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Changes To Starbucks Rewards Program Could Affect Store Traffic

Starbucks Corporation’s SBUX 0.67% shift to the new Rewards program could impact traffic much more than was earlier estimated, BTIG’s Peter Saleh said in a report. He maintained a Buy rating on the company, with a price target of $64.

Starbucks changed its Rewards program from transaction based to spend based. At a conference in New York last week, management indicated that the traffic impact from the change in Starbucks Rewards is likely to be -200bps, as compared to the earlier expectation of -100bps.

Overall Impact

Analyst Saleh pointed out that the increased negative traffic impact was unlikely to have any impact on the company’s comparable sales. He added that this would impact “the composition of traffic and average check.”

Saleh recommended investors to expect “fairly modest traffic results in the Americas segment in coming quarters.” He elaborated that taking into consideration the estimate for Q4 Americas comp of 5.0 percent and the higher traffic impact projected by management, Americas traffic could be flat to slightly negative in the current quarter and remain flat to slightly positive “until the program change is lapped in April 2017.”

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Jul 2016Goldman SachsMaintainsBuy
Jul 2016BTIG ResearchMaintainsBuy
Jul 2016WedbushMaintainsOutperform

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