Starbucks still hasn't solved a growing problem
AP Photo/Ted S. Warren
- Starbucks' shares hit an all-time high on Thursday, with US comparable sales up 4% in the most recent quarter.
- Despite the sales growth, Starbucks' transactions were flat yet again.
- The coffee giant has struggled to grow transactions in recent years, instead relying on more expensive drinks and customers buying more to boost sales.
Starbucks' shares hit an all-time high after reporting quarterly earnings on Thursday. However, the coffee giant still has one problem it needs to solve.
While US comparable sales grew 4% in the quarter, the increase was driven entirely by an increase in average ticket size, with transactions remaining flat. Beverage sales contributed 3% of the total 4% American same-store sales growth.
Starbucks has struggled to grow transactions in the US in recent years. Transactions were flat in the US in the last quarter, after two quarters of declines.
Analysts have been pushing for Starbucks to address its current inability to draw more people into coffee shops across the US.
"To us, this is an important step in the right direction, as we believe that it will be imperative for SBUX to truly fix its traffic problem in the U.S. for the stock to work l.t.," or long term, Wells Fargo's Bonnie Herzog said in a note in January.
One of the biggest ways that Starbucks is trying to fix its "traffic problem" is by improving the customer experience.
In 2018, Starbucks discussed how workers' tasks are being tweaked - some work is being shifted to after-hours and other tasks are being automated - in order to encourage more interaction with customers. On Thursday, Starbucks said that the company had achieved its highest level of customer-connection scores in the US since it began measuring that in 2015.
In March, Starbucks announced it is reimagining its "third place" concept, utilizing new store designs to better meet customers' needs. And, the chain has added needle-disposal boxes and other solutions to help employees address complaints over mess and drug paraphernalia left in stores.
So far, these changes have failed to substantially boost traffic.
"Starbucks does not seem to be attracting all that many new audiences," Neil Saunders, managing director of GlobalData Retail, said in a comment in January.
"Indeed, it still underperforms with younger coffee drinkers who are increasingly going to niche independent coffee shops because of the more authentic vibe and modern atmosphere," Saunders continued. "In our view, this weakness will become more obvious as conditions become tougher and it is not something we believe Starbucks has plans to remedy."
- Prunes: Nature's sweet secret to wellness
- A good season ahead for cement companies with price hikes
- Apricots: A nutrient-packed fruit for health and culinary delights
- Startup funding hits a 5-year low in July-September quarter
- Mobile phone exports from India cross Rs 45,000 cr in April-Aug period, Apple leads