Starbucks (NASDAQ: SBUX) succeeds against the COVID-19 Delta Variant by aggressively acting as a survivor and reading trends. While some fast-food chains struggle as the virus remains, Starbucks is moving to grow drive-thru options to a virus-wary public to 45% of its stores by 2023 compared to 35% today. In fact, 60% of all new units in the pipeline will have one — as Starbucks thinks this is a long-term trend — and older stores will be retrofitted with them.
As Starbucks (NASDAQ: SBUX) bets on drive-thus to win against COVID-19 and its Delta and other variants, its stock closed last night at $119.54. Its daily average volume is 5,290,395. Globally, it operates 33,295 stores — with 62% of them located in China and the U.S. This $27 billion TTM annal revenue behemoth with a 10.43% profit margin and 77.60% quarterly revenue growth YOY is fast-moving savvy on its feet in seeing trends and addressing them. Where other fast food chains were caught flat-footed by the long term impact of COVID, Starbucks management saw the trend to drive-thus and acted to embrace them.
The Company in Q3 2021 did $7.5 billion, up 78% and store-for-store sales jumped 73%. Stock analysts project a $32 billion 2022 for Starbucks (NASDAQ: SBUX) in part because this is a company that does not rest on past success. For example, Polen Capital remains bullish on SBUX because “we believe the underlying businesses for the company remain strong.” Most fast-food restaurants have found that customers would rather remain in the safety of their vehicles as they order and take food out through their drive-thru windows. Starbucks sees the trend and is acting on it: adding more drive-throughs as a higher percentage of its stores. It hopes to have 55,000 shops by 2023. This company sees the future and is maneuvering to win.
Starbucks (NASDAQ: SBUX) said more than 50% of its sales in Q2 this year were made through drive-thus. Not only are drive-thus literally driving sales, but the Starbucks team has been able to make drive-thus their own, upscale and proprietary experience. A customer initially reads a menu, which offers a 60-40 ratio of food-to-beverage. This sends a message: Starbucks is not just about drinks, it offers its own food, too — from scones to breads.
Starbucks (NASDAQ: SBUX) seeks to differentiate itself from other fast-food chains that see a drive-thru as a quick order-pay-pick up option. Instead, Starbucks identified seven different “customer zones” carefully executed. The goal: $500 million incremental profit. As it pursues customers into the suburbs, it is sensitive to consumer concerns over COVID, its always-adapting variants, and the desire to main in the car — not enter the actual store.
Howard Schultz, founder and former CEO and chairman of the chain, wondered recently about whether Starbucks would even exist today if Covid-19 and the Delta Variant had struck in the beginning. Remember: this is from a unique chain which had a Seattle/European business model of people remaining and dawdling in the store, making it their home office or a unique/cool meeting place as they drank and ate. Now the strategy is to be the ‘third place”: not work, not home — simple a place to get away from both.
So as COVID changes the dine-in-and-lounge here model, Starbucks (NASDAQ: SBUX) changed, too. As the Q2 numbers prove, drive-thrus are an even more essential part of the chain’s financial, marketing and growth future.
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