Starbucks (SBUX +0.44%) has been on a roll this year. Same-store growth has been robust, with the key metric coming in at a particularly impressive 6% in the company's most recent quarter. This was driven by strong same-store sales in both the U.S. and China, highlighting the company's execution in both of these important markets. Overall revenue during the period increased 11% year over year when adjusted for foreign exchange fluctuations and activities to streamline operations; this is up from 9% adjusted revenue growth in fiscal Q2.
But what's behind these surface-level metrics? In Starbucks' earnings call, management provides key insight into some of the drivers supporting this recent momentum, including a look at digital initiatives, delivery in China, and more.
Starbucks' digital loyalty program. Image source: Starbucks.
Digital initiatives
Starbucks' efforts to connect with customers digitally -- through loyalty programs, mobile order, and delivery -- are driving results. In the U.S., for instance, 42% of tender occurred through Starbucks' digital loyalty program, management explained during the company's earnings call.
Fortunately, this catalyst has been gaining momentum recently. Starbucks rewards members grew 14% year over year in fiscal Q3 -- an acceleration from 13% growth in fiscal Q2.
During Starbucks' earnings call, CEO Kevin Johnson said the company's digital efforts specifically contributed two percentage points to its 6% same-store sales growth in the U.S. "So the acceleration we saw in active rewards members is paying off for us," he added.
Delivery in China
Though Starbucks admitted during its conference call that delivery in the U.S. is not contributing meaningfully to its business yet, it's already a major catalyst in China.
"When you look at what delivery has done for us [in China], it has driven meaningful incremental transaction lift. It represents now 6% of sales [in the market]," said Starbucks international executive John Culver during the call.
Given this strong traction with delivery in China, it's no surprise the company continues to expand its availability.
"We're on-track to [expand delivery in China] to 3,000 stores by the end of fiscal '19 and we're continuing to see this as a strategic channel that we're going to continue to invest in and grow," said Culver.
Connecting with customers
During the quarter, Starbucks continued its initiatives to improve the overall customer experience. To this end, the company said its customer connection scores reached an all-time high during the quarter.
Further, this focus on enhancing the customer experience is carrying over to top-line performance. "The initiatives we are driving in the US to simplify work, allocate labor to better meet customer demand and improve our customer connections, all contributed to the strong performance in comp transaction growth," said Johnson during the call.
