Starbucks gains on rewards
Loyalty program shift not hurting revenue as much as anticipated
NEW YORK (AP) — Starbucks expressed confidence Thursday that an overhaul of its rewards program will drive up sales over the long term, but warned that the transition could be bumpy.
The comments came after the company reported sales growth for the first three months of the year that fell short of Wall Street expectations.
The Seattle-based chain said global comparable sales rose 6 percent, including a 7 percent increase in its flagship U.S. market.
While it’s still early, Starbucks said spending is up across loyalty members, including those who stood to lose out from the change.
“We are not seeing any of the noise that has been speculated on,” Matt Ryan, Starbucks’ chief strategy officer, said in a call with analysts.
The change in the U.S. went into effect just last week, with people earning rewards “stars” based on the amount of money they spend, rather than how often they visit. That means that people who only buy a plain $2.50 coffee would have to spend more to earn a free drink or food item.
The change had prompted worries that some angry customers would take their business elsewhere.
Despite the encouraging early signs, however, Starbucks executives warned that there could be “noise” in coming quarters as customers adjusted to the change. When asked about the mixed signals it seemed to be sending, Starbucks CEO Howard Schultz, who had been quietly listening from South Africa as other executives fielded questions, chimed in.
“We’re building something so enduring and so unique I think it’s going to be one of the most significant changes to the equity of the brand,” Schultz said.
Starbucks has said the change will help it give customers more ways to earn rewards stars.