about 80 percent of prior year levels, reflecting gradual improvements over the past several weeks," the CEO said. While it will “take some time to fully recover,” Johnson said the early results are tracking ahead of company forecasts.

One of the effects of the coronavirus pandemic has been the rise of contactless payments. Among the restaurants and shops still open during the lockdown phase, fewer companies transacted in cash to prevent COVID-19 spreading.

A Starbucks spokesperson told Yahoo Finance that the coffee giant still accepts both cash and credit, but using the app provides the “best experience.”

In mid-March, Starbucks pivoted to drive-thru and delivery-only in the U.S., in order to adhere to social distancing. As they’ve reopened stores, homebound customers are now using the mobile app to find nearby locations and place orders for pick up in the entryway and counter where available.

App use and the ‘third place’

With more than 32,000 stores worldwide, Starbucks has always established itself as a destination — or a "third place" between work and home, as the company likes to call it.

While cafe seating won't be widely available in the immediate future, Starbucks is hoping investments in its Rewards mobile app may entice more customers in a world of contactless pickup, thus accelerating trends that were already in motion before the coronavirus struck.

Johnson added that before COVID-19, approximately 80% of store transactions were "on the go," with most of those orders occurring on the mobile app. During the most recent fiscal quarter, Starbucks had 19.4 million active U.S. members on the app, up 15% from a year ago.

"The pandemic has forced consumers to change behaviors by socially distancing, accommodating self-quarantine restrictions and preserving personal safety and well- being,” the CEO wrote. “Working from home has become the new normal for many of our customers, as has purchasing food and beverage online for either pickup or delivery.”

NEW YORK, NEW YORK - MAY 10: A window at Starbucks reads 'WE ARE OPEN!' during the coronavirus pandemic on May 10, 2020 in New York City. COVID-19 has spread to most countries around the world, claiming over 283,000 lives with over 4.1 million infections reported.  (Photo by Cindy Ord/Getty Images)
NEW YORK, NEW YORK - MAY 10: A window at Starbucks reads 'WE ARE OPEN!' during the coronavirus pandemic on May 10, 2020 in New York City. COVID-19 has spread to most countries around the world, claiming over 283,000 lives with over 4.1 million infections reported. (Photo by Cindy Ord/Getty Images)

As a result, Starbucks is leaning in on plans to boost drive-thrus and pick-up options in more cafes. “The plans we had for this broader store transformation over a three to five-year period will now occur over the next 12 to 18 months," Johnson wrote.

In the last two years, Starbucks transformed its store experience in dense metro areas after realizing customers retrieving mobile pickup orders were crowding stores, lowering the experience for those opting for cafe seating. As a result, Starbucks debuted its first Pickup store in Penn Plaza in New York City for on-the-go customers.

"While the look and feel of many stores will change, the one constant that remains is the human connection made possible by partners who proudly wear the green apron,” Johnson added.

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Julia La Roche is a Correspondent at Yahoo Finance. Follow her on
Twitter.

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