Ahead of the Bell: Starbucks' Web shopping worry

As more people shop online, will fewer people stop in at Starbucks?

Associated Press

NEW YORK (AP) -- For marathon shoppers, stopping in at Starbucks is often a quick way to refuel. So where does that the cafes as more people decide to shop online?

The Seattle-based company apparently felt the impact this holiday season. On Thursday, Starbucks blamed its slower sales growth in the final three months of the year partly on the "seismic shift" toward online shopping that was underway.

"The impact to us is that there are fewer people out and about in the weeks leading up to Christmas," said Troy Alstead, the company's chief financial officer.

Sales at established U.S. cafes rose 5 percent in the period ending Dec. 29, compared with growth of 7 percent a year ago. In the previous two quarters, it had climbed 8 percent and 9 percent.

Still, Starbucks executives were quick to downplay any potential repercussions the trend could have over the long term. In a call with analysts, CEO Howard Schultz stressed that the company was uniquely positioned to handle — and even benefit from — the growing migration to the Web.

To start, Schultz noted that the "Starbucks experience" can't be replicated. He also pointed out that the company has been aggressive in expanding its loyalty program, which gets customers to visit more often. The company has also expanded its gift cards business, which helps bring in new customers.

And perhaps most interestingly, Schultz suggested all that time spent online will make Starbucks cafes even more important since they provide a "deep sense of community and human connection." As evidence, he pointed to the company's 4 percent increase in customer visits during the period, despite the weakness many other retailers experienced.

Still, Starbucks did have to dangle some extra incentives to get people to come out; Schultz noted that the company was "a little bit more promotional" during December after realizing there weren't as many people milling about at malls and stores.

As a result, that average amount spent per visit likely went down a bit, he said.

Investors didn't seem too concerned. Starbucks' shares are up 86 cents to $74.25 in premarket trading.

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Follow Candice Choi at www.twitter.com/candicechoi

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