Starbucks in hot water over changes in loyalty program
Starbucks (SBUX) is finding a less rewarding reaction from Wall Street to its revamped loyalty program.
The coffee chain's shares declined nearly 2.5 percent on Tuesday, the most in more than two months, after Deutsche Bank downgraded the stock to "hold" from "buy," citing concern that the higher bar for customers to get free drinks or treats would hurt sales.
Starbucks changed its loyalty program to reward customers based on dollars spent, rather than store visits, a move that "could slow traffic trends (as competitors vie for new customers) in the coming quarters," Brett Levy, a Deutsche research analyst, noted.
Customers took to social media in February to voice their discontent with the changes, which took effect Tuesday, giving customers two stars for each dollar spent, versus the old program, where customers earned a star for each visit to Starbucks.
That reaction continued on Tuesday, with one former loyalty program member tweeting a photo of a cut up card with the words: "I can do the math."
The rollout comes a day after rival Dunkin' Donuts (DNKN) unveiled a revised loyalty program and mobile app for Apple iOS that let users make purchases via Apple Pay at some locations. The company released an Android version on Tuesday.