MW Starbucks customers are giving the company over $200 million of free money

By Steve Goldstein

Starbucks' turnaround efforts are still in their infancy, but at least they can rely on their customers to give them some free money.

The latest Securities and Exchange Commission filing shows the value of the coffee chain's stored value cards and loyalty program at the end of the March 30-ending quarter was $1.85 billion.

MarketWatch has written about this phenomenon before, and the point is customers have deposited more money at the Bank of Starbucks than the typical community bank.

That $1.85 billion benefits Starbucks $(SBUX)$ in two ways - first, as an interest-free loan until customers decide to use that gift card in exchange for coffee, sandwiches or other products.

Even better, the company gets to recognize what's called breakage revenue, based on the idea that a majority of these cards get redeemed within a year.

"Based on historical redemption rates, a portion of stored value cards is not expected to be redeemed and will be recognized as breakage over time in proportion to stored value card redemptions," the company states in securities filings.

Last year, breakage revenue came to $187.6 million in company-operated stores and another $20 million in licensed stores.

It's not a large part of the company's total revenue - last year, Starbucks had sales of $36.2 billion - but if you assume the costs are basically negligible, a not inconsiderable 4% of annual profits.

-Steve Goldstein

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April 30, 2025 03:52 ET (07:52 GMT)

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