Starbucks projects profits from tech, stores, and staff costs

SEATTLE, Sept 13 (Reuters) – Starbucks Corp ( SBUX.O ) projects profits will grow 15% to 20% per share over the next three years, a sharp increase from previous guidance based on a $2.5 billion to $3 billion spending plan. The same season on technology, new stores and renovations, the coffee chain said on Tuesday.

The company announced at its Investor Day event that it is introducing technology to make cold drinks and send digital orders to its growing number of cold drinks in an effort to keep America’s cafes from being overcrowded with orders and improve working conditions for workers.

The Seattle-based company expects to return $20 billion to investors through stock buybacks and dividends from fiscal 2023 to 2025. Wall Street analysts had largely expected earnings improvements in line with previous guidance for 10 to 12 percent growth.

The rise of digital orders, which now account for a quarter of orders, has helped the coffee chain gain market share during the Covid-19 pandemic, but has led to barista burnout and strained fitness in older stores.

The company is exploring “load balancing” technology that could send orders to stores that have the capacity to properly fulfill orders — instead of, for example, stores already being swamped by drive-thru customers, Chief Technology Officer Deb Hall said in an interview with LeFevre. Reuters

“Reviving” Starbucks Since Pandemic

The pandemic has changed customer behavior, leading to a flood of mobile, delivery and drive-thru orders, as well as cold drinks and customized coffee drinks.

The company has unveiled a sweeping plan, calling it a “reinvention,” to be led by interim CEO Howard Schultz, who will be replaced by Laxman Narasimhan in April.

The plan includes new equipment to heat food faster with less plastic waste, new store designs for larger shelves for ordering, and more employee benefits.

A new iced coffee beverage system shaves about a minute off the time it takes to make a mocha frappuccino, up to 35 seconds. Baristas no longer need to haul a bucket to the station every hour because the ice is automatically fed into the new equipment.

Another machine that brews hot coffee at once and eliminates paper filters is being tested in areas of Minneapolis and could be released next year.

Starbucks is on pace to reach 45,000 stores by the end of fiscal 2025 — or about eight new stores a day — it says. That includes a net new 2,000 new US stores and some delivery-only locations.

It plans to nearly double the number of stores in China to 9,000 — or one new store every nine hours.

UNION Backdrop

Workers at 236 stores outside Starbucks’ nearly 9,000 corporate-owned U.S. locations voted last year to join a union. In contrast, 52 stores voted against unionization, according to National Labor Relations Board data.

Frank Britt, who was brought in by Schultz to lead the company’s transformation strategy, said employees are on the front lines and know how to solve the company’s problems.

In the interview, he said, “Many of the concerns faced by the alliance or partners are real concerns. We agree, there is a lack of trust.”

Union members have been protesting this week to get their demands noticed. Billie Adeosun, a Starbucks employee since 2015 who works at a unionized location in Olympia, said Monday that higher wages are a priority.

The company has raised average pay by nearly $17 in non-union U.S. locations. Starbucks says the law prohibits it from giving unionized workers extra benefits without bargaining. Read more

“We know these benefits or higher wages…even without unions,” said Adeosun, who earns $15 an hour. “We were able to shine a light on this company and they are not the liberal company they claim to be.”

Reporting by Hilary Russ; Editing by Josie Cao

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