Starbucks is growing its digital flywheel and engaging “occasional guests” through WiFi signup in stores, and opening mobile order and pay to all customers.
“Together these initiatives and related efforts will generate a few million additional registered customers by year-end, and we are already running ahead of our expectations,” chief executive officer Kevin Johnson said.
Other initiatives on the table include Starbucks’ continued foray into the food side of its offerings. Food’s share of total U.S. sales was 22 percent in Q2, up 100 basis points versus the prior year. Starbucks is in the process of expanding its Mercato lunch platforms, starting with San Francisco this month, to reach nearly 1,800 stores across six markets by the year of fiscal 2018.
There are plenty of other avenues for Starbucks to drive revenue, like additional openings, Siren Retail and other fresh concepts, as well as let its booming China business, where comps rose 4 percent in Q2, raise the needle.
Johnson said Starbucks is now venturing into building standalone Princi Bakeries, complete with Starbucks Reserve coffees and coffee bars.
“These stores will feature Reserve coffees, Princi food and design elements from the Roastery in markets across the globe. We will build on a solid foundation with the opening of our Milan Roastery in September and our New York Roastery in November. Tokyo and Chicago will follow in 2019. The potential opportunity for Siren Retail over the next decade is significant as it represents the finest of experiential retail around all things coffee, and we're off to a solid start,” he said.
The company opened 468 net new Starbucks in Q2 and now has 28,209 stores across 76 markets. Starbucks closed 298 Teavana stores in the quarter as well. Scott Maw, chief financial officer, said Starbucks is on target to open 2,300 net new units globally in fiscal 2018. Starbucks reported consolidated net revenues of $6 billion, up 14 percent over the prior year, in Q2. Starbucks' quarterly net income was $660 million, or 47 cents per share, compared with $653 million, or 45 cents per share, a year ago.
Johnson spoke of the global opportunity, especially in China. He painted the potential by saying Chinese guests drink one-half cup per person of coffee versus 300 cups per year per person in the U.S. “So you look at that math, that means it's over 1,200 times the opportunity size as the U.S. in terms of consumption,” he said. Its Shanghai Roastery is generating twice the dollar volume in a day than a regular Starbucks.
Johnson also addressed Starbucks’ recent controversy stemming from the arrests of two black men in a Philadelphia café, and the viral video that was posted by a bystander. Read more about it here.
Johnson said the incident hasn’t hurt sales in the U.S.
“I am personally committed to act on several fronts to ensure it never happens again. The closing of our stores for racial-bias education on May 29 is a small piece of a set of ongoing actions that will systematically be woven into our processes, training, and culture moving forward. The value Starbucks provides to our partners, customers and shareholders is not only through our coffee, but also through our brand, culture, and ethos. All companies make mistakes; great companies learn from them and improve. And that is exactly what we intend to do,” he said.