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Starbucks 2Q - loyalty up

Coffee colossus Starbucks released their second-quarter numbers stating that the company operates over 28 000 stores across 70 countries. The company saw a growing number of people join their loyalty program, which in turn has helped with global same-store sales growth. Starbucks also showed good numbers both in its home market and China.

CEO Kevin Johnson said the following on the earnings call:

    "Starbucks Q2 of fiscal 2018 represented another quarter of record financial results, highlighted by accelerating momentum across our American business - particularly in the U.S., continued strong performance in China and our strongest comp growth in Japan in five quarters"


The Starbucks board authorised a $100 million share buy-back programme. Nothing like Apple's $100 billion buy-back but a buy-back nonetheless.

This is how the company performed in the second quarter:

- Revenues of $6.03 billion up 14% beating the $5.9 billion analysts had expected
- Net income of $660.1 million in line with expectations
- Adjusted earnings were $0.53 which was also in line with the street's expectations
- Same-store sales showed a 2% growth in the U.S., higher than the 1.8% growth expectations from the street

The strong same-store growth of 2% worldwide was helped by a 3% increase in average purchase price.



Starbucks added 1.6 million members to its loyalty program in the U.S. an increase of 12% from a year ago. Kevin Johnson said that the new customers accounted for 39% of sales for U.S. company-owned stores. The Starbucks loyalty program now has 15 million members. It's very simple, you download the app, add credit and start buying your coffee using your mobile device. This helps the company understand your taste so it can improve on their coffee based on your preferences.

I'm pretty sure you might have heard about the Starbucks incident in Philadelphia, where two black men were arrested for trespassing after asking to use the bathroom. CEO of Starbucks Kevin Johnson apologised and pledged that the company would learn from the Philly incident; which is why the Starbucks closed more than 8 000 company-owned stores to have anti-bias training.

During the call, one analyst asked how this incident could affect Starbucks's numbers. Johnson's reply was:

    "None, we are not seeing an impact on comp sales as a result of Philadelphia, the approach of shutting down 8 000 stores to conduct racial-bias training will pay long-term dividends to Starbucks".

    "Our leadership team has been on the ground to understand all aspects of this incident, . . . I am personally committed on several fronts to insure it never happens again."


We remain optimistic about the future of this business. The company still expects to open 2 300 new Starbucks stores across the globe which will translate to 3%-5% same-store growth for the year.


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