Loyalty Program Triggers Starbucks’ Record Q2

Starbucks Core CardStarbucks executives pointed to their loyalty program as the key driver in its record second-quarter fiscal results, which included a 26% rise in profit and an 11% jump in total revenue, to $3.6 billion.

In its April 25 release regarding its second-quarter financial results, Starbucks executives indicated that the company has attracted more customers to its loyalty program – My Starbucks Rewards – in both the U.S. and China. They expect U.S. traffic growth over the next few months to be driven by the expansion of its loyalty program that now includes coffee purchased at grocery stores, and by new drinks for the summer.

Customers can now earn rewards for grocery channel purchases that can be redeemed in Starbucks retail stores.

Dollars loaded on Starbucks cards through both new card activations and reloads increased a whopping 32% over the second quarter last year.

Howard Schultz, Chairman, President, and CEO of Starbucks, said the impressive second-quarter fiscal performance validates the company’s expanding global business, “and the increasing relevance of the Starbucks brand to consumers all around the world.”

“Innovation and an enhanced customer experience drove strong comp sales and revenue growth, while a laser focus on improving efficiency and controlling costs enabled us to deliver record margins and earnings,” Schultz added. “Starbucks has never been better positioned to achieve the aspirational goal we have set of becoming one of the world's most respected, admired, and enduring brands.”

Starbucks has begun integrating the Starbucks Card and My Starbucks Rewards loyalty program across several of its brands, including Teavana. Since the beginning in April, registered customers who make purchases with a Starbucks Card or through the Starbucks mobile app at any of more than 300 Teavana retail stores will be able to earn Stars for their purchases.

Combined, the new loyalty program innovations are expected to dramatically increase My Starbucks Rewards membership -- from its current 4.5 million active members at the end of October 2012 to about 9 million members by the end of fiscal 2013.

In January 2011, Starbucks became the first national retailer to offer its own mobile payment technology tied to a world-class loyalty program. The company now generates over three million mobile transactions each week in the U.S. alone.

What’s more, Starbucks plans to open thousands of locations in China in the next few years, while also expanding to new markets, like India, where it opened its first store late last year.

In addition to its $620 million acquisition of loose-leaf tea retailer Teavana Holdings Inc. last year, Starbucks has taken on new ventures such as its own single-serve espresso brewer called Verismo, energy drinks, and the acquisition of a San Francisco Bay-area bakery chain.

For the quarter ended March 31, Starbucks reported a profit of $390.4 million, or 51 cents a share, up from $309.9 million, or 40 cents a share, in 2012.

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