Despite market fears that a recession could be nigh, Starbucks CEO Kevin Johnson told CNBC Monday that its customers are telling a different story.
The coffee chain is more in tune with its customers than ever before, thanks to investments in its digital customer relationships, and the company is seeing results, he said.
Starbucks’ loyalty program, which contributes to 42% of sales, now has more than 17 million active users that use its mobile app on a regular basis, Johnson said.
“We have not seen signs in the U.S. of anything related to a slowdown, but we do know these things go in cycles,” he said in a sit down with “Mad Money’s” Jim Cramer, “but right now we’re firing on all cylinders and [the] consumer seems to be doing well.”
Starbucks collected $6.8 billion in revenue in its latest quarter, more than 8% from the same period a year ago. Same-store sales in the United States were up 7% and, with trade tensions at boiling levels between the world’s largest economies, 6% in China. Management raised full-year guidance to $26.4 billion.
Johnson, who became chief of the Seattle-based coffee franchise in 2017, said adding new cold brew beverages and enhancing the customer experience both in store and in a digital ecosystem has been key. Technology has allowed the company to automate staff schedules, improve partner engagement, and bring customer connection scores to all-time highs, he added.
“The company is on a path where we now are accelerating the pace of innovation in ways we believe are relevant to our customers, inspiring to our partners and they’re certainly meaningful to our business,” said Johnson, who is a tech veteran formally of Microsoft and Juniper Networks.
In the realm of beverage innovation, Starbucks announced that it will debut pumpkin cream cold brew as part of its fall menu on Tuesday. Its the coffeemaker’s first pumpkin drink since the pumpkin spice latte was brought to market nearly two decades ago, CNBC reported.
Coffee drinkers tend to consume the hot drink in the morning to prepare for the workday, but Johnson said its cold caffeinated beverages, which brew for 24 hours in cold water, have opened new opportunities past the noon hour. Starbucks was able to project a shift to cold drinks and saw that it performed well especially among millennials, he said. The CEO expects its nitro cold brews, which includes nitrogen to make it sweeter and creamier, will be available in all of its coffee shops by the end of September.
“The combination of our cold brew — nitro cold brew, our refreshers — has unlocked the afternoon day part,” Johnson said. “In fact, a little over half of our beverages now are cold beverages.”
Johnson has also committed to looking beyond the profits it returns to investors in determining Starbucks’ value. He joined nearly 200 other CEOs to sign a Business Roundtable pact redefining the “purpose of a corporation” to include customers, employees, suppliers and the community as stakeholders.
Johnson gave credit to former CEO Howard Schultz and other past executives for developing a “purpose that goes far beyond the pursuit of profit.”
“That means we’re going to invest and take care of our partners, whether it’s health care, college achievement,” he said. “We just exceeded … the goal of hiring 25,000 veterans or military spouses. We’ve exceeded that goal 3 years early, and we are now on a run rate of hiring 5,000 veterans a year.”
“All of those things you know add up to what we’re doing to really drive a purpose that goes beyond the pursuit of profit.”
After trading sideways for roughly three years, Starbucks’ shares have climbed nearly 50% this year. The stock climbed 1.9% to close at $96.50 on Monday.