3 Reasons You're Spending More at Starbucks
Americans are shelling out more cash than ever before at Starbucks . The coffee giant booked a huge increase in revenue over the spring months, and celebrated the second-best quarterly profit in its 42-year history.
Powering that result are a few trends that have investors optimistic that the growth will continue. Here's a closer look at the three biggest factors that are pushing Starbucks spending levels higher.
You're visiting more often
First, we are having more frequent interactions with Starbucks baristas these days. The coffee giant booked a 9% jump in comparable sales in the U.S. last quarter, driven by a 7% boost in customer traffic, and a 2% rise in average ticket prices.
What makes that so impressive is that other mass-market chains aren't having as much luck attracting customers into their stores. McDonald's comparable sales grew by just 1% over the same period, and the company warned that results for the rest of the year are "expected to remain challenged." Things weren't much better at the higher end of the casual dining sector. Sales at Panera Bread were up just 3.8% in the quarter, below the company's expectations. Panera also warned about a bumpy year ahead as it works to get the kitchen humming at full speed again. Starbucks, meanwhile, expects a robust 10% to 13% revenue gain next year.
You're digging the specialty drinks
Product innovation is also helping boost Starbucks' sales. Its seasonal and "indulgence" drinks were a hit this spring. In fact, demand was so high for Starbucks' Valencia Orange Refresher and Caramel Ribbon Crunch Frappuccinos, that sales "exceeded even our most optimistic expectations," according to management.
The fall could be just as strong, as the company kicks off its 10th year of selling its wildly popular Pumpkin Spice Latte.
You're eating the food
Finally, while it dominates in the beverage department, Starbucks hasn't exactly been known for offering the best food options. That's one of the reasons why food sales have been stuck at 19% of revenue for the past three years running.
But that could be set to change this year. Starbucks credits "increased food attachment" for helping power its sales boost in the U.S. last quarter. Customers have been responding enthusiastically to an expanded menu of La Boulange baked goods that was made available at over 1,000 Starbucks stores on the West coast.
Foolish bottom line
I see food sales as having the best potential to drive further long-term gains in revenue for Starbucks. The company expects the new menu rollout to reach 2,500 stores by the end of this month before eventually covering all U.S. locations. It plans to start by enhancing its breakfast menu, and then moving up to lunch, giving people plenty of reasons to spend more at Starbucks in the years ahead.
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The article 3 Reasons You're Spending More at Starbucks originally appeared on Fool.com.Fool contributor Demitrios Kalogeropoulos owns shares of McDonald's and Starbucks. The Motley Fool recommends McDonald's, Panera Bread, and Starbucks. The Motley Fool owns shares of McDonald's, Panera Bread, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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