Starbucks boosts market value through leadership change, innovative revenue strategy
Date
8/25/2024 5:57:56 AM
(MENAFN) Starbucks recently captured headlines with its high-profile recruitment of Brian Niccol, the former CEO of Chipotle, who has been offered a remarkable USD113 million salary along with a remote office in Newport Beach. This significant leadership move has resulted in a notable increase in Starbucks' market value, adding over USD20 billion. However, the impact of this change extends beyond just a new executive. Recent financial reports reveal that while Starbucks may be facing challenges in selling coffee, it is increasingly adept at leveraging customer deposits to bolster its financial position.
Starbucks, founded in 1971, appears to be employing a strategy akin to banking by collecting interest-free loans from customers through gift cards and account deposits. According to a Market Watch report featured on Sky News Arabia, the company reported USD1.77 billion in unused gift card balances, marking a 9 percent increase from the previous year. A significant portion of this unused balance is likely to remain unclaimed, with Starbucks incurring minimal costs related to the production and marketing of these cards.
In the past year, Starbucks generated USD196.1 million from unused gift card revenue at company-operated stores and an additional USD18.9 million from licensed stores. Although these gift cards do not have an expiration date, the majority are redeemed within a year, allowing Starbucks to record this revenue as earned. This approach effectively provides the company with a form of negative interest rate on customer deposits. Despite the potential for customer awareness of this practice, Starbucks has maintained a steady revenue stream from unused gift cards, with similar figures reported two years ago.
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