Key takeaways from Starbucks Q4 FY20 earnings results
In the latest indication that the brand’s relevance with customers remains as strong as ever, Starbucks today announced its Q4 FY20 earnings results that point to a continued business recovery and an optimistic outlook for FY21.
Leveraging rapid innovation while keeping partner (employee) safety as a central focus through the COVID-19 pandemic, the company has shown a new level of resilience through one of the most challenging years for the retail industry.
As part of Starbucks quarterly earnings call, Starbucks president and ceo Kevin Johnson provided specifics on the improving business results and the company’s continued confidence in the path ahead.
“The guiding principles we established at the onset of the pandemic, combined with our industry-leading digital platform and our ability to innovate rapidly, continue to fuel our recovery and provide confidence in a robust operating outlook for fiscal 2021. Our strategies are working and I am optimistic that we will emerge from the COVID-19 pandemic as a stronger and more resilient company,” said Kevin Johnson, president and ceo.
Full details on Starbucks financial results can be found here.
1. Starbucks recovery strategy is working with the company reporting better-than-expected sales and profits in the fourth quarter. In the U.S., the company finished the quarter with a comparable store sales decline of 4% for the month of September, a vast improvement from the approx. 60% decline experienced at the depth of the pandemic only five months ago.
For the month of September, China’s comparable store sales were up 1%, building on the positive momentum seen in Q3 and reflecting continued sequential improvement. The company opened almost 260 stores in China in the fourth quarter alone, contributing to 14% growth in the market over the last 12 months.
2. Elevating and expanding customer experiences continues to be top of mind for the company. As communities continue to adapt to new routines, including working from home and remote schooling, Starbucks continues to provide familiar experiences, as well as introduce even more convenience including the expansion of Curbside Pickup and introduction of handheld POS devices. Staying ahead of customer trends has resulted in high customer connection and partner engagement scores throughout the pandemic.
3. Seasonal favorites and new innovations continue to delight customers, including the highly-anticipated return of popular Pumpkin Spice products. Sales of the company’s Pumpkin Cream Cold Brew and Pumpkin Spice Latte saw record high in average daily units, and the company’s cold beverage platform also saw strong performance, led by Refreshers and Cold Brew which delivered double-digit growth in Q4. With the holiday season approaching, the company is gearing up for the return of beloved Holiday menu items, including the Peppermint Mocha which is returning for its 18th year.
4. Expanding digital customer connections including convenient and contactless experiences have been key driver to the company’s recovery. In Q4, approx. 75% of U.S. sales volume came from drive-thru and Mobile Orders, balanced with expanded in-store seating in stores where it is safe to do so. The company also saw a rebound in the number of active Starbucks Rewards (SR) members, which grew 10% year over year to 19.3 million members in the U.S with the SR program driving 47% of U.S. company-operated tender for the second straight quarter. Also in Q4, the company launched “Stars for Everyone” which removed the Stored Value Card requirement to join the SR loyalty program.
In China, Starbucks saw continued strength in the mobile platform with mobile order sales mix more than doubling in the past 12 months to 26% in Q4. The digital innovations launched in China throughout fiscal 2020 include a new WeChat Mini-program and the enhanced Starbucks Rewards program, as well as a digital partnership with Alibaba, have fueled customer engagement and strong sequential growth in active Rewards members in the market.
5. Looking ahead to fiscal 2021, the company shared guidance on what investors can expect moving forward, including:
- Outlook for continued store growth in the U.S. and China, as well as accelerated repositioning of the company’s store portfolio, to
- Planned investments in partners, technology to drive further customer engagement and improve store operations, and environmental sustainability, primarily within the supply chain.
- Continued focus efforts on the Global Coffee Alliance in partnership with Nestlé, building on the momentum gained in fiscal 2020.