Starbucks speeds up 'on-the-go' store format as lockdowns ease

Starbucks is doubling down on its efforts to adopt more stores to an "on-the-go" format as it adapts to the economic realities of life after coronavirus lockdowns. Yahoo Finance’s Julia La Roche joins Zack Guzman to discuss.

Video Transcript

ZACK GUZMAN: Of course, it's not just small businesses impacted by the coronavirus pandemic. Also some rather large ones, including coffee giant Starbucks, noting yesterday that it's probably going to take about a $2 billion hit when it comes to store closures and the rest of the impacts of the coronavirus crisis.

For more on how the company is navigating that, I want to get to Yahoo Finance's Julia La Roche, who has more details on that. Julia.

JULIA LA ROCHE: Hey, that's right, Zack. Where in what is Starbucks' fiscal third quarter right now. They're on a bit of a different calendar. And you were just referencing how their operating income will be impacted because of the COVID-19 shutdown. Keep in mind, they shuttered more than half of their US store fleet, converted to that drive-through-only model, if you will.

And during the month of May, they did start to reopen their Starbucks stores. 95% of the US fleet has now been reopened, converting to that more to-go, more contactless pickup model, if you will, that we're seeing. And of the 5% that haven't opened, most of those are in New York.

So for the quarter, the consolidated revenue will decline by about 3 billion to 3.2 billion. That's what the company said. Operating income also taking a hit. On those closely followed comparable store sales numbers, keep in mind, they also said that this will be the most adversely affected quarter, so expect to see that.

They are kind of seeing a bit of a recovery. CEO Kevin Johnson said they had six consecutive weeks of those [? comp ?] store sales that closed. Now, they're starting to rebound a bit. It's still going to be quite a long road ahead.

Some interesting insights. They are going to be shuttering some stores over the next 18 months, closing 400 of their stores. They are still opening stores. They'll open a net new 300, down from 600 expected. Store closures I referenced-- usually, they closed 100 stores per year. And also transitioning to more of that to-go model.

The third place that Starbucks is known for, those cafe seating, that traditional seating experience is not going away, but they are doing more of the pickups, the Starbucks pickup stores. They have one in Penn Station. Expect to see more of those in metropolitan areas like New York City, Seattle, San Francisco, Chicago, those sorts of cities.

And then in the suburbs, expect them to roll out more drive-throughs, more curbside pickup. It's all about that Starbucks app. They had about 20 million users as of the end of the last quarter. We'll be watching what that number will look like. And a lot of changes for Starbucks coming in the months ahead.

ZACK GUZMAN: Yeah, I mean, clearly, the investments, as you noted, Julia, there, in its digital app side. And all the ease of ordering clearly paying off to at least weather the storm. Appreciate that update.