Starbucks (SBUX) 29 Jul 202020 Q3 Earnings call transcript

Good afternoon. My name is Hector, and I will be your conference operator today. I would like to welcome everyone to Starbucks Coffee Company’s Third Quarter Fiscal Year 2020 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. now of call Investor will Doraisamy, to I President Vice Relations. Instructions] turn over the Durga [Operator Ms. Doraisamy, you may now begin your conference.

subject call Good Americas. uncertainties joining last be our Roz Officer our us Grismer, CFO. are in quarter which materially thank that joined Johnson, cause President with filings you Report our by in discuss such to by Annual statements. statements for considered This statements, and including XX-K Form on in be statements these and Group will results. cautionary earnings and third report differ Pat CEO; will XXXX fiscal the SEC, to include release and could conjunction various risks afternoon, our Operating with year Q&A, quarterly be Kevin should and and Brewer, actual discussion led And conference risk Chief on XX-Q. and today forward-looking President our from everyone, Any to Today’s discussions for we results Form will factor

the based a results. In reasonable, information items. Starbucks are accurate. strategic GAAP impact we costs but update from and to spread to by These other obligation to to charges, of results of restructuring any forward-looking actual no items all not non-GAAP fiscal in to excluded and These which of virus results information. impairment assumes XXXX were statements created previous addition, including items integration our these variety forecast. the prove of or were be the assumptions, include and may actions transaction comparing related our forecasts of at the on COVID-XX available were estimate time believe we and prior on which some or several

reconciliation conference is our our investor.starbucks.com website XX, will For and certain website through well being measures. a This an measures August archive corresponding to as find available in corresponding webcast GAAP please call of non-GAAP call, Friday, to measures on these with at their of non-GAAP GAAP the the measures mentioned refer XXXX. today’s financial as financial webcast be

calendar October our fiscal Finally, turn call planning I Thursday, conference year tentatively for XX, your for over please quarter to note now call XXXX. fourth has XXXX scheduled the will Kevin. and purposes, been earnings that

serve. Supporting community of health and showing and positive And they up to every serve. in agility officials and contain me. local our virus. way responsible And positive work inspires in government each as the our dedication, period, partners health. transparency certainty mitigate energy a economic The Starbucks and we built dynamic of the the this I and I principal while through Throughout that, for believe prioritizing around shutdown, decision good provided world entire values period. since we very times challenging for being us this world, this well welcome. matter. been of and partners Well, guided And afternoon, partners as and the joining call I’m Prioritizing the It’s pandemic during COVID-XX our and the and Thank the have Starbucks of mission global navigating simple Starbucks pandemic. responded United by humanity today. of three In very and last you how adversity, all partners communication with grateful. trust making in been by We earnings stakeholders. am their health combination and proud of and our months three principles. customers values all the has trust, through has dynamic

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are With with strong Starbucks all believe important navigate we the pay points. is important My strengthened we strategy reality. of hope we for On this the future. is the a for ensure appropriate two flexibility we this take advance very today’s driving inspired quarter took we building summarize And how investments long-term continued to ever. and this situation is partners, our future as steps our rapidly you success. call maintained call, have the significant adapting to brand while attribute position we sheet, and Starbucks. all than the into stakeholders the quarterly our Trust I earned. business understand maintaining Starbucks for is to shareholders, dividends customer will trust the current made of that will to results liquidity new this dividend away stronger payment recovery loyalty are as business continuing balance And I and long while from Starbucks and did that

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in stores With as the the unfolded. vast now reopened, both the we sales majority and of saw world quarter improvements around meaningful profitability

growth demonstrated connection gains. share affinity scores, market improvements customer in is loyalty very in Starbucks and as strong, by our customer for customer Additionally,

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of year And our As Starbucks the to XX%, ordering percentage which in transactions, X year finally, above as customer as from customer usage result, percentage in from ago. a highlighting our total members ago loyalty re-engaging of points rose is tread, well a acquiring up new a pre-COVID to QX, points percentage X increased of tender Rewards as a base. mobile existing XX% success

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in continue the occasions the improvements peak We some see to shifting daypart. as morning well later as to customer morning in period

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orders, as the of and growth entryway orders, sales stores increased pickup mobile the in-store quarter Almost mobile through XX% flow moderated reopen we of in As QX unfolded. combination order-and-pay. to-go and to drive-through volume and volumes include transaction ticket

in U.S., late national morning levels, with the transactions from Delivers tripled In volume QX addition, with highest in coverage in mid-day. QX the the Starbucks and

recovery that we increasing enhancing All this drive customers experiences adapting by indicates of those familiar customers and and throughput simply desire. safe, are convenient are and well-positioned to routines, further their

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two by reinforcing key take messages, away close this you from me I Let hope call.

working, key results business First, of improving our recovery is as the segments. strategy evidenced across by all our

key Second, our points enable sustainable ahead. sheet we differentiate and our that and play to us offense reinforced Starbucks our business to Those an strategic have the opportunity reinforce initiatives by future. future-proofed accelerating model growth balance further two view optimistic long-term of reinforced

equity, change. we our times building to have and upon complex The actions to resilient to Before in today. help that opportunities Simultaneously, for true want inspire America several racism navigate embraced, deliberate always have partners us for unite impacts welcoming partners. given values not us. taken regard and address have we That than you of to who social it never is joining has the it Starbucks our the more inequality, I issues responsibility Starbucks us that The end. will public safe in role what and and that to of thank positive thank commerce everyone, And health a work partners underway we build been environment to awakening we our promote today. powerful quite to and believing provide been these all a there call, create us has core. mission And systemic customers and are and Starbucks communities. I again at and this advance months last is This expect unprecedented is continue a is warm, all COVID-XX. conclude

our another heartwarming. Your in commitment, we caring as and operate one pandemic and communities which well is this through as the dedication for customers

proud and to you. You are the heartbeat service of am of in I work Starbucks,

As always, Thank and bringing your you and communities. support. for to our along our your we today look ongoing for forward time to journey strengthen opportunities create you attention and

Pat. to over Now,

Thank you, circumstances. Kevin, our and to good all and company for They our Kevin’s Starbucks deliver have heartbeat safe, the familiar under worked and very afternoon, our everyone. customers echoing and challenging by will convenient start experiences for our I support communities tirelessly of to inspiration. are partners appreciation who

that Although sheet on we long-term, and to the the profits of our are all sales us our impacts has while make allowed we COVID-XX that investments very balance weighed our business the important financial QX by segments and in for encouraged fact recovered more quickly results, and significant across the our than operating strong heavily the expected, pandemic. weathering

At that of significant the pandemic, I I from sales a that well response the inclusive $X.XX, COVID-XX, outline to investments of impact store flow Non-GAAP XXXX, was in consolidated our due by Americas channels, QX. for guidance the perspective restricted $X.X QX impact discuss in the later. lower followed for noted for margins. the in that fiscal through billion, than which performance but a some COVID-XX hours and in I operating Starbucks equates range from $X.X by largely $X.X approximately of $X.XX provided still considerably preliminary earlier prior sales, XX% made as a We we loss our as stimulus guidance billion of on revenue XX, revenue including the EPS temporary This sales we on variable billion a expected partner segment and program then than down primarily June estimated prior the impact observe better higher EPS in that and Non-GAAP U.S. and results fiscal closures, $X.XX customer on as will through reported QX provide XXXX. better first our certain prior driven approximately to estimate was year which minus XX% benefits was due preliminary to be in will margin X-K through income incremental the the Americas and attributable on revenue segment negative respectively. revenue decline shortened includes on government highlights in store improvement down we COVID-XX global flow QX due operating year, billion comparable of of significant a I revenue and sales an decline operating QX, will store of XX% approximately to to the XX% flow in to in costs, QX our a than For than net business, estimate consolidated QX, support We traffic. to of be which XX% rate lost XX% as to the $X.X for rate reduced expenses. materially profit incremental operating billion, quarter, year. well $X.X typically primarily from in was

better range. from posted with The profitability in a month the May, comparable both XX% across profitability trended guidance were our for minus Importantly, business U.S. of the and improving in towards each the XX% quarter sequential to store business of June, sales positive and comparable improvements end restoring in the sales sales decline positively month.

in of the segment’s prior related store due benefit Beijing in was two that a on in QX in XX% exceeded by softness quarter we sales to of last boosted This the traffic the value-added to month, to benefit relative than offset driven comparable of sales resurgence in tax or largely by segment’s reflect sales The city. Japan’s faster expected exemption China. temporary VAT weeks Moving also X% last to QX a in COVID-XX emerged that recovery, by but declined shared pace successful by comparable product store expectations year, primarily The promotions. seasonal International. the

excluding improvement percentage For VAT sales point was comp a June, half X of store comparable which basis. sequential for to months true-up related May’s This the after declined the quarter. notable of about exemption a benefit, two of a month first like-for-like on XX% to the an was China’s

year. Development’s orders, and the impact X% adverse transition COVID-XX The grew basis improvement non-GAAP an the segment’s impact estimate These Normalizing improvement programs, the to were favorability in year, and percentage revenue of from as XXX the through was XX% that Development’s a China of unique was Nestle VAT non-GAAP within activities comparable lost million in QX, contraction a rent basis prior sales store QX. QX lower $XXX just impacts packaged decline licensed concessions as the over and offset in points China transition-related in was QX Thailand QX flow of and that from product sales. well including offsetting Development Alliance the decline comparable of XX third international sales a million lower revenue was attributable related points. On dilutive the items revenue operating At versus of Channel well contributing margin respectively. minus Development. the shared of The year. prior million growth higher reduction period, during foodservice margin lost strong on the outbreak due relief The the margin for sales coffee basis of was unfavorable from temporary temporary from prior XX% approximately pandemic Channel XX.X% International’s past in lapping, Channel partially adverse with for to as prior $XXX a over business rate due XX% Japan. transitioning extension For We XX.X%, in in relief store to in product the Channel sales business. revenue X% quarter, in the new manufacturing roughly including income the Coffee net impact $XXX government the there prior customer primarily XX% items to up Global year, limited prepared our in and the decline to QX over last program to XX.X% Development’s licensees declined prior level, time normalizing of COVID-XX mix primarily the inventory were COVID-XX our contracted temporary loyalty the favorable on Revenue the operating result to impact growth to benefits was in to both year-over-year volumes, months. was the benefited International’s point by When production fulfill operating as single serve resulting fixed the year. non-GAAP International’s in revenue year. as sales, the XX% Channel million by impact down XX% X% royalty driven mentioned, operating of across as retail China’s company’s consolidated XXX X $XXX driven XXX on sales the XX% our Also an I QX costs licensees. decline QX, deleverage to by shift year. business additional segments that of And operating was we of primarily to points coffee COVID-XX. operations store granted

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by who we suppliers third, we royalty development minimum effect in partners terms and services And supplier globally innovation. growth can Second, product are helped proprietary driving this long-term And volumes of strategic temporarily in sales the extending by through of international products certain periods July. commitments several licensees of and more with payments support supported in depressed honoring accelerated supply our ongoing our flexible our crisis they relief. our sustain weather so during

that scale well as and mission of with of are to values the the our We invest did fortunate our strength balance for business as sheet and enabled us a our while company, us the positioning we consistent future.

attractive Our to issuance shareholders. of year’s expenditures, course, bond at our honoring dividend bond sustain $X us and our capital quarterly next investments, billion maturities payments, in fund rates, cover to these enabled pre-fund our commitment May

in to upward a exited cash reduce setting momentum, we we quarters. our on us leverage QX, future solid as with positive financial Importantly, path flow were

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QX XX% and store also down for and U.S. comparable expect sales for to to XXXX. We Americas fiscal be XX%

in to be that that uncertainty of seating underscore actions as of minus our as U.S. bolstered operating improvement operations in innovation. expect the continued portfolio sales our persistent flare-ups U.S. regional modified closed, Currently, our several June minus Kevin in U.S. by of even locations remaining stores our sequential capabilities fiscal July the our the delivered operations digital COVID-XX parts XX% will the and to described in recent for contactless XX% in well nearly estimate dialed improvement business response in environment, in QX, as some the we from with cafe relation of limited the we experience, beverage X% company-operated store U.S. approximately of customer and a in While some COVID-XX XX%, that we focused flare-ups. comparable our back we

segment. Moving on our International to

the we impacts quarter, expectation COVID-XX in comparable International’s QX, impact. between to and a fourth to including sales XX% ease in With continuing Japan, particularly decline the in of favorable XX% VAT X% expect now store

flat For we range to comparable and QX store China minus specifically, sales between expect X%.

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exemption will We of at VAT the expect expire December. end the

in XX% the Development. to of $XXX Channel X% certain fiscal the is to to a year lap the reflecting negative QX Coffee segment’s in the we that through transition currently revenue to basis as expect meaningfully as to approximately improving we better XXXX, in our with EPS QX in between sales between rate to to expectations the relative EPS the we current results XX% non-GAAP benefits in non-recurring a business in we globally, the related to it our revenue realized to QX, $X.XX $X.XX. to prior prior between EPS versus decline compared and to and We This $X.X which full rates roughly profitability rate $X.XX. than year, expected expect forecast. leverage flow impact in for flow fiscal of segment’s range XXXX. $X.XX QX XX% $X.XX We QX to billion related will recovery, margin COVID-XX, QX. Adding the roughly we for XX% year QX, delivered will expected to to prior in operating and fiscal $X.XX X% full and the decline reported GAAP GAAP is to of to $X.X expect COVID-XX estimate very items Global in for at EPS primarily absence non-GAAP $X.XX to comparable on growth in we This we expect Alliance of We be a year QX. benefited improved on fiscal outlook million that up now through EPS billion. and XXXX EPS to sales return lost QX. billion our expect by of reflecting $X.XX of decline coupled with level, that This in compared yields to of globally, sales enterprise QX now all Finally, be the XXXX income offset estimate continued With approximately the margin $X.XX to top-line

infection and recover for the global major sustained curves quarters past months on going China that Based we substantially will recovery of perspective in any the like to and and waves our forward. by impact China sales well I’d respectively. growth COVID-XX fiscal what quarters end that year, Now we some comparable navigated in the as first planned innovations next six learned of of economic U.S. the for anticipate we’ve and we’ve barring U.S. the on our XXXX and/or and store new as as second share disruptions, and

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confident other improve. to Starbucks. and it us considerable honor developed our the company mission which growth unlock Our combined our and liquidity and investments and for to the are Starbucks, a appeal position It and continuing quarter position invest made ever in values And remains we the with level we in portfolio, of has in we to the business. as future. strong Thank stakeholders, other And store many Kevin the our and joined your been call. has for brand worst future to as strength our full and continues a evolving very as challenging as and happy agility potential partners of believe take of Durga our businesses, at is behind of I us unique outlined leave are new a top of The have resilience us. with Brewer, Operator? questions by that, our but We’ve you. for Roz

Your Jeffrey question the proceed Please Instructions] Thank Bernstein with from question. with your Barclays. you. first [Operator of line comes

much. very you Thank Great.

outlook seems perspective. most we entering Just consumers from looking COVID, bit and like little a investors It the broader like the about a consumer talk on are recession. a of alike heels seem to

fourth questions about of consumer versus to contrasting to I’m why better whether dozen I of China years a around, seeing or of expect insulated and a you’re and go end perhaps bit a And just think So so clarify, the signs slowdown at the maybe performance much. a China I’m from comparing to you fiscal U.S. Thank were just related wondering recover you maybe then China? if couple all that. delay mentioned I substantially your XQ, of talk you wondering comps that very the this weeks? the by the recent you previously brand could saying you fiscal end quarter. by little any in think of the ago

your is Yes. Kevin. Jeffrey, take I’ll this questions.

second First your with of all, start question, I’ll China.

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so And contributing factor that was in the China.

continued to of economists. for But recession, demand growth of the is economic the leave Starbucks. I’ll terms predictions we’ve seen what In

in and you up comps we’ve street. cars we And lined continue drive-thru, convenient. to recovery increase In is to channels the is outlined. you look thing and safe, typically how that times are deploying can fact, grow handheld of our these familiar seen why, do what the and the a at drive-thru. Starbucks for There often know that’s same-store the we’re out basically example, one throughput number I have into point-of-sales. many don’t The

line So to enabling have we curbside can up there occasions of continue taking cars, we throughput now open orders for partner Similar, more the going will which through deploy to dramatically into handheld us to transactions our stores. Starbucks point-of-sale, is walking this out customer drive-thru. more where at that a increase drive

the viewed going think on And and us to in the able so I that throughput safe on those our we’re as are being demand channels curve. help of seeing recovery by and in to terms that’s based by increase what customers, convenient

presence. think – differentiated recession hit, to lots I of We’ve we’ve should start got points of of terms period ourselves. recessionary In

We’re serving customers.

the think brand is strong. I

And I think Our that well we’re might anything digital navigate is reach our strong. come positioned to way.

to this on part would important and the back have today platform in industry-leading what XXXX, that digital program us Starbucks compared said were years advantage more ago. Jeffrey, And that an XXXX. resilience Kevin we exist XX has competitive thing and that’s build gives to say we compare if didn’t rewards a to an of today One is recession. I you during Pat. Today, where last is economic

question Please from Sara with of question. line Senatore the Bernstein. your next comes with proceed Your

thank I I bit the a to about you. just wanted could. if ask guidance, Hi,

just the there actually Thanks. parts. markets, versus I the comps sort moving this of again on midpoint said expected. considering of but on reconcile XQ sales a seems with through maybe happen maybe the most little if again again you’ve more You much But since if same better line at I’m I that consistent than you a of guidance. figure it and that and it EPS? what top-line? year top-line with is to like are – understand, will to lower discretionary looks that the it big the in out if profit more being or profits lot And conservative was has the the quarter profit kind of operating of curious, understand But been recovered just trying bit trying basically quickly trying even a EPS, function there look than lag to in pretty of bit said next recovery the then quarter, difference might of Just me, a the comps to or there’s a like this why disconnect was I how XQ, sort the expected was investments? flow of

do Pat, Sara. you take want Thanks, that one? to

Yes. Thank you, Sara.

see to right. and sales to much So flow manage inventory. a improvement efficiency position have profit sales recovery in you the shape with compared the increasing deployment the as was fact did XX, sales. QX, stronger much stronger that you’re we but much better did curve, a filed improvement we absolutely better than we to We And saw relation recovery, had in the outsized to the in than the relation the to labor as expectations highlighted. across visibility when June due We more that’s greater we our are of our to the expected our primarily performance operators on in X-K through, month, sales profit recovery

are we as it’s in QX, that is to Japan that as consequence, company-owned the In comparable improvement profit we fair I month they pretty saw we expectations. our X-K. profitability XX in of because a had outlook a would what I original particular sales. saw think compared in we rather And better with so they had significant to much relation that improvement strong say highlight a the saw for than a of to market, to June of – forecasted business anticipated. also performance our because June that And had our

for have as we visibility results one middle have ability into manage the the nearly month time, same business the because we range and quarter the have P&L. of more At the visibility the our generally Americas we’re our much to our U.S. narrowed for to to We fourth better quarter. for the

very noting program year look based But that I plans well brand building our the experience based in next based we next are recovery you very feel a comfortable on sales couple our to are that on digital likely predict rewards fiscal remarks the profit The to a XXXX, next for quarters. how year shape recovery on lag by our of that to-date, we early we’ve going of operating brand, our of sales EPS I’ve so my for on In what that And and to sales margin as know our asked levels our the platform, curve, gained we very and would like. preliminary given recovery presume that strength it’s about well. is and how perspective recovery to mentioned. the provided and of fact ranges relation consumers year, prepared responding with we’ve the is

to basis So preliminary perspective, we investors updated we’ve as is keep we’ll provided it and that on continue go. that

with Looking our call, time, operating we forward to which providing have more earnings refined fiscal QX developed perspective will by you. plans for XXXX. Thank our

line with the of Please Tarantino proceed your from with question. comes question Baird. next David Your

markets the perhaps, opened could or see that than seen on the maybe earlier, might you what a afternoon, difficult of you on most elaborate specifically? starting earlier navigating to back, is and build Good where business the And think, the back. is in that the build have the markets congrats shock markets? to of the if COVID for through the opened on have economies what is in what some here. And to I mentioned worst other morning to you’re business you’ve routine the up example, that southeast question And core I Hi. come hope the we really wondering going But Kevin, I back if business. be was U.S. plan

question don’t the Thanks of then question. daypart, your we things. have of your focused comments a on initiatives sort Yes, I’ll David. let sort and and for of describe Why morning couple I for Roz your or that punctuate

So Roz, to let me you. hand over it

question. David Kevin. Thanks, for Thanks, the

morning well all, you is as important daypart, to of First described us.

their and for have the that the the to so PM. shifted in around specifically tools, mid-morning And timeframes, another created we’ve routines. designed labor their what many in a because we’ve our of to in a shifted planning, morning. labor understanding tool they decision-driven has customers’ how patterns we’ve those then customer in We X:XX that X:XX terms shift And a we’re pickup seeing and around seen afternoon, shift view timeframe

some for recover. stores instance, also dense have to is that work areas we In our where addition, downtown we’re of slower more workplaces, those seeing where from really home been have in those there in geographies,

are And new those those carefully. the of network trade areas, and transformation we areas also in seeing those trade stores area in optimizing what But to the increase terms so that the work, area watching bringing revenue we’re we’re we are are in that our profitability. realigning of dense

stores. new So those by dense being transformed the are network of areas

Additionally, design I’ll the loyalty that tell you customer we a with level work are in the doing to reach broader our of base new program.

around our ways delivering announcement us the expanded will payment personalized helping business allow our we to the new this provide of options as results plan. loyalty believe heard offers have customer customer meaningful may Also, us reward and stars. earn you expand And so and to on impact activity understand to the we That And will pay-as-you-go the overall. base. the

Rewards. sign-up and Starbucks Starbucks U.S. this in fall Canada, to and App for starting be able So the download you’ll

be to with a a select having You’ll credit the to without or debit able mobile the pay Starbucks a within or stars cash earn pre-load wallet to card card, app.

the we’ll important patterns initiatives business from are and difference from as what And card make to the office, believe payments happens PayPal we the and so link most watching be customer transition account. returns the parts of home will back carefully our work can adjusting. the and very as these watch to from those a And work to we kinds that customers of try regain

business. that our near people areas in channels drive-thru where from those drive-thrus concentration we have out so Adding different We’re units. of it’s are working many comfortable highest really now our to metro suburban home,

agility the mid-morning that will look base adjust bring program. with And into so we’re we resilience feel seeing built base, then the new allow additional transitions new us to that to a customer at rewards morning this afternoon daypart, in early new in we’ve the like and business customer and

Thank you, Roz.

I hit thing, digital customer relationships. the think you right the

them new they’ve the in then the keep Roz million curbside, X rewards just throughput at we being watching personally. to up said, and able with customers done opens communicate Just increasing drive-thru mind, on that program new registered as channels. for work that And and just digital added

you, spot Roz. on. that’s Thank So

question the with Your next from from Sharon Blair. no is Zackfia’s of comes with there question. At Zackfia time, Please line. proceed line Ms. this response your William

with next question line Stanley. question. and question with next your your John Morgan question. Please of As will been proceed withdrawn, I the The has from comes to the proceed Glass

I and the the margins than you to slower wanted Thanks, good Pat, comment, sales. made afternoon. to back about go recovering

it these aren’t are And Like, some profitable, or also restaurants think that actually to in Just lot more I assuming? a determined during that transactions have menus this can I’m as can retailers should and they same a that assumption learned the so of is some high level, add the Starbucks efficient, make period of reinvestments more wouldn’t more case so efficient. be embedded more channels less or do be of accretive for time, margin opposite. that about accelerate would labor as there margins? that maybe of new Why they’ve the with would sort digital they

quarters, quarter to next of And improve into question. year. as reserves to we impacts leading your will depreciation fourth expect we such will costs, Yes, to margin do a benefits as gradually next in as sales. be deleverage to year. John. QX, are through margins of the occupancy and Happy margin and of pressure expect inventory do margins we although continue expense restore couple answer move will continuing prior to in the But and partner the work driver We the subside lag expected considerably fixed

we expect those cleaning drive efficiencies. of change it’s and systems costs includes because So certain to largely as operating, speed to operating business, is which due to the will do drive structural our associated to recover sales function whether way a costs we new it margin manage persist technology that continue and how our to and of incremental see the some can then our But innovate we premature supplies throughput improve with to to our a cost operating and we labor. say

some transformation margin rolled of from to urban new tailwind costs. We operating And will efforts that as includes incremental is any from of ongoing also margin that renegotiate U.S. and expect offset a to also our benefits assets, existing the the we help leases. expect and out market strategy repositioning

ability a the we to combination new biggest our and the be of expect recovery. sales see expect do headwinds will do to between that far lag but tailwinds, we in to refine and margin operate We driver continue away sales will differently margin as recovery environment. recovery So recovery the be of a margin the there

question comes next from of with Your William Please with the line your Sharon Zackfia Blair. proceed question.

Hope me Hi. you can guys now? hear

Hi, Sharon. you. can hear We

perfect. Okay,

little Rewards. around making to be has pay-as-you-go program. overseas? rewards But really it widen wanted kind a that or that a out in the thoughts. Is about feature clarity the customer U.S. a And And initial know mean, I follow-up greatest the rewards that acquisition regular it funnel? modifications is the Roz’s the So less frequency think tool? Does impact? comments I just where Starbucks of any I about frequent, help would helpful. Is bit on margin are than any any dynamic? I that us also it is rolling can think you for you the

ahead, Great. Roz. Go

Sure.

the Starbucks Starbucks choose credit now $X you with the Sharon, benefits wallet. or per current of the Rewards first pay the when with the their then mobile keep to usage stars $X. pre-loaded two to current card star or earn card, continue debit of paying cash one per will program, to have app. can current they And program And members, option to earn enjoy spent they select So a all all, loyalty those and members of

will funnel well. believe serves the that deeper as But actually Starbucks on One, – purposes. our get Rewards so members it we two base. customer even expand with it So penetration to the is

things. So those it will both of do

out and U.S. rolling Canada. are in in We this

this North and just China. So is we is different at in America to there program this time, that program use a

proceed line question of next Ivankoe the Please question. your from John comes Morgan. J.P. with Your with

Thank much. Hi. you so

It to be on a stores digital, shift would would one a with hours well. towards if efficiency off-premise. First there then apparent on as a follow-up be is the if towards less that separate be you operating question a there kind shift run of is able efficiency

of as If And think company – has, you about secondly, hearing perhaps G&A and we that’s can what and XXXX because from on or said give beyond a structure? as other some perspective effectiveness are organizational corporate kind the specifically, overall the you’ve about plan have then efficiency types perhaps of exercises previously we that emerged the growth think comment optimizing what on of a restaurants? what we the that perspective, XXXX and support organization of a

efficiency store? together in how on the why take what you hours we’re operating don’t Thanks, and and John. of with Roz, question Roz? of on P&L. half this G&A don’t the take why that And comes all then, question part on back of sort doing the Pat, John’s you

Yes.

first doing to of John, prepare us. the in we’re all, what stores critical for labor for is So

you for imagine, being any greatest labor As are can retailers expense.

those to And the of so being very manage efficient productivity. how in labor we addition hours in terms

And have hours manage in are when help labor so that the us store productivity needed. we tools

things watching infectious as rates. as simple We’re

to them in those And the that so in apply know rise work to will we’ll we adjust certain we areas, have rates store. the hours partners when stores, we available those and will

place uncertain have possible in do these times. And we’re that efficiently make sure in as just to so managing as we methods

that wanted an stores probably where partners you’ve So around we our ago likely decided the stores earlier, to six find to elsewhere work work heard who weeks who We’ve that and career. have four we return a – and they adjustment to those new to ongoing. in made also wanted

adjusted we’ve appropriately. so And

we However, run in looks created that store our based to we’ve on that decision hours demand like. to tools and what continue own decide area, and

over in done with the needed to what’s like lot we’ve continue that to we more the So those stores. in demand visibility work fulfill past a

but third-party they as sales. curbside new of aspects mind require our example, to John, delivery, of distribution term to important we then, margin delivery our longer order or innovate of And channels incremental the do It’s growth anticipate to just those necessary up pick additional on some that outlook. we the incremental bear for as costs, in in channels stores, capture at are

a but be see percentage growth So dilutive, may dollar margin examples couple those profit be we where of would accretive. that

point, to work efficiency the to Roz’s that we to of ways continues so evolution our these overall the some in team incremental the store an offset shape business. help in investments, to through of improve And can operating accommodate

that to talked about we’ve in also like look I’d our working, before, Pat, also efficiencies we stores. at add are equipment as

at speak. the X as stores so And is Mastrena X,XXX we

continue as bar behind to all look well. equipment And so at the we operations and

line Your next proceed from Please question. Andrew with the of with Company. comes & question Cowen Charles your

prize trying the you. curbside of get the at Thank Roz, I’m delivery. a size better of to sense Great.

which the many what how a context from that are drive-thru that up portfolio? And add perspective stores you’re process in of stores how can really obviously a easier exploring lot this in curious, smaller estate non-urban format and see in of just stores at how the locations? limits pickup are capability new speed you the progressing now given offering relative is these So the this it curbside you the some to real curious on are many

to do Roz, want you take that?

Sure. question. thanks the Andrew, for

X,XXX in order were we encouraged about here. of pleased stores in with and those XXX we stores, to short in saw will really be to test stores curbside, So in close which accelerate, us what with we

push us curbside interesting continue tech-enabled. curbside. it about that is is So we thing to The for

available So from is a access you app can it the where curbside currently.

that And out. to so continuing we’re roll

in And to trial running continue so what to see store we we’ve we that been saw XXX prior test that expect to just COVID.

is this So we’ve plan of a an already acceleration that had.

look so just our customers deliver service one to a and to curbside we customers. contactless more our our forward opportunity customer best to to And the chance give partners

Please Guggenheim. from question. DiFrisco question of Matt next Your comes with with your line proceed the

you. Thank

sort little growth Just dayparts. part the seems But text to to be sort year deployed spend. wonder entering you of I of can second of if having and could the you’re half? for it type from One July, that the seeing war year marketing? bigger AM to of the positive? Thank says, and correct Have dollar I XX% on marketing you. basis? meaningfully had in then – second your morning. chest should guess of and a you about a that the I one think the daypart about it I the the bit with dollars half this And first deferred the follow-up peers shifting in it year-over-year daypart mean, afternoon a in accrued in guess, marketplace is assume down today half the on we spent the talked about calendar post-XX:XX some is of be or actually it later What be with comment put with into

you Roz, Thank you don’t why those questions you, ahead Matt. and could? if take go both of

Sure.

and of we’re daypart, as to about pickup seeing expanded morning seeing ticket. shift things we’re your to in one Matt, the that question afternoon also another So later it first is the

So additional food where are and size group seeing larger believe we’re seeing ordering we beverage attached. we beverage and

we in expansion. so that increase of our we’ve talked seen And what about being XX% ticket

were had that rest marketing cafe we’ve transition in we stores In many So we ceased to are To that. of because very your so question the we beginning, marketing. seeing the We reignited marketing, marketing. continued drive-thru. from around

in our and summer menu. work then and our Double-Star then it the time our seen discussion plant-based Days the Happy around You’ve beverages, our initiation with of our Hour,

work Spice see with around coming fall us with will into our excitement the Latte. You Pumpkin

way for market the to and for have beverage loyalty that program. bring plan increase new frequently the is base and speak work app a we new an customer And to we then loyalty us plans. And new see into to them to attached the store market, to You’ll holiday can do again frequency. program another that us the

marketing have plan for remaining throughout we year year So the and of the XXXX. fiscal

of as of XXXX to on just build Roz higher part year the some to anticipate marketing what level spend comparable pretty in markedly QX, in the overall our of marketing to in that rate. relation of said to deferral just our percentage revenue in QX And our will a activity. do than of full revenue of our We QX due be point, was Roz’s level spend, to fiscal as a percentage spend

as marketing diminish we our attract. that low not going level the anticipating a of advertising the has of strength of forward. amount I would But are our that spend pretty highlight that historically overall been brand concept, and spend will of that We because

your Please proceed question. Your of comes with from the next question line Oppenheimer. with Brian Bittner

pre-COVID on new your just do Thank to level anticipate where or back this recovering need environment sales restored pre-COVID XXXX normal the to shift fully employment you. and you U.S. there environment is their or living really volumes you store get are Pat, do routines we’re unpacking levels an people you by in the same-store all recovery, back to XXXX comments fully can in in?

Yes. Brian, for your question. thanks

end recovering, how we March. developing that the and we or predict in U.S. As are would our meaning I anticipate impossible and It’s to the the see on major recover there fiscal our of will sales, whether second is on happen. based preliminary wave operating XXXX back plan said that our we assumption end an might prepared major what on quarter, my and be of today, those Based when macroeconomic second pre-COVID-XX remarks, fully no perspective be presumes dislocation. know around by business that nearly no levels fiscal we business to

We’re I anticipating about sales about expecting we’re will And by lag recovery margin quarters. China then quarter one sooner. recover fully mentioned, recovery as two will

very So a preliminary it’s perspective.

able other events and thinking how predict the to when investment about Just with of happen. I’m share shape year, we’re community some to whether the next not being might

with on to get our We have business.

deliver on and operating our focus We plans to prepare continuing results. have to teams

we’ve full to still drive and initiatives pleased We’re the progress a overall with have get have the strategies of we’re and and But go we to based recovery. the We optimistic on seen long ways that to improve strength margins. brand to-date. our back to the to sales

comes of Wells question Tower question. Jon Please next your Fargo. with line proceed from the with Your

you think you taking Specifically, longer you lot been them for But Thanks do already. see answered I think you this of consumers? from option? A home home how shift And might potential that new new see the items even some products wouldn’t without from be potential you for do add around be were to product if with Great. that that you not to offering how work curbside, innovation working question. curious about potentially term some to am have add many able also yourselves consumers often? that? And about as in able not

one, been that anything, we clear on let we’ve in focus Jon, to look, think, customer I our really the let extending you relationships. – me things Number Yes. And I’ll we’re That’s is; that growth innovation. three add these number store really about. the stores is different customer our primarily number talking drive Roz in two then comment always that relations the experience. digital experience three our and beverage is channels experience that

company then and we beverage We’re first food. attach

or safe, they’re vaccine, think we I that home that you experiences right those And so works on to whether do familiar what focus work until realized whether same are is I which you from work. that or convenient. from not, there’s optimize think focus formula work a customers working the now we’ve from around and got just home

to been going all curbside. And beverages, home have doing coffee cold And fact as forward. to of great work that refreshers, foam, we’ve our our that that I or around driver move our see necessarily on with from continue of is lineup, innovation don’t people to the we is beverage the a being to things cold focus going so beverage continue all forward

a innovate our buying family and Roz And out, they by do as we breakfast group which I more a very is our Canada customers that from becoming that part that food. or sort we’re around launched China. announcing They seeing We’re a buy the it’s And of plant-based are I the from I the make more in run on think is for Impossible think, going Plant-based orders. to continue ways they’re and work to larger of of people the menu buy in offerings. ticket. Starbucks home. well and of popular milks that been put pointed the to whether we think attaching channel Beyond They’re they relevant function innovation for whole that independent offerings driving the bodes we’ve that or the sandwich plant-based in us. U.S., Meat

things. we’re – I’ll And a and want or let maintain some there’s too. things handcrafted that customers, focus our stay Pat the on else that – true and going know innovation those then Roz, so think is around inspire us. partners who if things to to our got differentiates drive to And are beverages, add I to our we you to comments relevant that’s anything to what continue going agenda

So let’s to Roz. go

a few things. just Yes,

since a of mix sales of more First afternoon has and really still although tilted COVID, us. morning launch towards remains daypart to onset significant all, our the for

accelerating are some in are we’re that then pipeline. away So There we’re some innovation things that. not from walking considering there terms things are of the in we that and innovation

be afternoon needed. For instance, a this in to the because extra is box going we are plant-based boost protein we there introducing know

And so quicker planned. forward than that will come

to We’re also bring curbside, at for looking side. instance, with to things lobby door we’re trying like, the

added we merchandise recently, just app. the So to

order wanted you So then nice for if mug, to of gift-giving, a serveware, our some a cup.

understanding because So do you wanted they can. as things, can we innovation Pat, what really we we’ll add continue we’ve done evolve and of to customer pipeline need as just some our we’re listening then those and quickly the can something? accelerate and to to and that we

volume at team highlight business at-home sustain were Yes. outperformed Thank but from are and to consumers for to the our Starbucks We strategies work how across is we adjusted coffee I’d capitalize seeing levels benefited opportunities we Development Channel category. at-home in as elevated on you, the Roz. our core generally routines. are coffee looking at the from opportunities same, share. at gained quarter. And to gained specifically The looking at-home how home the like we momentum the their that has that. remained

evolving shopping patterns focusing meeting accelerating consumers’ based on the we’re example, in For needs. and on e-commerce shift

the premiumizing through Development at business driving well. consumption and our looking Channel also We’re expanding loyalty as Thanks. category,

comes O’Cull Stifel. proceed question the next from with line Please with question. Chris Your of your

curbside? that understand credits Thank in the then, to that third. initiatives you. payroll potential the Roz, a quarter would maybe could qualified you the capacity the do the on some you were a than lift impact fourth of describe benefit you store Pat, And be expect in sales help adds and throughput? And they from believe have other smaller us meaningful for the

comment. you why will Roz, first the and Pat take part then don’t

Sure.

start Let me off.

terms First Chris, there. your and It’s what saw would trial we around in curbside of base. encouraging all, our of upside what question we in expect

and know So we our than customer contactless for is present that experience – ever. more

channel grows. early in to for tell us. working But believe for we’ll to you that’s really we come this be. the So will But back what new as it’s how us. this too benefit us let know We’ll you thing real for

we what terms think drive-thru. In a to This could of allows handheld, busting instance, line us creating, retailers call that do we for are of our help, that capacity new lot the and what actually. capacity

in much out the out get to and items the the And able to food so put and quicker. a customer faster and beverage those of we’re much line, out-the-window get get order get and store, an that queue in down times

if enable are We’re – doing the handheld that picking long, the stores. work into wanted if began walk and to line to up to you just will you also trying if get

efficiencies customer we to speed. going and deliver and able different be like between that and unlock So feel need and enable will we’re to handheld it curbside, we service a some

And those so looking as we’re key drivers. at two

question The investment program was a the benefits relation And a government of portion share regarding our partner of on around in pay, form that. care. offset the of benefits. in QX government stimulus where program your Chris, lion’s catastrophe kicked and to stimulus And in support that’s helping to

sunsetted anticipate pay, effectively since expense we have benefits payroll significant by catastrophe as our of So program tax a stimulus for credits. anticipating government QX, we would we’re QX. not result, And significant way in not

Your Geiger Please UBS. last comes with proceed line your from question Dennis the with question. of

that Great. to think the net how their or Thanks. solid drive metrics now routine customer customers the routines? to and maybe of with existing share for thinking – ultimately, their throughput sales. customer that demand kind to Kevin, or to there little have customers the is can over share perhaps, bit users existing a customers new how you return But by that few heavier become using And new because customers sounds you’re the I Thanks. talked operations more continuing a levels, last and more net you’re little anything and of changed offset that just it some Anything respect less you perhaps, therefore, brand from that months? highlighting about their has – pre-COVID brand become that sticky, gained importance to benefit changed, you remains, about dynamics?

throughout others and this I and safe and to many in our customers. consider well customers And quarter, Yes. with food we In a was Thanks items environment as have for that and partners the our serve. the many April, this pandemic a very all our contactless question. – And yes, clearly in we start Starbucks saying, being for partners the safety the navigated in handcraft of the stores way with and industry, our many, beverages the in closed of I’ll navigated to by the for unlike by values. consistent And ways, prioritizing mission we April, that we us for the and health exception provide well as experience drive-thrus.

significant period, had of in The customer and line that wait in During we was Starbucks. time the their demand It drive-thru. drive-thru the the amount amazing. quite through to lines get

that powerful was that in global a very Starbucks, first indication even there And customer is to a pandemic. so the affinity

us. we or entryway the Now, as to customer behavior Clearly, familiar, continue – coming safe, ordering stores we back priority – began started convenient see was contactless pickup, mobile we to the to re-opening customers and in and around customers May with experiences.

we And in way number customers the the that’s the order. that safest of and why downloads because so I to rewards increase such a that think saw program dramatic joined is app

it delivery. and for can on order phone You get your it contactless or up you pick you then can

was so And that indication. another

drive-thru and local and to even out, serve, curbside, contain work figure in the every more back. the which way to a is we drive-thru. going just see outlined, lines, launch the officials the time, we they yet quickly to serve. our we of stayed the orders virus, to-go third up If is responsible we as true community support prioritize limited that come being customers. point-of-sale health health get to we positive to same the at and we handheld customers we government, we principles show also we well we’re customers in spread partners, at Starbucks So seating, if of put And our open get for the When stores or we

was an look that trust. Now are is, And when we’ve I that of high. all-time our going always at had We put we’re to that of or people our interact whether navigated safe customers at providing right for the us. customer built that built partners the partners trust thing. way profit, ensuring our has it ahead this believe, connection our part ways in the economic data, It’s do Starbucks to with I scores certainty

saw that a to where deposit make to then serve we experience in then we with good building we easier needs, of and continued us is month of more And with have and the certainly Obviously, affinity. for that continuing of expectations And I we July unfold. the to relationship can the their saw response that become customers customer in would is we’re building is experience trust that that’s is we reach for deployment very exceed They think to mobile sticky. what that investments it just we that helped customers reservoir can making from see strengthening those customers sales build communicate into them, June in on progress. personalize the Starbucks, them. can

look gain share to month at I June, to month and when in gained of we continue our I’m on of in share. share the fact that So that the the a June, we’re path confident

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everybody. thanks So

third call. This XXXX Coffee fiscal concludes quarter conference Starbucks company’s year

may You now disconnect.