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Here's How Starbucks Is Driving U.S. Same-Store Sales Growth

By Daniel B. Kline - Updated Apr 22, 2019 at 11:03PM

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The company has a three-pronged approach.

Check out the latest Starbucks earnings call transcript.

Starbucks (SBUX 3.87%) has a three-step plan to drive same-store sales improvement in the United States. This includes enhancing the in-store experience, delivering beverage innovation, and driving digital relationships.

Basically, the coffee chain wants to cut wait times in stores -- especially during peak times -- create new drinks or food items that entice consumers to either spend more or make an extra visit, and sign more people up for its loyalty programs. Those efforts are succeeding; the company is delivering 4% comparable-store sales growth in the U.S.

"We are particularly pleased with the sequential improvement in quarterly comparable store transactions in the U.S., underpinned by our digital initiatives and improved execution of our in-store experience," said CEO Kevin Johnson on the first-quarter earnings release.

A Starbucks cup.

Starbucks is working to take non-customer-facing work away from baristas. Image source: Starbucks.

What is Starbucks doing?

The chain's efforts to enhance the in-store experience focus on serving customers faster while continuing to build the connection between the consumer and in-store staff. To make that happen, Starbucks has been working to free up employee time to focus on customers.

"Our Starbucks store partners who proudly wear the green apron are at the center of connecting with customers and we are on a mission to support them by simplifying work and reducing some of the non-customer-facing tasks that historically have taken up to 40% of their time," said Johnson during the Q1 conference call.

The changes made include shifting some cleaning tasks to after the stores have closed. in addition, Starbucks has automated "product planning and replenishment which reduces store clutter and time away from customers." 

These changes will take multiple quarters to be fully implemented, but Johnson said that they are already paying off. "Our customer connection scores continue to improve in Q1 on both a sequential and year-over-year basis. And importantly, across both, the morning and afternoon dayparts," he said.

The company has also expanded its delivery pilot program. Ultimately, this should allow U.S. stores to increase comp sales, assuming the company can manage workflow to not impact in-store visitors.

When it comes to beverage innovation, the company has focused on its cold drinks. Johnson said that cold beverages had gained momentum across multiple dayparts.

"The focus of our latest beverage innovation revolves around iced espresso, draft nitro beverages, and refreshers," he said. "We have expanded the deployment of our nitro offering from about one-third of U.S. company-operated stores last quarter to 40% in just one quarter. And we remain on track to reach our goal of 100% penetration by the end of fiscal 2019."

Digital relationships, the third growth driver, have been increasing as well. The company has collected 13 million customer registrations from people who use its WiFi but are not Rewards program members. The chain also added 1 million members to its Starbucks Rewards program, a 14% increase that brings total membership to 16.3 million.

"This result was driven by leveraging our increased digital reach, as well as a more seamless customer onboarding experience, greater mobile order and pay adoption, and enhanced personalization features," said Johnson. "Between digitally registered and active reward customers, we are now approaching 30 million digital connections in the U.S."

Steady as she goes

Johnson has shown that Starbucks can continue to grow sales in a mature market. He also has a clear plan to continue doing that, though it's important to note that he has largely backed away from his predecessor's plans to add premium products to up to 20% of stores.

That plan hasn't gone away, but it has been scaled back into more of a test. In theory, that leaves the company with another potential growth driver in its back pocket once it exhausts its current three-tiered approach.

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