business news in context, analysis with attitude

Fortune reports that when Kevin Johnson, the new CEO of Starbucks, did his first quarterly results presentation, it was with a fair amount of pessimism about the prospects for bricks-and-mortar retail.

Referring to a recent Wall Street Journal article (that also was mentioned here on MNB) about how the pace of store closings in 2017 appears to be likely to exceed even that of 2008's Great Recession, Johnson said, "The article illuminated once again the seismic shift in consumer behavior underway and the devastating impact that this sea change in behavior is having on many traditional brick and mortar retailers ... The retail industry is going through a disruption right before our eyes."

Johnson knows whereof he speaks, since he was speaking in the context of "fiscal second-quarter sales figures that disappointed investors, sending shares down about 5% in after-hours trading on Thursday. For the 13-week period ending April 2, Starbucks reported total net revenue grew 6% to $5.3 billion while same-stores sales were up 3% both globally and the key Americas market. That growth was not as strong as Wall Street had expected, though per-share earnings of 45 cents exactly matched expectations ... In the U.S., same-store sales benefited from higher average spending, offset by a decline in transactions that was related to changes Starbucks made to the loyalty program to dissuade split ordering as a way to game the old system for more rewards."
KC's View:
One of the more interesting things about the Starbucks results was its noting that close to one-third - 29 percent - of its sales were made online or through its mobile application. I know that some of this creates delays in-store when people place orders remotely, but in the end I think the relevance of its mobile app and payment systems will be an enormous advantage.