BII CHART OF THE DAY: What Square's Starbucks Deal Might Look Like

Square announced yesterday that it will handle all of Starbucks’s U.S. credit- and debit-card sales.

According to Yahoo Finance, analyst consensus for the calendar quarters ending September and December are $3.38 and $3.81 billion, respectively. This doesn’t quite align with Starbucks’ fiscal schedule, but we will assume revenue distribution is similar.

Historically, Starbucks generates about 75 per cent of its revenue from the Americas. For the sake of simplicity, we’ll also assume Square is handling Starbucks’s Q3 sales even though the system probably won’t be rolled out for a while.

According to SAI’s Owen Thomas, 25 per cent of its sales go through its prepaid Starbucks cards. His assumption of 50 per cent credit card sales also seems fair to us.  

Additionally, Square’s annualized run rate for transaction volume has organically been growing by $1 billion every other month. Square last announced they were handling transactions at a $6 billion-a-year rate in June. If this growth rate continues, Square will handle the annual equivalent of $7 billion this month, $8 billion in October, and $9 billion in December.

Combining the expected Starbucks sales and its organic growth, Square would be handling $28.6 million of payments a day at the end of the year at an annual run rate of $10.4 billion. With a 2.75% take of transactions, it would be generating revenues of $787,000 a day—for an annual revenue run rate of $287 million.  

Square Starbucks

     

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