Apparently, the key to Starbucks’ performance was in a glass bear cup.
The coffee shop giant on Wednesday reported its best domestic sales results in two years, coming from both loyal and non-loyal customers alike, boosted by a strong holiday product launch and the company’s service improvements.
Same-store sales increased 4% in the U.S., including 3% traffic. The company credited a strong holiday launch, driven by strong demand for the chain’s glass “Bearista” cup in November. Customers kept coming into the chain’s coffee shops throughout the period.
The company generated traffic growth from members of its Starbucks Rewards loyalty program for the first time in two years. But traffic from non-members of that rewards program improved even more, company executives said.
“We have a plan, we’ve been working the plan, and our plan is working,” CEO Brian Niccol told investors on Wednesday.
The quarter was a crucial one, both for Niccol and for Starbucks, as the company has faced consistent questions about its performance for the past two years among investors and others. Starbucks changed marketing, refocused the company on in-store service and restructured the corporate functions since Niccol took over as chief executive in 2024.
Starbucks’ efforts have cost the company profitability, as investments in service and remodels have eaten into margins. Operating margin in North America, for instance, declined 480 basis points last quarter, to 11.9% of revenues.
Yet executives have long maintained that improving sales and traffic was more important. “The topline will come first, and earnings will follow,” CFO Cathy Smith said on the earnings call.
Last quarter, Starbucks’ fiscal first period, was also the first full quarter in which the company had deployed its “Green Apron” service model, which featured investments in store labor to improve traffic and therefore sales.
The model led to improved brand performance across a number of metrics, including brand affinity scores.
Niccol said that traffic to the company’s coffee shops increased all day, but the performance was strongest in the morning, a crucial time of day for a brand that sells mostly caffeinated beverages.
Just as crucial to the company was improvements in its less-frequent customers who are not members of its Starbucks Rewards program. The company has 35 million members of the program, and growing, but its declining sales from less-regular customers was seen as a red flag.
The company shifted its marketing to broaden its scope and capture more customers. The Bearista cup helped drive that business last period. “You have to win both with Rewards customers and the lighter, infrequent customer,” Niccol said.
Also crucial for Starbucks was improvement in China, where mounting competition had dogged the chain over the past few years. Same-store sales in that market rose 7% last quarter.
Starbucks’ stock rose 7% in premarket trading on Wednesday.
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