Starbucks (SBUX) 28 Jul 212021 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 2021 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 would Smith, to I President Vice Relations. Instructions] turn over the Greg [Operator Mr. Smith, you may begin your conference.

Chairman costs which impairment cautionary These materially obligation transaction should Officer; Operating assumes Any the from Good conjunction Form Form report on fiscal Development; America Today's in Conway, our Chief for Starbucks’ by statements. considered President, International Culver, Q&A, filings afternoon, in our joining us Starbucks Chief our strategic XX-Q. these And information. Ruggeri, and last risk and or Channel by report This and John actions, we quarterly President discussions include statements SEC, related fiscal any Wong, restructuring statements today results. several results you update to items in including everyone. CEO; for to our are Kevin and Starbucks these excluded forward-looking and GAAP Group our actual XXXX integration differ North Johnson, and third to call items. factor of and Belinda such in with be annual to and statements include cause risks China Group Mike year will and that Officer, discussion are quarter to including earnings XX-K and and release non-GAAP on no Executive other items charges, from with will and could results. XXXX various results be led will uncertainties CFO. conference joined Thank Rachel forward-looking subject discuss President, be statements,

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

year fiscal quarter November has conference note end planning for call that purposes, and your our been please calendar tentatively XXXX For Thursday, fourth scheduled earnings Xth.

for on moment partner of Durga deepest Doraisamy, we recognize seven years. all a behalf contributions Finally, for the an I Investor of of Relations years of including company and turn Head the extend to has Starbucks to company, behalf past two-and-a-half the for and the I’ll a to Kevin. opportunity our want Durga done left she thanks as the our IR take now exciting overseas the for our over partners call recently shareholders. on Starbucks

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multi-year represents that tailwind factors. beginning the by a is of quarter this three As for powered Starbucks,

to X%, coffee total over recovers X% the represents rapidly. size as grow over the to First, The addressable annual the of is growing years. three to expected a rate is rapidly next the growth from and That large compound market well billion in global market pandemic. globally $XXX market

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thrilled Kevin you, afternoon milestone delivering Thank four the record EPS good quarter, revenue quarters share you pandemic. everyone. and depth am after the record of the results of and to non-GAAP I with this only

largest average in driven QX performance to in app, for surpassing ticket. to quarterly unique impacts in billion impressive benefit up largely faster our from year, the global XX% the market. incredible down year, aisle, recovery our year leading XXXX, in strength the in non-GAAP prior the margin revenue $X.XX Starbucks expected continued U.S., prior or QX from through this lapping and year the of from personalized Starbucks our record was prior from $X.X due by up COVID-XX the ability experiences stores, the loss create grocery results. the in the EPS have $X.XX we past Over differentiate QX, and leverage in sales driven far whether set fiscal than we Americas to ourselves by reached the to proven pre-pandemic the customers, quarter’s our

tax benefit made This related outlook call. by resilient, an by and to our more which for business segment, investments EPS previous discrete gives Our raise $X.XX margin powerful our stronger, in to EPS momentum, consolidated have for our made you confidence Starbucks growth. our most meaningfully of items, referenced The performance anticipated I QX earnings us of full QX was have long-term analysis of I originally the will operating positions QX our on year as in fiscal as the XXXX now includes we explain later. take performance. followed will through

which of increase in higher fueled than segment, in revenue by primarily delivered billion comp growth. an record XX% driven Americas transaction including the our Our comparable sales store QX, prior XX% quarter, year, $X.X XX%

sales U.S. store Average growth FY As quarter to beyond to store driven by pre-pandemic reached nearly material and levels QX, return transaction grow comparable a Kevin comp XX% the presenting opportunity to XX% mentioned, in grow levels. XX%. in of improvement at ended further transactions XXXX continued and of

transformation QX, meaningful have over us strong non-GAAP transactions our Growth the coupled coming over have XXXX, beverage trends the of SKU over with ticket distribution than strength cold driven the waste XXX strong of and ticket gives year, on prior prior two including quarters. portion supply as the favorability, leverage record sizable by chain ticket margin investments the contributed in all and we’ve gains maintain inflationary key to of attach beverages elevated expanded basis years mix confidence XX.X%, shift. pressures. and up benefits, wages attach operating our to of costs food as grown, in average sales in costs QX X% and trade and and Pricing maintained a product QX to of ability in also favorable Americas’ consumer the higher more benefits offset sustained in the to remaining due and customization, rationalization largely as from well area benefits helped continued. points As the many sales fiscal post-pandemic significantly the

expect are QX, with continued we to inflation, thrilled discuss QX, of performance to moment. While in I’ll our growing the impact we investments our which critical incremental slightly a to it with coupled in margin moderate growth, due in primarily

impact XX% the in to currency a International. International $X.X our benefit. from impact the sales X% from lapping delivered Moving net China. contributed revenue reflecting performance revenue store comparable growth in well spoke the of of segment’s prior to billion grew VAT as our increase a X% growth inclusive store year on sales the XX% past translation, also XX a Strong prior licensees, of the International prior – new Kevin as excluding The this year, favorable XX% adverse growth. months segment foreign over in QX, to over over

state In in traffic of U.S. addition, both resurgences with Japan virus severely performance during remember we which segment impacted vast of markets majority terms the emergency are vaccination in adversely a the most operate of and by behind quarter. It’s important mobility. limiting the International of was in to the International consumer that

predictably revenue Alliance XX.X% to Coffee labor to well an driven driven to are boosting the excluding Channel transition-related during operating decline year, benefit Development, level prior increased Global in driven is impact in QX, two-year structural the do XX.X% leverage in partners the the I a control store of Coffee XX.X% basis the Alliance the fiscal XX% basis Normalizing in points they they the Development’s close provide pre-pandemic they operating our of lagging by single-serve by as minus in and support product every across company-operated operating X.X% segment’s temporary quarter, QX a revenue On markets Channel driven moments improve. can impacts non-GAAP business. the will the point prior these these for change including margin expanded mainly recovery transition-related providing those subsidies. Coffee what a primarily by Development’s activities of in times COVID-XX, our our subsidies focused million its business. efficiencies from On When revenue activities, challenging adverse our from was $XXX business. QX, This rates customers XXX connection government So in primarily and XXX growth market XX.X% best, to markets. as non-GAAP rose from by operating basis, in in activities, as point vaccination by approximately mentioned, X% year, the XXXX. on remained approximately our just prior XXX growth these ready-to-drink International’s Alliance in transition-related year. margin of the mainly Global segment’s strength Still, and our Global in of larger sales lapping basis in margin XX% non-GAAP QX Channel sales impact QX, of margin expanded of ready-to-drink from what

from substantially impacts the be of end transition XXXX. the expect fiscal to by the completed We

consolidated lapped Finally, the related for in our in These partially prior increase level, impacts as partners. retail wages at our investments which world-class as additional strategic operating up to year. we a The well year-over-year costs, remain priority in offset COVID-XX were QX our benefits, partner across store was XX.X% support the operating pricing P&L, as primarily us and by Americas. leverage and the by minus margin from QX, non-GAAP sales for driven the was in margin XX.X% in

of are to quarter, we our update for key have strength guidance a performance we in the the Given number our optimism the and across areas. QX of pleased fourth

reconnection of We X% the U.S. QX sequential growth range two-year and to already range continue momentum QX. strong in Americas the expect comp a to XX% the a we of in QX human Americas This expect from in reflecting corresponds for we and the comparable great sales XX%, of XX% by to an improvement level have further XX%. to underpinned in the result, ongoing in U.S., as seen both store

as two-year are on instead comps basis calculated basis a described we monitoring a an multiplicative additive today’s release. in As of are the reminder, earnings

to we store virus in sales QX. resurgences impair now mid-to-high sporadic mobility in expect continue International grow For some where markets, the to single-digits segment, comparable consumer

for flat International Based growth to expect to equates we comp roughly to from these linger range two-year segment, comp Similar the now a store in market both from in to to XX%, translate expected improvement the comparable of a to to in QX. ranges two-year the we Americas, despite range challenging China outlook to sales sequential of of in two-year the X% dynamics QX, X%. meaningful be on and China, For QX. On this a consolidated considerable for XX%. XX% expect comp sequential a the this basis, QX QX increase QX

retail to fiscal development, although new stores shift a on in store Moving we expect slight approximately X,XXX now our globally we between anticipate segments. net XXXX,

we For area in higher now trade by total remain virtually the transformation initiatives. new reflecting continued the openings year roughly prior fiscal the flat count Americas, store closures, offset of are than store expect accelerated progress XXXX the to our normal as to

For to increase for X,XXX in International, expected approximately stores are X,XXX new to the net from XXXX fiscal guidance. original

includes revenue, billion reflecting expected this billion $X.X is which previous $XX.X Channel to a strong fiscal guidance performance our to updated $XX.X store of from range full for Development’s for billion consolidated to fiscal year $XX.X This are outlook, billion XXXX, full the $X.X tightening comp billion. to billion With to sales of of in segment’s we $X.X also revenue growth $X.X range the now billion, guidance compared XXXX and the billion new $XX.X the to-date. year to

fiscal consolidated is billion inclusive range As week. a reminder, of for revenue approximately XXrd our guidance XXXX the $X.X

XX% expected to from the recovery outlook up year than raising to-date, to operating faster we approximately XX%, our the full XX%. margin the for GAAP previous consolidated margin Additionally, range are given of

expected non-GAAP expect up consolidated momentum is we reach Our to margin XXXX, of approximately XX.X%, the QX in fiscal in guidance saw operating from reflecting in XX% the XX.X% and previous to QX. now

a tempered that operating growing relevance see fiscal factors and in is we XXXX. Our into margin QX in by two bit

our rising is inflation first growth. incremental The investments latest global support view our continued to on requiring

commitment wage year. increasing store The last strong of $XX for investments deliberate hourly of towards November in making the U.S. announcement partners, line to we wages the with in our an in made second is our

continued are the Apron fundamental of Green critical As solidify Kevin stage operational to our experience mentioned for to initiatives coupled partners increases, the next growth. important investment digital Starbucks our our further of are success. will and wage in with and efficiencies These long-term foundation

Given were rate QX, tax our the which noted XX% accelerated timing to teens. in we non-GAAP anticipated now QX outlook to high benefits of the forecast originally increase from of I earlier, QX effective our certain in previous discrete low tax

are raising fiscal QX, non-GAAP the we customers revised our tremendous in tax our momentum the this rates by stores XXXX, results record XX% GAAP driven full as XX%. in previous expected all our seen guidance. from of low return the effective For and up, to XXXX year guidance low-to-mid our we’ve propelling range, Summing are fiscal EPS

Our XXXX $X.XX, to new is up $X.XX $X.XX to GAAP guidance range fiscal previously. EPS $X.XX from

expected disruptions. to performance the as and significant new major barring for be economic sustained to fiscal predominantly our expected $X.XX. EPS to to-date, reflects in of $X.XX and non-GAAP the of QX, infections now well as from XXXX any COVID-XX better-than Our range is of $X.XX improved $X.XX, up our outlook waves any This range prior

past EPS our Consistent earnings $X.XX guidance practice, guidance on our XXXX XXrd we of reminder, a ranges fiscal non-GAAP As XXXX our QX fiscal GAAP with provide benefit week. for for will the include and call. approximately

earlier expected margin provided fiscal EPS However, than we outlook should saw expect at not in our that Day. and note recovery I QX we Investor in our December XXXX the contemplated QX growth was when

with pleased outlook business during of and our the provide are strength FY our our XXXX We QX call. we’ll

as expectations record as intact. revenue summarize, and resilience ongoing relevant double-digit ever. our our exceeded at performance of and commitment earnings,, with growth non-GAAP power To EPS which strongly scale remains QX the to Importantly, remains underscoring the our brand,

our fueled growth. of our dynamics long-term around the thriving impact is enduring us, reconnection remains marketplace this will in guide strength global globe moment behind by human While of to the until Starbucks partners continuing our business the temporary incredible and pandemic experience, intact the

take quarter always, Conway our As in our Thank They questions, your world Green appreciation. greatest and the partners that, and Michael the to Wong. Belinda and respect success for I have And the our Kevin to this Starbucks and you. are future with Operator? Culver; Apron. the by John belongs wear credit happy proudly joined around who

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

specifically Great. you I I market, very consumer-wise. it been for China it’s operated. that mentioned is know is Kevin, Thank a much. on XXX% Obviously, agree you about company highest politically, the it clearly volatile you A intense think market. we would confident very said everyone a question your think market and or and know are with you never whether Starbucks growth competition

shortfall color you a brands. in attribute major whether guidance, sounds like quarter at With and expect are was you maybe that. all wondering wondering I the concerned of you by commentary much. slowdown? I So, fearful terms reduction market significant can is sitting so continue was seemingly consumer player. whether uptake or from your I you maybe in that or of fiscal It the comp give to that third to there the China XXXX U.S. not What perhaps people whether that on said, pushback some Belinda know certain what some are

and longer you. term. a to of sense changed what’s is market the for late yet still Thank confidence in trying get Just China high quite

Yes. Jeffery, the thanks for question.

a step built then in resonates and thoughts now for over China. bit with we’ve every to have China in way our And the Belinda China. twenty share further. for it been hand me the customers Let And comment China over Jeffery, years. to I’ll in brand we of Starbucks some

levels fact are growth a comes in mode continuing new China. that presence one. have prior number now. market open of building confidence that two, in at Most and stores that’s new our expand that that the reach are the think some from Number stores and us performing the we the highest our gives right are of been opening AUV I we we to we So, generations

Certainly, two those XX world. businesses a think the in we’ve markets standpoint, from things. I geopolitical around got

the Green who So Apron over our we partners great constantly situations focused stay really for created years China. has and of there continue as that we care wear do deal in our has bullish. are happening to Starbucks a not don’t we with I’d which as customers that what on do really in and we and in I Take us impacted geopolitical the And foresee what well, situation couple say, experience last geopolitical of China. we long proudly is China

invest, the navigating are we are the new park, being innovation making plant the of of of in sustainable the with in sort farmers – Yunnan it’s implications this are the and – work investment whether we We just whether doing we as to building roasting the in at continue it’s COVID short-term. coffee coffee China, some look the that stores, I’d first

why that’s as a at a kind of long-term. bullish very very – perspective so, And look it I from

over I’ll you Belinda, it further on Jeffery’s hand Belinda. bit So let question. a let me comment to

comp Thank you, Kevin. XX% the in with resurgence QX We achieved slight COVID in south.

outcome if actually impacts year exclude benefit in XX% adverse the the from VAT exemption Now, grew lapping prior you quarter.

travel Our guidance we of and And restrictions uncertainties. shorter that faced hence, timeframe reflect previous for of the the are a also comp our less have we comp lifting has adjusting guidance assumed the uncertainties the markets. in to

are we today facing that always short-term will volatilities the Now, said continue are mistakes make non-linear. we The as be no recovery temporary. to only that

Now net than and that, have on more returns. by our of pace QX one next have fully XXX that have we and achievements we new talked well fully and delivering pre-COVID open year fiscal of developments are stores Kevin is store yes, realize that and point we are year. to we operate in track about regained you profitability this to stores achieved best-in-class store X,XXX the top fiscal And on that, the

huge during new the about Investor customers growth experience been trial past performance and please that A growth addressable the last stores. from China total them to population note new new We our always has and to XX% comes disposable that for Rising growing to and revenue provided one markets. reaching majority China in the for revenue Starbucks in close of Day and total of This the are focus we meeting coffee runway consumption and middle-class store and coffee that due in markets. our income. growth year guidance decade

innovation here or consumer chapters retailer growth early the story in personal in dynamism F&B full I market the of are and and very are and quality, we on the unmatched My brands of still pipeline gives we our of in coverage of confidence robust present to ecosystem national China market-leading footprint, our our me ever economy. the the coffee here win in our market. other engagement, specialty Chinese and well speed, our positioned customer are to in digital all experience in No this these ground than what this and our see strength resiliency continue brand, the So market.

on We can what control. we will focus

are working. strategies Our clearly

opportunities here travel the capture pandemic Thank and So, is efficient lifted and restrictions we behind are are growth the the us. and to ready the international playing excited once you. game long

you, Belinda. Thank

question. Jeffery I to other Rachel comment, your think, one had

Yes. Thank reiterate blocks as growth. our building our as well at you to you. EPS scale one is two want as comp quick growth, that is, the which is unit know I committed of that one to, points, to of key we’ve double-digit our growth just

be long-term unit not equation. so, for this but And only year, to China growth important our for in continues

QX. to for comp that year QX The show two improvement fiscal continued on to I would continuing optimistic implies the this a for for from is guidance of be basis But that showing a in I year. the other out gave it’s in remainder to the are we on important QX point that momentum think business China, thing we it and international sequential

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

the quarter very margins above reported to I outlook Hi. in in at wanted an operating comfortably and now to laid range Good XX% about margins I this Day afternoon. you you think that long-term for Analyst back and ask December, the that. out just XX%

in profile the be on talked factor you So, I Rachel, about how should for what looking as an business we right the if had sort wanted updated think about of forward you that to some earlier? investments of and the you view ask,

preempt think our We a to I Sure. a well FY was guided, XX% would wage and we from expansion our prior the margin both it impacts was XXXX. we sales context against even of mean, standpoint our The markets, way QX, that And across versus let is, incredible. me all a – margin I’d about little year of bit saw our is, in of margin big pricing. well of over to guided in think we made COVID of about offset year. increase we’ve But as investments pressures. QX, did balance from we broadly, XX.X% comping as to leverage, the to expect inflationary some it for accelerated as XX.X% as as going help driver

as investments the make momentum we investments and important continued that our increasing are to in to growth. on we in business. QX we they this well So performance Those us continued there that the see optimism shows caution related cost what inflation our for in to but a to slightly more as need our based were the critical is saw lower relative the business. our foundationally recovery, even But

be committed EPS I of to But if FY XXXX. But XXXX are you think our That to clear annual we in Give we that to we are so, FY guidance has growth. as forward FY now. we QX growth right from process into XXXX, be EPS, our think today. at about which us FY And for XXXX plan that, we provide to about going non-GAAP want the call. Investor pulled what some complete guided Day operating of been double-digit time not remain in on that will

laid are previously. to we we So was to we the investments about that making. accounted are seeing we to that are Investor from XX% had benefit up that for that. that think that XX%, XX% That out you When at we that margin XX% the Day, from committed guided

So again those investments. reiterates the just importance of

on we to perspective. QX into do it at And But allows when provide guidance modestly at expand margin Day, call. what guidance how think so, continuing that is we’ll XXXX that’s while again, further I it us to our Investor FY about And invest. put

Please Ivankoe with question. your comes with from question next Your the proceed JPMorgan. line John of

and question average the would would yet I think quarter, quarter It’s to been Hi. actually for second XX% it reasons that you. me, by you that XXXX I back transactions, fallen. from the to do came U.S. definition mean, for been just excuse expectation possible you of in toward basically would a think and rational for and third Yet, ticket Thank ticket people China. a have probably lapping pointed migrated out. I the able would both an that as order have more have have the a all single thought were morning the

you - ticket. color that of could you maintaining So, give around more average some kind

XXX% was I lift an China the significant China, of of - common benefit And a got excuse in the so. made think ticket the or there - pricing. especially year VAT actually in But ticket inverse in be secondly, it prepared portion a previous comment whether remarks that that fact inflationary about very for the over me was was that, quarters of environment. which about maintaining you in the I even adjust five if the the from down past isn’t can

the both If your menu about well well China that’s as that cost pricing, something menu pricing, for ticket is talk as could may that’s consumer the on higher just something as as you accelerate, on attitude pressures overall well expect may that whether your and what for businesses given businesses? inflationary Thanks. both

Rachel, Culver China We’ll can and any take John additional. U.S. and John, then your for can have take the Belinda you question. thanks add

John? So

question. It’s question. the appreciate a John, great

you give little a me Let context.

most business particular are of recovery and in We and record rural the drive-thrus drive-thru common. continue overall ticket helping the orders drive to in in sales suburban a an quarter where us to is larger see and strong ticket. We the perspective. areas higher from U.S. That saw

and time are the future comp XXXX, trade more the optimism also QX time of into that since even area districts business. more for for positive a become we gives in business us coming the FY recovery the the as Now first of did central urban in which at achieve customers same back core, the the mobile start we

of Now, those those areas in transactions ticket as urban drive business the now, that, will moderately what core, opportunity part great and begin frequenting it that our central district that will stores business. we We time. the stores will expect out recovers as do in and decrease the customers and increase, across over see continue and right transactions broadly will to to in but is U.S.’s itself balance

transaction at pre-COVID about levels. XX% We are operating of

pre-pandemic-wise rate And more that, normalized go time. room that got as relates moderately we grow expect lot to back to during it we to So ticket a do as we’ve to to do that a transactions. decline of

Belinda, do China? to you take want

Kevin? turn right, my Hi,

Yes?

China.

said, you lapse. Okay, really is John, majority on X% XX great. VAT the what of X%, QX, X% drop, that but just from

XX the So, just a drop negative is really X%.

are note So, digital acceleration mix. delivery thing portion that The of ordering have mobile we the that is seeing you to sales it. one our of

We’re seeing store our on transaction. the XX great uplift versus

is good a thing. that So,

pressure, our we U.S. the savings inflationary So lesser of increases we’re but - inefficiencies and achieve to much increase. in to by to extent or question and the net on it were our any volume your in to able that any this to does terms comparing operational due own of year, a exist, fiscal able

So, thank you.

add function I little further I our the both clarification a good say part of mean, broadly our and going the I would just to just ticket is, John. from year-over-year and comp want X% points around U.S. in of is What that. our Belinda lap. to

believe have consecutive remain our moderate, drivers our of pre-pandemic which our our XX.X% levers slightly that, point year will to elevated to that compared one quarter in and have elevated, one growth that of in beverages, only that not continued levels we to level. continues food; basis one up our to to is the we ability addition our need the coming that across investments and the other move – on that promotion it’s highest we from of ticket support guiding to Our we we be non-GAAP single pressures I actual from to further premium and are that not to ticket are beverage offerings a see, it Americas continues customers spoke and ticket previously about to ticket. the U.S. of help XX.X% a a an is Part that that John ticket more we many but price, our again to customization. our make a mentioned, but continued we many It’s we from thing, at where more out our margin third that And elevated increasing inflationary balance us the as to just continue guided. but and see what - headwinds XX% continue for be business. from expect our John attach in to the to transactions, to that space. as see want we really it’s XX%, And the and well attach as are of only cold to are the of the evolving as ways we Those on the do

critical a part of So and provided. to guidance that it be continues the reflected our equation we’ve it’s in

has I weather of price in And me the close, sort cold and been hit that’s a of just the C implications the know the press about lot there let on – written coffee. on the Brazil

use of very we and green And an so, how approach the just should you techniques at coffee warehouse to always premium supply Arabica a to source, hedging have give price you created know ensure attractive basis. some context, that over we to of have C cost increasing we coffee, years, on the thoughtful

the In green XX advance through XX coffee we months and green fact, to we never in buying purchase stopped pandemic. coffee

don’t well, And that that our to through locked place. competitors, and result, not if we coffee of on buyer coverage a gets cost months, most this in will who have XX fiscal us in that us year significant price gives rest as large price-forward they approach currently it advance means of advantage put So this over only the the as buy relative XXXX. months structure far next XX which coverage, year us I fiscal think be we and green uses a we which will our for that certainly we serve have XXXX of the have of may

on on since John, in just to so, I your been relates press of and comment kind want And to question, that it’s the inflation.

the from Stanley. with comes Glass Your your next Please line question Morgan with of John proceed question.

you that? in to but mean, or about inflation in question, environment? are in more other of pricing supply of context? is significant frame in is pricing of pricing you the that facing there talk your you inflationary maybe like take you about My it’s much. they think a of use always pricing peers to on do relative I P&L can now. the how of about Great. Starbucks inflation I some inflation, you is pressures, some places history you because And an others, Are changing your thought that your up aggregate some talk about and the maybe just the amount Is that very offset taking wages. companies P&L. notable but know talk about They amount quantify aggregate this to that power. judiciously, to think power, there actually feel you that chain? Thanks that’s find what I had Is way coming amounts there it unusual willing how do have are Rachel,

Yes.

start think with saw. first inflationary pressures I’d that we I the

So, covered we’ve we in QX, that within given. pressures to points. basis XX is headwinds which in into QX, had to we we continue cost in that, the but Americas expect outstanding about of inflationary And guidance performance, reflected business headwinds related rising the and

pricing we also not so of the fundamentally some inflation, in the inhibit our offset always the And that changed. investments very take, are growth. measured we we don’t — that been and we’ve ways And are Now, making our but say we I pricing only actions price. such strategy thoughtful would spread hasn’t as headwinds

to and leverage which our rate we this a slightly and is stay elevated. gravitation that show headwinds. have very our we a elevated, in at opportunity But in why many leverage and insights to see in our analytics these use nature. our offerings beverages, towards as continuing importantly price are our analytics store-by-store and today, those will have not we pricing levers pricing one insights is look ways, that the power we and surgical to premiumization be the is about we on talk promotional and reasons We basis what that offset but be do able the of we that of We the one ticket to

more to continue and we to For premium offerings drive a drive example, possible. have are where our customization customers, continue to elevated when nature, ways continue to our a will have where food beverage an cold Those and beverage drive our we attach ticket. customers to with continue

So our chain, through pricing we efficiencies as G&A. in to continue and at look well elevated ticket in supply also as efficiencies will

we’ll levels way. efficiencies be able revenue find returning with to less So G&A growth goal this in our particular quarter, time pre-pandemic our saw as G&A continue to our to grow G&A than over we and another to

addition trade are that, benefit we In from transformation. seeing to area

growth segment broadly another lever Our trade and that that offset That’s need optimized that’s area we to the portfolio so also headwinds Americas more critical investments in know continue that yet delivered almost but in to only basis the are to we using the points not as inflation, that in help the as as in meaningful initiatives. our our transformation wages and our related are only to growth XX margin. on years we experience we’ve and those we are All make digital in in but the really as our our growth our service both future our for come. And the not as investments for are partners, fuel in will recovery future. investments for are well to - and throughput, those critical well fueling investments

while about those important ways investments for we us we’ll the still how are are offset broadly So increasing think those expanding modestly and those costs margins.

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

are to you not you the ask And I the X% there, growth kind had Analyst at think I a Day are labor still kind Analyst about pushes XXXX. re-doing given unit committed into in Rachel, because Day, guidance. reaccelerate to afternoon. development, I But the environment? the appreciate good and of held? of I to fiscal did Hi, particularly want that X% wondered what if question pulls

of see a our unit EPS growth as non-GAAP double-digit to meaningful continue growth. We driver

both remain in committed licensed and we’ll markets, company-owned. company-owned to or So markets stores international our expanding in our

stores going the that of stores in new seeing Americas net to with open the We’ve XXX this a So are mentioned, that labor. XXX China. as open year. today, we’re opened segment than even we on fiscal to pressures more - we’ve, will our net driver stores in be in broadly and And we plus a track Belinda are X,XXX continued growth

stores only growth to in So, year still continuing into meaningful next not this our but have year.

the on the detailed come be growth update you provide our our like, only when of what as growth in to critical future. our can will guidance our growth FY QX also but QX when a Now that more we But to again, earnings look not continuing unit earnings, of have details in we’ll XXXX. of we part provide in expect driver a

Trade Yes, remind Area foot that and Sharon, this there. gotten in remarks have we is is through are XXXX, commented Kevin. store my in certainly you. as which net Americas get front in that I’ll North I we team back just new - fiscal into China puts on XX% for America Belinda Transformation, her the already year and growth us the

helpful as that’s go So, to we into going XXXX. be very FY

comes question question. from Capital Your Please with RBC Markets. Carril of with proceed line next Chris your the

question. the Thanks afternoon. for Good Hi.

to So, reward Kevin, I follow-up outpacing non-rewards your spend. on spend wanted around comments

And to first as Or seen quarters. Do also that relationship and to are those seeing the that the then, in non-rewards rewards of persist spend, expect for elevated further had to noted increasing routines normalize? you expect non-reward you the you you think near-term? mobility I of members? on in Thanks. where to back guests recently shift eleven conversion would time you

I that’s Chris. Thanks, key point. the mean, Yes.

Rewards they we return that coming over at and significantly our customers non-rewards where from Members look grown Starbucks fact active – we’ve to active rewards our are those stores. getting are You XX-day $XX the members, million the into that active

have aspiration we customers I they add customers you be members they think spend to me you base bit else let the if anything North I’ll fuel more on customers going continue a active number have that Starbucks is the helpful rewards Rewards John, to U.S. that from frequency very There more further know think and - why those multi-year engagement We the a this more. So, and to increase America. to join to let when comment is actually you of period, active double rewards over that’s in non-rewards members. in of

program. we payment Reward the saying To that this this conversion joined the while customers Rewards membership we it The what value. that seeing leaving that put from program driven really the program. nearly broadly across drive customers join makes alternate helped store make X three by has adding to value customers It we shift new Stars a the Everyone to Chris, Rewards I into to program. payment or who we’re XX% we there methods, Yes. And are in seen not are utilizing purchases these is reengaged what use addition is, majority to program. into material really ago. the are it to little context, the year-over-year add would in added the a And Starbucks those alternative the to since vast payment one of XX-day the members options program methods launched is tracking we’re back of people for rate year alternative beginning is members quarters and Starbucks It fiscal of that have meaningful Kevin million, easier in increase the seeing who thing the store that the success over increase Starbucks active enables for done for what

being occasional forward, to see attracting going and this we our going members, as for frequency, we non-rewards to long-term opportunities is the the down as as biggest our to growth our spend have are double in one both being well highly as program as that members. customers continue So, those on rewards We as we stores. well accretive driving into of see

the improve guidance you just we on QX, - is, QX going basis at are raised in to see for for two-year add on our implies comp Americas from could QX. look it to that is if I what given thing would I And that, QX one into add what and my our U.S. I we’ve as that, prepared we’ve guidance that’s we in a remarks, mentioned If the that, this in is overall quarter FY with we frequency. saw implying levels saw two-year customer fact this comp U.S. the X% the customer opportunity accounts, The accounts about where saw a and driver is XX% basis two Americas to we quarter have XX% above of our XX% XXXX, in in above which year that in we really line on a pre-pandemic we is but growth,

support And and in we’ve QX. aligns that guidance so, provided really the our that frequency helps is optimism what with

be from question next with Your proceed Geiger with will UBS. Dennis Please your question.

opportunity am Great. within you question. important Where Thanks have much talk And doing that I from sales? right curbside sort most throughput for the I here? of now? some how of a do service service the quarters. you. of driving in could is about is been And a the for you and bit am a stand recent adjustments that drive-thru recently wondering just kind channels operational perspective? operations how channels in launched maybe made now you’ve of in U.S. and then on the from new Thank these to opportunity ahead, then, What And more right sort you’ve there if the look throughput throughput curious

take would you that? John,

for Very in efficiencies has talk about a U.S. Thanks the of to throughput question operational job overall. Yes. driving team the this, excited Dennis. done terms remarkable because and Yes.

of to operating pre-pandemic of big is our that within levels the have returned overall stores. in One to efficiencies things we our terms note

very that’s see. to So, encouraging

and the done of efficiencies that other we’ve productivity drive in things. to couple operational The store, thing a

hit, environment. over hired months it the so, been us our investments, labor. to customer good our or XX last upgraded how XX%, training. builder COVID First, they’ve been operating partners also We’ve allows roughly have about has be at last in XX since service in made more we these we in you significantly restricted investments of in our which if program, this XX% look play months deploy And COVID effective strong and

our our reinvesting the training become stores. service customers we as and So for in customer in more now partners, are mobile frequent

operations two investment in Now, to strain stores as in a big is as operating, equipment are our are investments The we machines espresso efficiency. we’ve throughput well in that as well addition the innovation ongoing making. and made driving also partners is that

it out an roll we’ll XX% more the developed through a in we’ve that’s oven, and We of XXXX. the the have end which oven, Merrychef proprietary a and upgrade our introduced it by house. of complete the the company-operated system of makes particular, have U.S. deployed in new stores efficient our Center, X,XXX We’ve is of warming warming partner at Tryer fiscal year in is of the currently It in more stores use stores. current It Cold brewing and the our Brew, system, beverages stores fiscal will with brewing then, the U.S. success fits the Brew cold of efficient. be end And XX% back Cold stores It ovens. year. That’s in by our a of to XX% product XX% time of our of in year. in the also within currently the will

other recently test. expanded rolling been team is supply I chain and inventory thing operations on is excited we we’re and that We The big that the ordering about automated am this just which out a worked team with testing. have is our the system

It year. expect allows rolling be items and stores store their and by basically task asked to drive-thru. you calendar rolled We other will past end X,XXX that customer thing that partners are stores then, food and it our all week. the of out on merchandize the And about customers for just focus one the in this now at removes And this fully we out company-operated from the inventory them experience.

experience. lot revolutionizing are We work on a drive-thru of drive-thru doing the and

customers. the experience. constrained handheld for stores through are of are introduced the is managed consolidation decreasing POS and the drive-thru also dedicating of to hand-offs to So, innovate going it window store really drive-thru your not times we or continuing points removing We cases equipment are when system for and new really a next through to then focusing on and about around and orders drive-thru our the stopping the We’ve renovating to service. target pace we design improve and engine, make new speed with the XXX location. there, tech we the to repositioning drive-thru more easily introduced the that to evolution out And technology improvements order

store operations, teams, technology chain, of and lot So, broadly great across by the supply the development, work the team.

hats all them. to So off of

proceed question. Evercore comes Please question your Palmer last The with with from ISI. David

Thanks.

and remarkably user I a at XX%, this that looking doing Culver’s by two growth. sort back points expect people was to in would you in help then, fall, acceleration. saw it been March, be about the have was dynamics and to the check. Cold the headwinds a back us Rachel’s about and that year He tied you might In trend Thanks. are past as going similar you’ve back about going factors the comment earlier done done last quarter. this around sequential John perhaps the this you improving Just areas to X And think were X what urban perhaps about of quarter, way two-year insights to you And is doing wondering any that guidance? going as to relatedly anytime Beverage potentially with contemplated of quarter? could to how follow-up mentioned comment. in think in work I this getting am Any traffic the going after type you’ve Rewards school performance and

Rachel, the do question asked? David you trend, take want to on the

the year we’re that, with guiding largest And quarter. Well, we comp comp double - delivered proud this a think, delivered just we clarify, showing business, two improvement. XX% of QX in incredibly our from That’s I QX to U.S. that to sequential a our even are market two performance. year to David, now Sure. we

above are range improvement that on are So we’ll XX% a are given we we’ve showing about we XX% two-year a the XX% that and of – have we implying expecting to basis.

expecting see customers business reflects are stores. we as momentum certainly the we and to momentum the we’ve that the returning seen So more in the

reflected XX% give been pandemic, some in quarter But mentioned, we customers. those that we But about the really from And to of a in it really the we’ve FY - opportunity John I’ll the we’ve had overall XXXX where guidance given. this similar have opportunity frequency that. pre-pandemic. We to the customers so our to terms add more count in, continues is at very a opportunity our commentary ended and we the certainly quarter be bring standpoint As but on versus prior transaction in count, customer to levels. ability to our of further that’s I of

Yes.

resonates very strongly than that our nowhere we of, with in our are I beverages. we terms relevant our stores number to very customers. in and returning think are being one, with with stores And optimistic seeing that that cold cold, ready more customers innovation

than record in note and shared mentioned XX% and ticket percentage it’s it important cold in what emphasize, Rachel As was higher generally we previous sales the to I QX to just but of XX are points accretive. that’s beverages this, beverage quarter. margin And want

and Nitro then, shots, really we personalize are It’s Cold are Foam, ability awareness and cold. it’s modifiers of refreshers. and meaningful seeing got you Brew, such customers with Cold wide options these the as those to their people alternate Cold And driving So, desires. it’s to are customers’ our how a beverage couple hot, do resonating with products, as customers and the personalized the range customization espresso adding to We’ve dairy of offerings our that. products it’s Ice for beverages? we cold classify growth espresso beverages that customize well are that as And shaken in Brew, the and of both

seeing. we encouraged by So, we are very are what

terms customers’ doing are to yeoman’s and are same great loyalty, We got day every of that in earn expect. we creating very realize that our each and optimistic. respect we’ve customers But trust, at work and partners also our come the time have experience to that

congratulations So, to them.

be I as the to able critical add That’s making to we critical. overall. are for to as our to to serve growth why critical well and would that continue right. for it easier And our it better partners they our for our us that’s partners They investments make are make customers, for continue are

Kevin closing over I to call remarks. will turn now the for Johnson

all you for thank us joining Well, today.

Starbucks I that optimistic the and think this future. are quarter we front amplifies is foot about on fact the the

brand, the market trifecta beginning. multi-year a that to you the for is is coffee strength and growing addressable a the within coffee. think combine of just Arabica are creates premium I a I and the Starbucks in shift with for operating And think market we that large this and tailwind that

you for today. us thank joining So,

This concludes Starbucks XXXX Coffee quarter year conference Company's fiscal third call.

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