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Starbucks reports sluggish same-store sales growth for Q3

The coffee giant looks to expand in the South and middle America while continuing to search for its next Frappuccino.
Starbucks

Lagging traffic continues to plague Starbucks, which reported very modest same-store sales growth for its third fiscal quarter. Despite efforts to boost afternoon visits, sales in that daypart have particularly dragged as Frappuccino sales continue to slip.

Starbucks’ comparable-store sales in the U.S. grew 1% for the quarter ended July 1, while revenues rose 6%, the company announced this week. Traffic at the chain fell 2%, and full-year sales growth is expected to fall “just below” the previous goal of 3% to 5%, executives said.

Closing stores for half a day in May for companywide anti-bias training lowered same-store sales by less than half a percent, they said.

Starbucks CEO Kevin Johnson admitted during the earnings call that the company had fallen short of expectations for the third quarter. To grow sales and improve traffic, Starbucks plans to focus on adding units in the South and middle America, innovating around better-for-you beverage options and expanding its digital reach.

More than 80% of new stores built in coming years will have drive-thrus, to capitalize on growth in areas where real estate is comparatively inexpensive.

Beverage innovation will focus on less-indulgent cold beverages, particularly those using the chain’s new cold foam topping, plant-based milks and draft coffees.

On the digital front, Starbucks is looking to capitalize on spending from its loyalty members, who now top out at 15.1 million active users, an increase of 14% from last year. Next spring, Starbucks will allow rewards members to redeem different amounts of points depending on their chosen reward.

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