January 29, 2014, 11:38 AM

Starbucks gets a buzz from shoppers’ shift to digital buying

More than 10 million consumers are using its mobile shopping app.

Lead Photo

How did Starbucks shoppers get in shape for the holiday shopping marathon? By loading cards.

Starbucks Corp. reported double-digit revenue growth in the first quarter and attributed a 4% increase in store traffic to a cultural shift in the way people shopped in the recent holiday season.

Shoppers embraced giving plastic and digital gift cards with gusto as they moved away from giving specific gifts to gift cards, what Starbucks’ CEO Howard Schultz called the “gift of choice.” And Starbucks was ready, because it had invested in digital technology and mobile payment tools in recent years. That positioned the coffee retailer to post big gains, Schultz told Wall Street analysts on the company’s earnings call last week.

The company processed more than 40 million new Starbucks card activations, valued at over $610 million in the U.S. and Canada alone in the first quarter, Schultz told analysts. That included, he said, “over 2 million new Starbucks card activations per day in the days immediately leading up to Christmas and $1.4 billion of Starbucks card loads globally.”

Each of those metrics marked a “significant” increase over both prior year numbers and company projections, Schultz said. In addition, more than 10 million customers are actively using the Starbucks mobile payment app and there are almost 5 million mobile transactions taking place in Starbucks stores each week, he told analysts, according to a transcript of the call from Seeking Alpha.

“Holiday 2013 was the first in which many traditional brick-and-mortar retailers experienced in-store foot traffic give way to online shopping in a major way,” Schultz said.

Starbucks, No. 454 in in the 2013 Internet Retailer Top 500, did not break out online sales, but for the first quarter ended Dec. 29 reported:

  • Total sales of $4.24 billion, up by 11.9% from $3.79 billion in the same quarter of 2012.
  • Comparable-store sales grew by 5%.
  • Net income of $540.7 million, a 25.1% increase from $432.2 million in the first quarter of 2012.

“As our solid traffic growth and record Q1 results demonstrate, Starbucks’ unique combination of physical and digital assets positions us as one of the very few consumer brands with a national and global footprint to benefit from the seismic shift under way,” Schultz said.

Starbucks also announced today that chief financial officer Troy Alstead has been appointed to the new position of chief operating officer, enabling Schultz to focus on expanding the coffee shop chain's e-commerce business.

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