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Uh 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 earn
by tempsy 7y ago
Uh 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.