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Target to add Starbucks curbside pickup across the country

A worker delivers an order to a drive-up customer at a Target store in Miami, Florida, Aug. 19, 2020.

Joe Raedle | Getty Images

Target is looking to jolt sales by adding Starbucks drinks and food to its curbside pickup service at stores across the country.

The big-box retailer on Wednesday said it will expand that offer to its more than 1,700 stores that have Starbucks cafes and Drive Up, its curbside pickup service. That’s the vast majority of its nearly 2,000 locations. The company said it will begin the chain-wide rollout this summer and will have the new feature across stores by October.

Target has experimented with ways to sweeten the shopping experience and deepen customer loyalty, especially as consumers buy fewer discretionary items and prioritize spending on experiences such as concerts and dining out. Among its strategies, the discounter has opened more mini Ulta Beauty shops, debuted curbside returns and invested in speedier shipping.

Target has a licensing agreement with Starbucks. Baristas at its stores are employed by Target.

The retailer began testing the Starbucks curbside pickup service at some stores in the fall. The feature allows shoppers to tack on a coffee drink or another Starbucks menu item when picking up groceries, a birthday present or any other curbside pickup order they made online.

Target said it proved popular. The Iced brown sugar oat milk shaken espresso, birthday cake pop and iced caramel macchiato topped the list of most commonly ordered items.

Target’s curbside pickup service, Drive Up, helped fuel the company’s e-commerce and sales growth during the Covid-19 pandemic. The company’s annual revenue shot up about $31 billion, or nearly 40%, from the fiscal year that ended in January 2020 to the fiscal year that ended January 2023.

The company declined to say how much Starbucks lifted sales and visits at the nearly 250 stores where it tested, citing the quiet period before it reports earnings.

Yet, according to Target, curbside pickup has led to more business. Customers who try Drive Up for the first time end up spending 20% to 30% more at Target than they did previously, the company said. That explains why Target has added other features and more items to curbside pickup, including beer and wine.

But Target has had a rocky stretch over the past year. It missed Wall Street’s earnings expectations three out of four quarters in the most recent fiscal year as it coped with a glut of unsold inventory and higher-than-expected markdowns.

Target will report its fiscal second-quarter earnings next Wednesday. The company said in May that it anticipates slower sales to continue, even as its profit margins improve.

It predicted comparable sales will range from a low-single-digit decline to a low-single-digit increase for the fiscal year. Target said its full-year earnings per share will range between $7.75 and $8.75. 

Shares of Target are down about 12% this year, lagging the approximately 17% gain of the S&P 500 during the same period. The company’s stock closed Tuesday at $130.98, down about 1%.

For its part, Starbucks has been diversifying its store formats in recent years as customers spend less time lingering inside its cafes and more time ordering from their phones or in drive-thru lanes. The coffee giant has opened cafes reserved for mobile orders, with walk-up windows, and inside Amazon Go locations.

The cafe locations inside grocery and Target stores drive sales for Starbucks, and incremental traffic for those retailers, even as their customers pulled back on visits and spending, Starbucks’ then-CEO Howard Schultz said in February.

— CNBC’s Amelia Lucas contributed this report.

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