Starbucks Profit

We are sure that you are familiar with store gift cards and the frustration of have 43 cents left on the card. In retail, gift card balances are known as stored value liabilities. Each year Starbucks recognizes that a portion of its stored value liabilities will be permanently lost. This is known as breakage. Starbucks recognizes this amount as profit. In 2018 the company recognized $155 million in breakage, around 10% of all stored value balances. Wow! Starbucks already pays just 0% on its debts to customers, but add in breakage and that equates to a roughly negative 10% interest rate!