In the news:
Starbucks prepaid cards hit a record $1.3B in holiday quarter
Starbucks CEO Howard Schultz told managers that customers loaded $1.3 billion in Starbucks cards across the U.S. and Canada during the quarter ending in December, an unprecedented figure
Seattle Times business reporter
Customers filled Starbucks’ stocking this holiday season by loading an unprecedented $1.3 billion on its prepaid cards in the United States and Canada.
The figure for the final three months of 2013, unveiled in a note Chief Executive Howard Schultz sent Starbucks managers on Monday, highlights the growing importance the cards play in the coffee-house empire’s business.
The cards amount to a big advance payment to the company, and generally account for about a quarter of Starbucks sales in U.S. stores.
Holiday activations of new cards are especially juicy for the company — amounting to some $610 million this last season, Schultz wrote.
That’s a big bump in cash flow for a company that last year reported $14.9 billion in net revenues.
It also bodes well for the company’s future profits, as customers are more loyal to Starbucks when they have a card, and tend to pick pricier items, especially if they received the card as a gift, said McAdams Wright Ragen analyst Dan Geiman.
“They’ve got money on the card, it has to be spent, it’s not coming out of their pocket,” Geiman said.
In the memo to store managers and senior leaders, Schultz called the results “nothing less than extraordinary.” He said Starbucks employees should gear up for an “influx of customers” eager to redeem their cards.
An ongoing shift from traditional to online and mobile shopping may have played a role in facilitating card fill-ups: Schultz wrote that Starbucks’ investments in digital and mobile payments helped the company to “efficiently handle” the loads.
Starbucks won’t comment on how the $1.3 billion in card loads in the U.S. and Canada compares with the same period last year, nor on the figure for holiday activations, because it’s in a quiet period ahead of its first-quarter earnings report on Jan. 23.
But in the memo, Schultz said both numbers were significant increases from last year and ahead of the company’s plan.
Last January, Schultz said in an earnings conference call that globally more than $1 billion had been loaded onto the cards during the first fiscal quarter of 2013, marking a record at the time and the “best holiday season in history” for the card.
While the United States and Canada represent the bulk of Starbucks’ card business, the cards are also popular in Asia.
Starbucks card activations also broke daily records on three different occasions, starting Dec. 19, when 2.4 million cards were activated. New daily records were also set on Dec. 23 and Dec. 24, Schultz wrote.
Ángel González; 206-464-2250 or email@example.com. On Twitter: @gonzalezseattle