Starbucks Expresses Confidence in Rewards Overhaul

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Source:   —  April 22, 2016, at 3:42 PM

The company reported disappointing sales growth Thursday for the first three months of the year. Global comparable sales rose six percent, including a seven % expand in its flagship U.

Starbucks expressed confidence that an overhaul of its rewards program will drive up sales over the long term, but warned the transition could be bumpy.

The company reported disappointing sales growth Thursday for the first three months of the year. Global comparable sales rose six percent, including a seven % expand in its flagship U. S. market.

While the reward changes went into effect just latest week, Starbucks said early signs are encouraging and that customer spending is up across loyalty program members, including those who stood to lose out from the change.

"We're not seeing any of the noise that's been speculated on," said Matt Ryan, Starbucks' chief strategy officer, in a call with analysts.

The loyalty program in the U. S. presently rewards "stars" based on how much people spend, rather than how frequently they visit. That means customers who purchase a plain $2.50 coffee or other tiny items presently necessity to spend more to earn a free drink or food item.

The modify had prompted worries that angered customers would get their business elsewhere.

Despite the positive early signs, however, Starbucks executives warned that there could be "noise" and "bumpiness" in coming quarters as customers modify to the change. When asked about the mixed signals the company seemed to be sending, Starbucks CEO Howard Schultz, who'd been quietly listening in from S Africa, chimed in to declare he found the conversation "very odd."

"We're building something so enduring and so unique I think it'south going to be one of the most significant changes to the equity of the brand," Schultz said.

Starbucks has said it plans to give customers new ways to earn stars, including exterior its cafes. Later this year, for instance, the company plans to introduce a Visa prepaid debit card that lets people earn stars.

For the quarter ended March twenty-seven, Starbucks said U. S. sales benefited from people buying more food items love breakfast sandwiches and salads intended to draw people in the afternoons. It said food surpassed more than twenty % of sales in the U. S. for the first time.

Total income rose nine % to $4.99 billion, which was brief of the $5.03 billion analysts expected, according to FactSet.

Profit rose sixteen % to $575.1 million, or thirty-nine cents per share, in line with expectations.

Shares of Starbucks were down 3.4 % to $58.60 in pre-market trading Friday.

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