Starbucks shares jump on the back of Q2 results

As the bell rung at the New York Stock Exchange to signal the start of trading, shares in Starbucks began to slowly climb, before racing upwards in a manner that USA Today compared to a “late-day caffeine burst.”

The rise, in the region of 5%, came on the back of the global coffee giant’s publication of their second quarter revenues, which saw the company’s net revenues jump by 18% to $4.6 billion, and total same store-sales improve 7%. Profits are reported to be in the region of 16%.

Howard Schultz, the company’s CEO, said that the past few months had been “a stunning quarter for Starbucks on almost every level.”

Analysts, such as David Palmer, believe that this juggernaut isn’t going to slow down in the immediate future: “Starbucks remains one of a shrinking group of consumer large [capacity] growth stores,” he said.

Schultz, speaking to analysts, noted that new menu items such as the Trans-Tasman favourite the Flat White and cold-brewed iced coffees cemented Starbucks’ position as an ‘authority’ in the industry, which helped the company’s standing and ability to turn a substantial profit. And that’s without mentioning that their stores in China and the Asia Pacific region increased by an impressive 12%.

But, interestingly, Chief Financial Officer Scott Maw noted that the company was seeing a ‘premiumiszation’ and a ‘trade-up’ in-store. We’ve discussed in brief the idea of this before, but are Starbucks making a subtle move into the area of the industry inhabited by the likes of Blue Bottle et al? And are they doing it whilst keeping hold of the vast majority of their existing customer base?

If they ever fully transition, then that would be a remarkable feat indeed.

However, a key area of their report is the section that discusses their My Starbucks Rewards scheme. During Q2, Starbucks attracted 1.3 million new members to register, taking the number of people registered with the loyalty initiative to well over 10 million.

“We are now seeing large numbers of last holiday’s first-time gift receivers become loyal, engaged, repeat customers,” Schultz said.

“We know that increased Starbucks cards sales drive increased My Starbucks Rewards memberships, and in turn increased traffic and sales in our stores.”

And with the company processing over 8 million mobile payments per week (!), a feature that is soon to be rolled out nationwide in the United States, Palmer’s words certainly do ring true.

It’s fair to say that Schultz is right when he says that Starbucks is an industry authority, and that’s why they’re doing so well. But we can’t overlook that Starbucks is also succeeding from a technological and innovation standpoint and in the long run, that may be the key to their continued success both in America and on a global scale.