Starbucks finds gold in drive-up windows

The stores with drive-up servce are far more profitable than ones without. So the coffee giant is adding the windows to most of the 1,500 US stores it expects to open over the next 5 years.

By Charley Blaine Jan 29, 2013 10:46AM
Starbucks (SBUX) started out as a nice little place to order a cup of coffee, sit down, relax and . . . enjoy it.

The experience was not meant for those crazies who zoom up to the drive-up window at, say, McDonald's (MCD), Wendy's (WEN) or Dunkin' Donuts (DNKN), get their coffee to go and roar back out into traffic.

But times have changed for Starbucks. The company has figured out that a drive-up window makes for a more profitable store.

So, the coffee giant will offer drive-up service at some 60% of the 1,500 stores it expects to add in the United States over the next five years.

Just how profitable are drive-ups? Starbucks stores with drive-up windows account for 30% of the U.S. total, CEO Howard Schultz noted on the company's conference call last week. But they produce 45% of U.S. retail profits. And, since Schultz and his team aren't stupid, they're going to go with the trend.

Starbucks did have a fine fiscal first quarter. Revenue reached $3.8 billion, up 11% from a year earlier. Comparable-store sales were up 6%, with 2% due to higher prices and 4% due to more traffic. In the U.S., same-store sales were up 7%. In China and the Asia/Pacific region, same-store sales were up 11%. Earnings per share rose 14% to 57 cents a share. Debra Leewaye gets a Starbucks drink from a drive-through window at Starbucks in Lakewood, Colorado (© Matthew Staver/Bloomberg via Getty Images)

Starbucks has bought Teavana Holdings, a key element in its drive to become a global leader in tea. It opened its first store in India and its 100th store in Beijing.

The shares were off 74 cents to $56.08, but they're up 4.6% for the month. That's a touch better than the Nasdaq Composite Index's ($COMPX) 4.5% gain this month and the 3.1% gain for the Nasdaq-100 Index ($NDX), which is up 3.1%.

But it is lagging the Standard & Poor's 500 Index ($INX), which is up 5.2% for the month and held above 1,500 for a second day in a row on Monday. Starbucks is also lagging the Dow Jones Industrial Average ($INDU), up 5.94%. The Dow, in fact, appears headed to its best January performance since 1994.

More on moneyNOW


3Comments
Feb 4, 2013 4:53PM
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If starbucks didn't limit to one MPOS provider, for sure we will be looking at 50% sales increase and more than a 100% loyalty card member increase before the end of q1. I am an mPowa (www.mpowa.com) user, and if my mpowa is compatible to starbuck's app then I could be purchasing all the things I eat and drink when at work in a starbucks!
Jan 30, 2013 4:25PM
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There is one near where I live and those  " green" starbucks types are lined up there at all hours with those huge SUV's idling away in the drive-up line-  Gotta watch them too, cause they will cut across 3 lanes of traffic without signalling to get in line.
Feb 4, 2013 5:13PM
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I agree with Jesslas. I am an mPowa (www.mpowa.com) user too. Anyhow, I will stick with mPowa (www.mpowa.com). They are the best in MPOS. I don't care about starbucks... I'm on a diet anyway! hehehehe
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