Some Starbucks workers are staying home amid a surge in COVID-19 cases, but shoppers are still eager to pick up a coffee – and happy to pay more than usual for it.
Starbucks reported sales were up 13% at the start of its fiscal year – the three-month period between November and January – due mostly to an increase in the number of orders, as well as a bump in the average amount customers spent on each coffee run.
In the same time period, Starbucks said it is spending more than expected due to three factors: inflation and global supply chain disruptions, training and onboarding for new hires, and extra time off for workers who have COVID-19 or were exposed to the virus.
“Prior to the emergence of the omicron variant, we were experiencing some inflationary pressures and staffing issues. When the omicron variant began, staffing shortages amplified,” President and CEO Kevin Johnson said on Tuesday’s quarterly earnings call. “High inflation, COVID-related pay and training and onboarding of new members impacted our profitability … even while customer demand remained strong.”
Days and weeks before Johnson and other officials touted Starbucks’ investment in “partners” — the company’s term for employees — employees at about 50 Starbucks locations across the U.S. announced plans to petition to unionize. Workers in Seattle and Everett are among those attempting to form unions.
The Workers United union, an affiliate of the Service Employees International Union, said Monday it is filing 16 unionization petitions with the National Labor Relations Board. Those follow dozens of other petitions submitted in the weeks since the group’s landmark victory in a Buffalo, New York election.
Workers at these locations say they face understaffing in high-pressure stores and want more input on store policies, staffing, shift scheduling and safety protocols.
Starbucks officials did not address the union drives during the quarterly earnings call Tuesday.
But, officials said, Starbucks’ turnover rate in the U.S. has “stabilized” and “flattened” over the last several weeks. In China, the turnover rate was the lowest it has been in three years.
Rachel Ruggeri, executive vice president and chief financial officer, said the company expects its partner investment will translate to higher retention this year for its more than 200,000 employees.
“Credit for our success today and tomorrow belongs to our strong Starbucks partners around the world,” she said. “Our partners have our greatest respect and appreciation.”
Starbucks reported net income of $816 million, or $0.69 per share, in the first quarter of 2022. That was up nearly 31% from the same time period last year.
Sales were up 18% in the U.S. and other markets in North America but fell 3% internationally. Starbucks attributed the drop largely to China’s “zero-COVID policy” and customers opting to stay home.
Sales at stores in rural and suburban areas — where drive-throughs are most common — outpaced other locations, including those in urban settings.
The more than 26 million members of Starbucks’ rewards loyalty program represented about 53% of the total spent in stores. Members visited stores at a frequency rate three times higher than non-members.
“There is a pent-up demand for Starbucks and for people wanting and longing to return to their normalized routine,” said John Culver, the chief operating officer and group president for North America at Starbucks.
Starbucks recently opened 484 new stores, bringing its total to more than 34,000 locations globally.
As part of its efforts to offset increased expenses brought on by the omicron surge, Starbucks raised prices in October and January.
Culver said the company hasn’t seen a “meaningful impact” to customer demand following the price jump.
And, he added, the ticket price is likely to keep rising. Culver said Starbucks has “additional pricing action” planned for the rest of the year.
