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Starbucks' annual revenue is about 25 billion. Let's say they are making a (very generous!) 5% on that balance. That's 80 million dollars or about 0.3% of their
by harryh 7y ago
Starbucks' annual revenue is about 25 billion. Let's say they are making a (very generous!) 5% on that balance. That's 80 million dollars or about 0.3% of their annual revenue.
Starbucks doesn't run its payment app so they can make money on the float.
- tempsy 7y agoUh why would you consider it revenue? It’s more like risk free profit. Meaning they keep some tiny amount of every cup of coffee sold, but 100% of interest earned. And it’s important enough that they call it out in their earnings report. And the more interesting use case is that it’s a billion dollar 0% loan, not necessarily that they make interest off it sitting in a bank.
- harryh 7y agoAnd the more interesting use case is that it’s a billion dollar 0% loan Maybe this would have been exciting a decade or two ago before interest rates dropped so far. Now Startbucks can issue all the debt it wants for...checks notes...about 2.3%.
- tempsy 7y agoOk. That is still more than 0. And it will continue to be 0 whether interest rates rise or fall in the future. And you missed the other point about how they actually move gift card liabilities to assets after a certain about of time because people forget about balances, so it’s actually negative. I think it’s a bit naive to think that holding $1.6b in balances is not useful or meaningful to Starbucks or a company hoping to emulate their mobile wallet success.
- mandelbrotwurst 7y agoThis feels pedantic, but to answer your question: because it is revenue and calling it profit is incorrect. It may be a very good revenue source which a high margin and very low expenses associated with it resulting in a large profit, but money in is revenue and money in net of expenses is profit. Parent was discussing the former.
- ethbro 7y agoObligatory Buffett-esque: "Cash isn't always about the profit. Sometimes it's about access to it."