Starbucks says its US stores have made a full recovery from the pandemic thanks to drive-thrus and mobile orders

• Starbucks had a strong quarter with 11% sales growth compared to last year.
• The company credits drive-thrus and digital ordering with recovery thanks to their larger ticket sizes.
• Mobile orders also tend to have more customization, which also helps grow average order size.

Starbucks credited increased drive-thru sales and digital ordering with a strong second quarter on Tuesday, noting that its US stores have made a full sales recovery from the pandemic.

Revenue was up 11% over the same period last year at $6.7 billion. The growth was driven in part by larger tickets, Starbucks says.

Digital ordering, which exploded during the pandemic, was at an "all-time high" as customers ordered bigger tickets and increased frequency, Starbucks said. Mobile orders made up over a quarter of transactions in the US. CEO Kevin Johnson also credits Starbucks' AI called "Deep Brew," which recommends food and drinks based on the weather and time of day, for the growth.

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Food sales also hit a record, Starbucks said. Serving more food and larger orders to fewer customers is great for profit margins, especially in the drive-thru, J.P. Morgan analysts wrote Wednesday.

Drive-thrus were the other key to Starbucks' recovery this quarter, Johnson said. Growth at locations with drive-thrus in rural and suburban areas more than made up for a slower recovery in urban centers. "Out the window sales," including drive-thru and mobile orders completed through the drive-thru, made up over 50% of sales with a 10% increase over pre-pandemic levels.

The CEO noted Starbucks' new strategies for keeping drive-thru wait times down, even as customization increases and average ticket size grows. Baristas can take orders through digital drive-thru screens, which the company says are installed at about 3,800 stores. Starbucks began rolling them out in 2015, and they also use Deep Brew AI.

The company is also rolling out handheld devices for baristas to use for inputting orders. Starbucks says they are in 500 stores already after being implemented during summer 2020. Starbucks says it is designing new drive-thru ideas, including double lanes, drive-thru-only stores, and drive-thru plus curbside pickup locations.

"Full sales recovery in the US and favorable trajectory from here, robust growth in digital, and raised margin targets are encouraging," UBS analysts said. Despite the optimistic tone, shares of Starbucks fell about 2.8% in trading Wednesday following the company's slight revenue miss and a slower international recovery.

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