The coffee chain lost $1.2 billion in sales in Q4, but CFO Patrick Grismer says the company is recovering faster than expected
As Starbucks continues to recover from the effects of the COVID-19 pandemic, the Seattle-based company said on Thursday that it would be closing an additional 100 stores (plus 100 closures in Canada), in addition to the 400 closures that were initially announced in June, likely in underperforming, dense metro areas.
As customer priorities shift, Starbucks CEO Kevin Johnson said during Thursday’s earnings call with investors that the company is moving full speed-ahead with this store portfolio transformation with the closure of some traditional Starbucks cafes and transformation into new store concepts like the express-style Starbucks Pickup locations. Johnson said they expect “much of this work” will be completed by the end of 2021.
“We’re extending the reach of the Starbucks brand with high-volume, high-margin stores and providing our customers the convenience they are seeking,” Johnson said, adding that after pausing their store redevelopment plan during the pandemic, they’re going to reaccelerate that strategy.
During Thursday’s earnings call, Starbucks chief financial officer and vice president Patrick Grismer confirmed that the company lost approximately $1.2 billion in revenue due to the pandemic but that the company is recovering faster than expected. In comparison, five months ago, the company’s same-store sales were down 65%.
The company reported a 9% drop in same-store sales both for U.S. stores and globally for the fourth quarter ended Sept. 27, driven by a 23% decrease in comparable transactions but partially offset by a 17% increase in average ticket.
Much of Starbucks’ relative success compared to the beginning of the pandemic can be attributed to drive-thru and mobile orders. Starbucks executives reported that 75% of Q4 sales were from drive-thru and mobile orders, which was down from 90% in Q3 when many cafes were still closed. With drive-thru orders still representing a significant portion of customer tickets, Starbucks said that their high average ticket is a direct result of people placing larger orders in the drive-thru lanes, with food add-ons at a record-high.
“Broadly speaking, we’ve seen U.S. transactions migrate from dense metro centers to the suburbs, from cafes to drive-thrus and from early mornings to mid mornings with outpaced recovery on the weekends,” Johnson said, adding that same-store sales were “solidly positive” for drive-thru cafes and stores in suburban areas.
Curbside pickup, meanwhile, is available in 800 stores currently, and Starbucks said it’s on track to be available in 2,000 U.S. stores by the end of 2021. They’ll also be rolling out handheld POS devices to make employees’ jobs easier to 400 additional stores by the end of Q1 2021.
Starbucks revenues for the fourth quarter decreased 8.1% to $6.2 billion as compared with $6.75 billion the year prior. The company reported a net income loss of $392.6 million, or 33 cents per share, down 51.1% from a net income of $802.9 million, or $.67 per share the same quarter the year prior.
Starbucks predicts a strong FY 2021, with projected global same-store sales up approximately 18-23%.
Starbucks opened a net 480 new stores in Q4, and as of September 27, 2020, had 32,660 stores globally, with 94% of their store portfolio reopened from the pandemic closures.