Starbucks Corporation (SBUX) announced its third-quarter earnings on Thursday after the bell, sending SBUX stock 3% lower as investors worried about the firm’s revenue miss.
The company reported earnings per share of 49 cents on revenue of $5.24 billion, below analysts’ expectations. Despite the revenue miss, the company said it still expects full-year earnings to be between $1.88 and $1.89.
Loyalty Program Changes for SBUX
The coffee chain may have seen some pushback from customers this quarter after changing its rewards program to track the amount of money spent rather than the number of visits customers made to the store.
While this shift may have put some clients off, Starbucks has created arguably one of the most successful loyalty programs out there.
Part of the success of Starbucks’ loyalty program is owed to its mobile app, which has been a runaway success. The firm’s rewards program now has 12.3 million active users, an 18 percent increase from last year’s figures.
More and more customers are also using the mobile app to make purchases — mobile order and pay usage made up 5% of Starbucks’ transactions in the U.S., up from 4% last year. The app requires users to pre-load their account with money, making it faster and easier for them to spend.
Growth In China
Starbucks also confirmed that it was on track with its push into China, where several new store openings are expected to be wildly successful. CEO Howard Schultz noted that the firm saw record revenue and profits in China this quarter, with comparable-store sales rising 7%. Over the past year, SBUX has opened 888 new stores in China/Asia Pacific, and net revenue from that region rose 18 percent during the third quarter.
The coming years will be big ones for Starbucks in Asia. By 2019, Starbucks is planning to open thousands of stores there in an effort to grab a larger marketshare.
The firm has also begun to roll out mobile pay options in both China and Japan; and plans are moving ahead to open a Reserve Roastery and Tasting Room in Shanghai by the end of 2017.
A Bright Future for Starbucks Stock
Starbucks CFO Scott Maw said he was confident in the firm’s direction, noting that this is the first nonholiday quarter in which the company’s operating income came in at more than $1 billion. SBUX has set itself up for long-term growth by building an increasingly popular loyalty program, moving into new markets and finding ways to grow in mature markets.
While this quarter’s results didn’t fall in line with Wall Street’s expectations, long-term investors may want to snap up SBUX stock while the price is low.
The company’s future prospects both in China and at home look solid, and you can’t overlook the strength of the firm’s digital presence and loyalty program.
As of this writing, Laura Hoy was long SBUX.
