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- Starbucks reported disappointing sales Tuesday in both US and international segments.
- One thing that's not helping: the peak demand in the mornings is too high.
- The company said a mid-teens percent of mobile customers abandon their carts due to long wait times.
Starbucks is having a rough year so far.
The Seattle-based coffee giant posted worse-than-expected sales figures for its second fiscal quarter as visits from "occasional customers" declined, the company said Tuesday.
But while visits from loyal customers remain strong, CEO Laxman Narasimhan highlighted a curiously Starbucksian problem that any occasional or loyal customer has likely encountered: demand is too high during the peak morning rush.
Narasimhan said on the company's earnings call that nearly two-thirds of Starbucks' morning business in the US is from rewards members using the mobile app, which has yielded a remarkable insight.
"We saw a mid-teens percent order incompletion rate within the order channel this past quarter," he said. "In other words, customers using Mobile Order-Pay put items into their carts and sometimes chose not to complete the order, citing long wait times and product unavailability."
That works out to more than one in eight mobile order customers opting not to buy a menu item they were otherwise interested in — a hefty chunk of cash left on the table for Starbucks.
Even as Narasimhan assured investors that his team is working diligently on improving performance in the morning rush, he also said the company is ferreting out untapped demand at all hours of the day.
"Last quarter, we mentioned we were conducting a pilot program to serve customers overnight between 5 p.m. and 5 a.m. when our stores are traditionally closed," he said. "During this pilot test, we doubled our business. Building off that success, we are aggressively pursuing options to build a $2 billion business over the next five years."
The bottom-line impact of these strategy shifts will take more time to be seen however, and the company cut its revenue forecasts in half.