Starbucks Achieves Remarkable Digital Milestones and Strong Growth in Q4

Starbucks, under the visionary leadership of CEO Laxman Narasimhan, continues to unveil a new era of brand delivery, combining in-store experiences with digital innovations. The company has set its sights on five strategic areas, each contributing to its impressive success.
Starbucks digital transformationThe CTO (Chief Technology Officer) of Starbucks is Deb Hall Lefevre. She leads the tech function with the mission of ensuring our stores run smoothly each and every day while delivering winning digital partner and customer experiences.

Prior to coming to Starbucks, Deb Hall Lefevre was the Chief Technology Officer for Couche-Tard/Circle K where she was responsible for the global technology and digital strategy and execution across a network of 15,500 locations and 125,000 employees.

In the fourth quarter, Starbucks reported a record-breaking total company revenue of $9.4 billion, marking an impressive 11 percent year-over-year increase. For the full fiscal year 2023, Starbucks reached a remarkable milestone, with total revenue hitting $36 billion, reflecting a substantial 12 percent growth year over year.

The growth story continued in the global store sales, which increased by 8 percent year over year, both for the quarter and the entire fiscal year 2023. This achievement was driven by a healthy mix of ticket growth and increased transaction volume, underlining the brand’s enduring appeal.

Starbucks does not reveal its spending on digital transformation initiatives. Starbucks’ global digital prowess came to the forefront, with Starbucks Rewards programs experiencing phenomenal growth in international licensed markets. The 4 million new 90-day active members contributed to 30 percent of total sales, marking a remarkable 9 percentage point increase in just one year. This growth was largely attributed to Starbucks Digital Solutions.

In the U.S., licensed store revenue remained robust in Q4, showing an 18 percent increase from the previous year. This was partly due to consumers embracing pre-COVID routines, including summer travel and business trips, and the expansion of digital offerings such as Mobile Order and Pay (MOP), available at airports and curbside at select retailers.

North America reported an operating margin of 23.2 percent in Q4, expanding by 420 basis points from the prior year. This growth was fueled by increased efficiency in Starbucks stores, driven by reinvention, sales leverage, and favorable pricing impacts, albeit partially offset by ongoing investments in Starbucks partners.

The international segment displayed impressive results, delivering $2 billion in revenue, an 11 percent increase from the prior year, or 15 percent when excluding China. Store sales in the international segment increased by 5 percent, driven by a 6 percent transaction growth, demonstrating that store traffic and digital engagement continued to thrive, thanks to a growing base of Starbucks Rewards members.

Moreover, the international segment achieved a remarkable 12 percent net new company-operated store growth year over year. China played a significant role in this growth, with the country exceeding expectations by opening nearly four new stores daily in Q4, surpassing the 20,000 store mark collectively across the segment. This leaves ample room for further expansion in the years ahead.

Looking forward, Starbucks anticipates fiscal year 2024 U.S. comparable store sales to grow in the range of 5 percent to 7 percent. This projection is underpinned by the brand’s ongoing commitment to innovation and technology, customer loyalty, and robust digital engagement, as evidenced by a strong 9 percent comp growth in the fiscal year 2023.

China’s performance is expected to contribute significantly to global comp growth in fiscal year 2024, with expectations of 4 percent to 6 percent comp growth in Q2 through Q4. This growth is driven by Starbucks’ increasing digital capabilities and local product innovation, resonating with customers and boosting engagement.

Starbucks also envisions progressive margin expansion in fiscal year 2024 as the company continues to prioritize efficiency, both in and out of its stores. Investments in partners, stores, and customers, including wages, new store equipment, digital and product innovation, and supply chain modernization, are expected to play a pivotal role in this expansion.

Starbucks’ digital reach is impressive, with over 75 million customers worldwide engaged in the last 90 days, and the company sees significant potential for further growth in its digital relationships. This digital evolution promises an exciting future for Starbucks, where the blend of in-store experiences and digital innovations will continue to drive success and customer engagement.

Baburajan Kizhakedath