Like many restaurant stocks, Starbucks (NASDAQ:SBUX) had some of its worst quarters ever in 2020 as COVID-19 disrupted the economy, kept people at home, and took a big bite out of sales. Net revenue fell 38% year over year in the fiscal 2020 third quarter (which ended June 28), and comparable-store sales were down as much as 65% at their lowest point in that quarter. It was a big drop, but what sales there were still actually ended up beating analyst expectations.

For Starbucks' fiscal fourth quarter (which ended Sept. 27), comps improved to a 9% decline, with comps down only 4% in the month of September. In the earnings call late last month, management said it expects sales to turn positive beginning in fiscal 2021. Again, Starbucks' performance beat analyst expectations.

Much has already been made of Starbucks' latest earnings report. But let's take a deeper dive into what was said and reported and extract a bit more of what investors really need to know about this company's potential for future growth.

Starbucks barista making coffee.

Image source: Starbucks.

Data analytics helped keep Starbucks operating well

Starbucks considers itself a digital-first company, and that focus helped it stretch operations and make a stronger showing in the fourth quarter. 

CEO Kevin Johnson, who took the reins in 2017, has an extensive background with tech companies, and he's using tech to steer the coffee retailer in new directions. Management developed the "Growth at Scale" program, which includes three goals: a better customer experience, beverage innovation, and digital expansion. These all became pivotal during the pandemic as consumer behavior shifted and Starbucks needed to adapt. The company opened new drive-thrus and launched tech-enhanced shopping options such as curbside pickup. Mobile ordering and drive-thru sales accounted for 75% of total revenue in the fourth quarter. That rate is actually down from 90% in the third quarter as more stores were allowed to reopening, but it's still a significant portion of overall sales.

Starbucks also rolled out a new loyalty program that gives members more shopping options. Active memberships are up 10% over the prior year to more than 19 million. Results from the new program, Stars for Everyone, weren't discernible as it was released too close to the end of the quarter.

Starbucks is meeting customers where they are

CFO Patrick Grismer said in September that the company would be closing some stores in metro areas where offices are shutdown as people continue to work from home. Johnson said in the fourth-quarter earnings call that Starbucks is, however, opening new stores in suburban and semi-rural areas with drive-thru and other efficient pickup options.

Internationally, China sales were recovering even quicker -- posting a 3% decline -- and they trended positive during September. "What's most remarkable about the recovery in China, in my view, is the rapid reacceleration of new store development, which is our No. 1 driver of growth in China," Johnson said on the fourth-quarter earnings call.

The company opened almost 260 stores in China in the fourth quarter, surpassing 4,700 in total, and the new stores are showing pre-coronavirus-level sales. It also opened 40 Starbucks Now stores, which are digital pickup locations, and overall digital sales were strong across the region. Rewards memberships were even stronger in China than in the U.S., with active members up 34% over the prior year.

There was high demand for packaged coffee products in the U.S. as many people continued to stay home during the quarter, and Starbucks' growth, at 17% year over year, exceeded the general category's 9% growth. Ready-to-drink products increased 15% year over year, but some of that growth was offset by slowness in hotels and other travel businesses.

How does all this affect Starbucks' stock?

Starbucks stock jumped after the earnings release and is now up about 9% year to date. The company also increased its dividend despite the revenue drop, suggesting management was giving a vote of confidence for continued future growth.

Another vote of confidence was the company being willing to offer guidance about the coming year, forecasting 18% to 23% comps growth for fiscal 2021 with China comps increasing between 27% and 32%. It's also planning a whopping 2,150 new stores globally (while closing 1,050) with almost half being built in the United States.

Investors who believe it's too late to jump on the Starbucks wagon should think again.With declines continuing to improve and lots of new stores in the works, a return to prior growth rates is just around the corner and there is still time to take advantage.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.