Earnings call transcript Q3 2023

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Operator

Good afternoon. My name is Diego, and I will be your conference operator today. I would like to welcome everyone to Starbucks Third Fiscal Year 2023 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. Instructions] [Operator

turn Relations. to now Ms. conference. now President Willis, begin call Investor of Willis, the will Tiffany over Vice your I you may

Tiffany Willis

joined you, Laxman fiscal President Officer. of year thank Belinda results. and Today's Executive everyone, by today Thank Vice be and discuss Executive XXXX good And led Officer; Chief will we joining Ruggeri, by to quarter Financial for will Chief Chairwoman for us and Officer third Starbucks' discussion and Diego, Narasimhan, Chief be you Wong, Q&A, Executive afternoon, China. Rachel Starbucks

cautionary call which materially risks our risk on report various XX-Q. include statements these on statements release with earnings conference filings our This could results actual with report will such factors in forward-looking considered from are subject XX-K SEC, our cause including latest and the Form and be that uncertainties quarterly statements, statements. in conjunction to our discussed Form differ annual to Any and should in

assumes XXXX impairment statements results fiscal non-GAAP including numbers non-GAAP adjustment These related items. are to and integration and or no or is non-GAAP noted costs actions, quarter of in there transaction on period third obligation information. and other year these forward-looking strategic basis to to Starbucks the several items GAAP referenced call a metric. comparative excluded restructuring results. from are include items related update today's charges, and any our All on unless no otherwise the

has please be November available call that Friday, our year note scheduled your of of our purposes, measures. planning and September is for their at X, investor.starbucks.com the webcast, earnings XXXX an call X, through quarter earnings fourth call, XXXX. XXXX. those been refer reconciliations the website and mentioned being archive release on fiscal Thursday, today's in non-GAAP find to Also for and This our webcast corresponding website non-GAAP measures measures please financial For will on GAAP to to

that, now over call turn with And I'll the to Laxman.

Laxman Narasimhan

all this for Ruggeri will and walk us for moments, quarter, you, the would and Q&A. Thank then joining you Wong third In a few Belinda results join afternoon. thank us the of you detailed through Tiffany, Rachel

strong third the all-around To to momentum start, in results business. quarter point our

This consolidated excluding than foreign by up XX% XX%, record quarter, translation we $X.X a more billion. grew to impact revenue when currency a in X%

Importantly, of by margin earnings outpaced XX revenue growth basis XX% to XX.X%. growth with expanding points

strengthened we against foundation from Our business, of progress making significant strong the are the plan. reinvention performance reflects resulting our our

role, experiences each connection. us, region, the in margin partners. unique the traveled us brand to working by the innovation I every These by of Starbucks me strengthen global the appeal growth value. great with I now well ability Since have to to front in our give of stepping deliver powered anchored significant directly outsized left opportunities into and the and brand interaction create and impressed in confidence shareholder human positioning long-term differentiated

It and reinvention Howard identified for time investments year was and team last our foundational the opportunities the this plan. when must-win

will I headroom. now the key from while quarter where five will the outline in out you results, further areas see walk we Rachel pointing detailed we momentum While through have priority

the brand life This elevate in to priority, the will strengthened comes by first great America. Our running we in North stores. execution

by quarter, to history. our North weekly sales revenue the of X% leading with same-store average a in the highest Our team growth, delivered America underpinned sales growth comparable record XX% in

driven was food growth ticket attach. and customization Our pricing, by

labor per improvements hour. we continue Additionally, sold in items see to

while also to and improvements, Through store, partner number are running to in engagement scheduling evidence stores and we Barista seeing productivity. Operationally, per executing XX% beginning we increase are we where are we improving improved attrition, further by great are that already of has critical staffing the better. industry-leading hours improving partner year-over-year.

Innovation drive and equipment to in business. beverage our continues

In past fact, quarter. this of beverage cold business our reached U.S. sales XX%

the in were are up espresso particularly we XX% see beverages encouraged year-over-year. cold to premium coffee, leader As

Additionally, hot. we continue and to elevate the premium in both coffee experience cold

Vertica variety decaffeinated continues on planned, our of brewer delivering as coffee, For a including larger hot example, the high-quality demand. of rollout Clover

blenders track, Our and now out new blenders growth portable customization innovative company-operated at equipment easier to blenders cold cold additional annually. in time foam, to billion the in of rollout form the an now remains for are Modifiers impact frozen use Starbucks continue contribute beverages. customer cold experience. the for The both U.S. to all Starbucks. such meet summer Refreshers' stores support $X to on foam cold handheld over demand rolled faster revenue to foam The have fastest-growing the and outsized are partner as

warming and new U.S. The in machines stores. espresso Mastrena company-operated are all ovens also now X

saw all parts. our year we afternoons. that past are efficiencies, by allowing again differentiating labor unit and Taken both this during together, dayparts, volume pre-COVID investments busiest well day with These across increase investments began to the in America, double-digits rates North In our attach our Experience we competitors. supporting mornings elevating as high the us as Starbucks from further equipment capacity us last are quarter levels once the outpace

of the customization past few expected of testing thinking cold-pressed dayparts, as towards our which With fiscal quarter our this our are XXXX. a across This company-owned with occasion Brew, quarter Oleato includes platform end a enters well we stores with this a leaning across in further Starbucks of Refreshers with double-digit across Cold this has about frozen fourth summer's which Refreshers as rollout phase dozen stores even year beverage in seen by in beverages, U.S. alternate pipeline growth systematic our dayparts. launch Also skews innovation Starbucks success, every a an platform, location in this daypart.

we fueling saw all-time breakfast past of high Food quarter, is growth. attach sales also food and This sandwiches.

drove weekly elevated the to food and attached improving quarter, are Overall, average food business, As record offerings. in growth as and explore new, we volume significant an we contributing higher convenient excited the food in the ticket sales. a about opportunity

more time. share We will of this in

significant larger metros. our see store in We diversify as new including areas growth to in formats smaller We well headroom portfolio. as the store underpenetrated in cities new grow U.S., for also continue and

are remodels first and rollout over years personalization prioritizing plan stores stores to activation. sharpen couple we we move are Siren System to the all boards further menu and next daypart and New digital equipment of to brand-forward our where

We are strong seeing growth in delivery.

channel In setting strength. fact, starting a operationally in are And a major $X billion from up now minimal delivery years from we a for we our close position presence to ago. markets, incremental creating business are leg this of in ourselves few

As will third in universe. and leadership position continued differentiate grow a we're strengthen our we our we digital ahead how at to second In further the strategic priority, quarter, looking digital.

user year. grew million Our growing of customers from Starbucks previous the was XX-day Starbucks in million new nearly record in Rewards globally, quarter. a This active customers Rewards XX the million XX-day or the XX% an customers active to more by X approximate U.S., growth XX.X base driven XX% than

engagement Starbucks brand Rewards Rewards prior consecutive Starbucks million in strength, in we customer evidence we members In active hit of X the highest tender further China, have second market. the XX XX-day This drove points of XX% the relevance from number for at U.S. our the had the customers. over year. and of is over quarter, percentage up ever users

innovation. of industry-leading long record digital has Starbucks had track a

with area the Brew using launching the capability fundamental to a As this intend underway as we in platform we foundational pad. invest transformation lead Deep approach AI, to

remain experience the on elevating Our and investments focus improving these in productivity partner delivering the experience gains. will while customer

greater mobile leads We accelerate personalization, to to enhancements, experience innovation, which are as order, customers. further includes delivery believe and including user approach payment speed app revamping we in U.S. our well. developments This our habituation the of digital and including in terms by

significant Additionally, capabilities we in to in plan market. digital to investments China further our make enhance the

global growth. priority third Our is

over customer occasions more markets growth each and As a the operating limitless. than XX,XXX XX the around week, stores runway company is for in million with world, global XXX

growth double-digit across since system quarter, delivered fourth as the XXXX. The second International margin well of highest for the operating the segment we sales revenue quarter again fiscal record and For quarter the segment. year saw consecutive line the as top

and negative markets to U.K., of all Japan impact partners world the while the we performance. Excluding of foreign the company-owned growth strong of the the double-digit license rest reported see continue across exchange, geographic the in very

XX% store international year-over-year. was growth Our

unit while strong capital on benefit New invested these we growth returns from attractive economics business markets. stores for the bringing in in are

am in the I time our to performance recently. resilience can China. of market which Xingbake encouraged to by the Turning in fully spend locally. opportunity the appreciate quarter. brand, the now is had strength as I and I known Starbucks extraordinary the

the our of revenue China results, from when XX% XX% year currency grew X% third impact excluding or at a translation. up prior Looking foreign our quarter

Despite business. currency recovery these achieved sequentially grew of journey, X% up or the monthly morning the impact sales in robust health early our long-term or from we our year improvement. quarter revenue XX% XXXX a days excluding sequential when foreign X% in our prior underscoring that translation, reported of in the opened stores while daypart recovery earlier routine fiscal other dayparts full Additionally,

recovery strong by in quarter us advantage amplified in third A many distinctive apart China. the was the that set competitive

in to advantages quality company, our for ways relevant who in Experience high are our appreciation partners heritage foremost delivering are and bring Starbucks that comparable sophisticated the first customers. The our honor the Chinese of passion coffee for and

operations. Our footprint. a increasingly is and start integrated second We our relevant with store greener advantage vertically locally

customer Innovation fall, U.S. chain arts, Our also unique celebrate in culture local reflecting the of a the distinctively state-of-the-art In Chinese operations our with will This calligraphy. facility include Coffee largest outside stores we a unique sustainable Park, most next-generation our to and single manufacturing the formats open across plan center. manner, designed Xingbake and crafts investment immersion supply

years we in within of through underpenetrated and so has X,XXX program China China. nearly for in And Third, nearly a in We yet, another X,XXX is stores over there historically been has our in much opportunity XX areas ahead Today, customers culture. tea-drinking innovation connection more locally customer won our relevant market. this points over Serve have Proudly what

also have and in we in where market grow capita Shanghai, facts significantly about. to and now is stores. The per coffee Compare And we like Tier That think to our XXX X is drinks XXX. to Shanghai. growth this versus XX average capita more of where lower have cups closer still China cups XX person cups consumption the first Japan per room cities China the U.S., nearly entered year. to in than the where coffee each in the X,XXX Some

in consumer our largest of early in the days still are markets. China, We one

our like amazing investments locally With had which offerings in our relevant dumplings, Dragon locally-based R&D an quarter. and

believe that win. a we built brand us is to play highly the and has China, in China. game for have relevant And our unique long approach We positioned well

in the way further demonstrated supply chains Finally, digital. is and digital another run customers. we China we will highly our with advantage This in be engage

our for into On-The-Go business. business of as convenience Starbucks remarkable leaning the including We and our models, as loyalty members our well are curbside offerings, reshaping delivery Rewards

beyond A business comment China. on our international U.S. the and

have It seen strong strong economics important very and these unit third leg in for growth We markets. an becoming is us.

X% third with basis stores customer. segment shifts quarter, more Development XX.X%, Looking $XXX taking outside down well up the reflecting year-over-year, place was SKU as revenue million, the while delivering the year-over-year, rationalization operating Channel XXX margin in of as our on-the-go points a

just cheese launched partnership continue Drink the the introduced last our see saw in Suntory. of Starbucks highly cream during with innovation, China. Japan, first in growth we unprecedented ready-to-drink opportunity by and Japan in Go did for We in Pink quarter channel-through as evidenced and the and the Paradise series We in successful sales with the Drink launch Grab to lattes as month Starbucks

business productivity. fueling factory as and is We back. think priority strategic a our theater the front a in of fourth in the Our

a stores. to above also by opportunity and focusing reducing opportunity a effectiveness while maximize stores in waste efficiencies clear vast We and have on

to right right the on ensure productivity. have that meaningful in right we the right hours We and to both partners combination have engagement improvements with the the fuel scheduling in focused roles of and staffing

our we Starbucks. closed is Experience. waste productivity the while efficient on strive to as This operations journey as preserving also the third make We with beginning the at Starbucks just target as goals possible quarter the reduction of

build and as plan the processes. include to direct our our supply as supporting reinvention broadened opportunities have end-to-end procurement, chain, areas how indirect we initial and stores our and design well technology across We beyond

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our immersion without and Finally, the the inherent DNA was is something of nothing is to I Starbucks quick culture. and working learn to in through This experience stores. company my

our connection. fifth Our culture priority strategic of is human reinvigorating

just humanity, on to we that as business success lens requires the reinvigorate our through culture. measure will We performance our always of our have. us And

our for me. Our partners business of are heart the

and through improvements. the as to will experience overall as partner invest well in benefits continue through We compensation in-store

new we different that of is Starbucks, kind months world. operating that recognize strive are different kind several the mission do a a the At we a a spent new culture heritage of our of for It for have all out but unifying lens in workplace. to will we reground that our stakeholders company, set be and we values new more soon, through and rolling promises company, the in of a last modernized Starbucks

leave Before to a is with over one in an be this. stellar I honor branded I turn It company to call best driving of you chapters. the want to Rachel, such its

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I to in detail more year at strategies I growth our long-term of runway connection earnings call revenue forward is greater deliver paths format. We durable in to truly XX% What the in the XX%. iconic with discussing our possibilities growth of on and in share details deliver look multiple us, As available fiscal for organized and beyond investor front I and XX% a would media November weeks. to for coming in us extended of that an to look are business limitless. XX% to see hybrid the a in plans XXXX

I'll financial the turn quarter And to call Rachel? with our over talk about remarkable performance more of to Rachel the third quarter. now that,

Rachel Ruggeri

stores and and our our customers QX world, continues the Laxman, you, as our pleased demand our fueling Thank I'm our good expectations afternoon, resonate very discuss everyone. digitally. with which brand across to innovation performance, around to beat and our

and clear we recover record our business ahead. continued have fronts, business with abundant performance opportunity breaking China Our U.S. delivered line on many in to expectations. It's our

financial Our progress overall specifically the it's against tangible plan making reinvention by results. our and strategies, performance we're was bolstered into our unfolding

fiscal exactly we a reinvention benefit of for from of As the highlighting benefits of we the we're ability plan all reminder, half would effectively to amplify our seeing, this the year, the back reinvest set when year, our our said stakeholders. the and at is beginning what that guidance in at business that

XX% resulting and the more up foreign revenue products strength excluding of year of strong consolidated translation. than prior record X% double-digit XX%. sales QX $X.X growth a Our reached impact The currency billion, innovative brand, XX% of from up comparable consolidated sales or when store in loyalty of the our customers fueled

In new X% to also year-over-year as market. momentum in globally store sales growth, benefited revenue store comparable the continued net global our as growth XX% company-operated from addition licensed well

as by from by expansion investments XX year basis our the prior productivity in the consolidated year, offset up and business QX of the performance in costs margin QX expanded pricing prior exceeding our partners reinvention. $X, points well partially portfolio. operating by broad stores. improvement primarily demonstrating XX% to store in expectations, driven a global of from from across XX.X%, support strong as Margin EPS was U.S. driven was increased leverage, sales power G&A segments, higher our efficiency

a X% X% I'll driven prior X% up comparable segment increase growth America net and for store record $X.X consisting growth the billion new and year, respectively, delivered now quarter from store well of by in as average provide North as QX, sales, revenue year-over-year. of XX% company-operated highlights in primarily with another in transactions, ticket of QX. X%

further licensed strengthened the business. our by continued were results store Our from momentum

growth growth, attach benefited comparable which combination food a ticket solid pricing, Our U.S. customization. performance business driven of sales X% primarily in QX, from with by X% and store delivered

higher-margin relatively practice Our while differentiated to adopted of opportunity allowing customers and ticket beverages, a have customizing the growing with contributing ahead. their for abundant experience personalized more a

continues Foam, In XX% to customized, to QX, for ago. a beverages five representing customization growth compared of Cold over X% favorite. were years a be when example, just

high delicious food our in leading customers by with orders, by driven years from high two This was sandwiches five up driven breakfast of the just quarter's all-time an every all-time over quarter. attach to five attaching ticket ago, food XX% their

ticket Transaction comparable history, in weekly all-time high average of which highest quarter the was record sales holiday during first surpassing the X%, year drove the quarter growth company's in fiscal sales combined in our with set XXXX. the

this We our are seeing up more fiscal customers into come customer X% record line stores QX in counts year-over-year, of in with the set high with year.

customers attach to more shift Starbucks record towards incremental capabilities and leading to in enabled are deeply growth more with Our our driving as convenience mix demand customization, higher-margin by premium growing evidenced revenue. and engage the beverages, tech

of is and reflect member most our which of the business, many success consistency Starbucks and satisfaction highlights Starbucks which quarter spend. the delivery member Rewards are ongoing point our spend stickiness These active record proof a members, customer of fronts, number per of alone of the connection on the records Experience. demand Another ended total records but our of we continued program, the our pleased the stores, customer by achieving

revenue points reinvention U.S. productivity year especially benefits post-COVID by in the margin from from U.S. out plan. from our prior XX% North of major operating part vending as Connect, up America's its across the increases the as contracting in rolled licensed airports. business continued with prior offering, momentum (ph) investments return labor digital primarily QX, was timing across travel, our expected, all XX focused the food year now XX.X% of Starbucks basis driven strength of which portfolio travel, from quarter, this stores and

with favorable by included of the ramping as color, increase contraction sales partner partner targeted coupled an wages was well in from productivity plan. reinvention and the reinvention leverage The impacts investments benefits largely the of as offset benefits labor and For pricing partially training.

in or delivered billion to of the from more quarter, translation. the foreign from prior on currency revenue, QX highest XX% year segment year X% than impact XXXX, fiscal International. up when up XX% excluding revenue the since In $X the Moving

Our markets, in prior all revenue including in mobility the remarkable China growth XX% transaction growth returning increasing as growth which our as a customers reflects by double-digit driven stores, digital Starbucks major to sales, to XX% as is increase restrictions. member The well, from through in comparable lapping year China, which growth engagement benefited continued store Rewards attributable was base. largely

contributing to store China long-term curve growth net we the International supporting for company-operated the growth ahead of invest a segment continue in new addition, China, In as with store of delivered significant market. year-over-year, portion the ambitions XX% our

our international with China, a Excluding in from year-over-year growing QX X XX% percentage foreign when markets continued revenue strong momentum impact combined currency translation. their excluding or XX% up

The markets. was digital various innovation of our byproduct meaningful a and growth successful across engagement

to Excluding year-over-year in drive-through, growth approximately new our channel were China, drive-through globally. XX% serve ability new stores total year-to-date the our XX% of occasions furthering X% store of count had create International resulting new customers having and store approximately and

strong had growth China. our lapping for year line delivering years, store QX by comparable prior was Shifting underpinned highest benefited in to which sales XX% with China restrictions. a their growth QX expectations. over sales driven QX, Comp in strong five the quarter, of the last mobility transactions, beverage from by

innovation, per record amounting recover, to of store openings stores day. new demand food Dumpling with As we're of new continues sales fueled the capability, the nearly consistency three Festival product and market of Dragon to pleased our increasing acceleration an digital by

with grew weekly in average in growth to we to sized the sales mid-single into continue comp sales expect and for of quarter. weekly digits, China Average resulting low QX similar quarter-over-quarter growth this

we fall. roasting to the largest and see stores, and we'll Park U.S., this outside opportunity the current our our the continue And the of With plant in partners we invest communities. Coffee demand Innovation opening China, in long-term have

for investments long performance, to well term. recovery have the unwavering healthy Our positioning our and contributed us

inflationary basis in leverage and as was mobility XXX Operating by margin partner QX, year for digital International prior offset investments as segment well wages pressures. sales XX% China, expanding partially restrictions points the year, lapping the from in prior an driven impressive in by mainly from

share at-home Shifting while driven the to of softening of coffee the X% segment to revenue at largely XX.X%. holding due depth by strong Development. the to in Channel position year-over-year proudly the the QX, contracted portfolio. Despite revenue, The million breadth segment's remained one number and $XXX

the particularly North are sales proud our partnership, and outpacing coffee growth American to which of We category-leading total category. share see continued

Our innovation the strong benefiting us overall continues while to segment distinguish with performance.

Paradise points strength operating of by mentioned that Starbucks Laxman is award-winning in margin prior the shift. segment's example basis up this driven from the America and and Starbucks sales mix North year, earlier. A partnership Drink ready-to-drink coffee Pink resounding a perfect Drink in QX, was The XX.X% XXX

to of testament has As segment's a the the diversified mid-XXs of strong previously shared, margin range, our normal portfolio. operating partnerships returned and a benefits

for guidance Now year moving the balance fiscal XXXX. of to

through growth end combined long-term the final the plan of fiscal visibility year range and to into from year the building environment low a are shared it to our macroeconomic XX% our of poised in growth move have we're our strength the year for plans reinvention Given we've full XX% to year the portfolio, and full November that we move Despite pace of of confidence fiscal growth durability variables, built, earnings the plan. of of with in quarter globally year we as unfolding with growth reinvention of the guidance the the are we reflects the earnings brand to strength our the XX% XX% our global momentum clear XXXX. results, full to we our

all reaffirm As other it measures. remaining our pleased to relates are on year to full guidance, guidance we

revenue rate spend reminder, to growth X% growth, capital previously. what XX%, end and solid As we X% a global that the of tax and XX% guidance remain expansion. high margin to near unchanged includes also growth from comp shared of Store

foreign impact unfavorable to an X approximately XXXX fiscal currency of As X from earnings, points respectively. year on reminder, points a percentage and percentage translation expect we revenue

detail provide me With that, around further QX. our let

International. to regard in First,

lower accelerated Looking investments. store margin be year, segment along renovation our expect than the seasonality QX ahead due QX of the International balance to digital meaningfully to with to to expand and we but year-over-year

in sales noted weekly we to customers quarter-over-quarter, to digits similar I expect with QX, weekly growth in mid-single growth in average average China's earlier, resulting to sustain sales regard low continue Second, of as sized the to which China, is government comp contributed transaction all the of and year lapping of discounting prior prior for year from to favorable growth the timing as Mid-Autumn coupled Festival, stimulus the growth. with market difference

a comp to full consistent new mid-single-digit development. with year prior of as basis, net record-breaking low on expect to a our well guidance store as continue We year

as coffee Finally, to relates be largely revenue in we business QX, at-home shift to by to it Development, Channel the customer pressures behavior driven as expect largely year. to continue flat with prior revenue expected

However, be will by margins a continue we leveling mid-XXs to the above the to year. range, business driven strong seasonality, expect full margin for mid-XXs

In takeaways from summary, today. my discussion key here are my

strong Our testament product our momentum brand, discipline. full operational our focus and in globe and and to financial a is our performance and is across successful the innovations swing

Our providing and business. investments returns reinvention unfolding throughout tangible are our plan

result confident full move full including for we and a guidance to of XXXX. revenue As our fiscal growth XX% are earnings been XX% solid year to has performance, year our year our reiterated XXXX to fiscal

Finally, I making is partners brighter our limitless. It's of extending you truly want globe for to you to showing every the by that around day because customer's and day the active future up kindness. say thank

to the With call Q&A. that, Operator? we'll open

Operator

Bernstein, your Thank you. first Instructions] Jeffrey question. Please question Barclays. from Your [Operator comes state

Jeffrey Bernstein

the to one traffic was just I just the one on in and question some question The going the much. positive to safe a Great. is comments. I menu and it's there's slowing this looks be that average therefore, and traffic. last quarter. modestly think had to say bit little very Laxman's slowing pricing Thank quarter, in like quarters, U.S. It then you clarification from forward comp ticket. And the

your likely current average that to into confidence next So looking with the I'm slowing comp to algorithm for slow, and X% the X% comp just the in wondering ticket year.

XX% think And you report XX% I the quarter. you mentioned I update to XX% long-term with just when that fiscal the guidance growth. you did XX% and clarification But would long to the Laxman, that term growth fourth mention revenue is you EPS think said,

the to that you're into safe as is initial that So those quarter? we are offer are things with or table you look levels say future comfortable next your as on all guidance years out

Laxman Narasimhan

up. about questions Well, in was let of were There this the third there as the was and a XX% quarter. a several question what earlier well expectations the question And break the the the about multiple to -- XX% confidence about then growth a to balance there I'll XX% growth, just as There all for to there on question and my the was achieving me comment I've XX% earnings on our said paths so year. three.

let QX. a mentioned Rachel It's our QX as us strong with line very was quarter, first So well. in me start for with as expectations.

the comp, two Our from XX% last X% were bond. was comps which consistent X% had a the consistent a comp lapping we QX, very in comp lap Omicron, We so year, so on in month a every a off came year of month. impact comp and basis. over was The QX

food customization to the is at records. strength sales it's led QX pricing attach the levels the you this, weekly mentioned if and as brand, of so to the we in And growing And and took the what really but also of look well. break of that the Rachel continuing that average actions levels

across Now attach. levels year-over-year QX your question Transactions is all on above from are dayparts. XXXX but higher coming below transactions. grew Traffic average XXXX the units store in per food

led price customization weekly increases the the this you record food to growth judicious more saw with and in that quarter. So along sales

grown So transactions, said, as I all dayparts. across year-over-year have

our to of very QX a most which for had and also customers. compared but a ago, of of is pricing, customization the sort increase balance year occasions between strong the which in a increase doubled judicious, There's incremental also ticket. units. in in number is We Delivery sales

So that's QX.

some about gives our Let me a the loyal sense you just the of highlight strength ways, of customers brand. in that, something because

in They we smaller members frequently, come our Our interestingly enough, X our largest Rewards million number year-over-year. And Starbucks as buy more. the over sizes. [indiscernible] we've sizes, seen active our of more grown in sizes see have they actually growth

trading So base. the down our customer in seeing we're not

we how card QX. balance sequentially. stored exit Our the credit, the value is of That’s also great

go of don’t continue. As the previous to pricing final we you X% will the the to have year do we expectations the the look as the annualization And trends expect feel of comp year. end X% first with significant at into quarter, expect set. growth pricing the from that, actions of to the year, line said, but in any moderate lagging as that We we of we balance we all, had you impacts comp do

the me both fact growth gives terms long revenue I question your to in real the XX%, what about to the that. paths confidence to have XX% in in in the – the previously, XX% XX% Now to growth the multiple that we’ve and growth top seen answering have earnings earnings of line term, to as getting of what guided well as we

So elaborate see, of just the multiple the line signals and the earnings growth, paths of business, happy we as well on. durability top that as the terms both brand the really resilience to which I’m in of

Operator

you. Thank

Your with state William comes next question from question. Sharon Zackfia Blair. your Please

Sharon Zackfia

be? you that I where the the you'd hours Hi. Can about color it would think Good related that's is in us some now of the kind love like to be around on long per kind of but partner. associated was get throughput some to U.S.? that I improvements you that. what comments give where number assume of afternoon. there? curious How color And would takes the on and productivity

Laxman Narasimhan

this good very making progress are area. we're the we feeling So about in

the last are productivity announced plan good store the very There it. meaningful is that now. as reinvention the in to making. we're We're environment as well that making that year we essential on gains progress improvements foundational seeing Our we're improvements

equipment rollout track. Our is on

and the growing we're making on dayparts. staffing the faster basis. progress are peaks than strong rest of the scheduling Our And

coming. we're see improvements improved improvements proposition, terms our you're and look pay X% reduction versus said, barista you see down, is a reduction combination the that have you economic in to that quarter. X% just the retail of team, the of the we year-over-year second as scheduling previous as turnover If on take-home by we're XX% well And year, baristas improvements I us And make making. making, versus as the has month-over-month to is investments more the improvements going what

we're scheduling accommodate on the continue going part-time to ensure to preferences, through keen but that also a that average mean, staffing to increase to attract I their many better hours and we schedule. work including we a these

come that week progress and more So there's this to next over is making month month, week, we're year. over

Operator

Thank you.

TD comes your Cowen. question Please Andrew from next question. state Charles, Your

Andrew Charles

the a number competitor Great. on earlier in Belinda, question indicated activity to for that a ignore coffee shops, It's Thanks. one of persist will years. discount it's hard China. two-part amount China by of today competitive

new you curious so premium degrading strategies traffic place Starbucks could to the And help about in status. protect for if talk without brand's

little a China to know, or Rachel for allows margin an either a are a that's were I performance in where there's about is question so from America area that macro, but cushion in out to become you other that China area XQ some the we model my macro headroom another not sequential improvements times. The productivity that perhaps of if Laxman, XX-Q, more grow there's what China's model then maybe for called offsets perhaps mentioned more bit or Amid see the couple volatile thinking North And weakens? if the uncertain. increase I'm

Laxman Narasimhan

Belinda? first get the come some the it. then Rachel take comments Belinda I'll with to to I'll second, question, summary take at and end. Got the in

Belinda Wong

your for Great. Thank Andrew. you question,

First of to sales that there's to performance say in all, no noticeable impact I our want QX.

QX the achieved. -- very happy sequential we and very improvement we're fact, performance In that I'm with our

return. will and optimize and been stay disciplined have focused in to our to investment We and deliver discount continue incremental

accelerate vacancy and propositions. consumption. just talk our years I propositions when Different on They our value coffee delivering On one want coffee value we our we of human the in We're and focusing we occasions, welcome partners day anywhere entered brands the expand premium adoption else. quality to competition in topic, actually and been about of connection bring customers have replicated different by the the defined competition. coffee can't experience market we've Since ago, XX emotional be our built a China, with and the that business. and experience and

and a have distinctive serve needs range capabilities diverse fast And customer occasions, advantages. mentioned slow. that built physical built business we model Lex of and and digital, our business and China And to the has competitive gives unique strategically has us

product you. distinctive the Thank advantages people even the long So digitalization investment the we'll our in create store in to future. our limitless We're to our on in more in down experience, opportunities capture innovation playing China double game.

Laxman Narasimhan

Rachel?

Rachel Ruggeri

we're that even by towards sales look at encouraged today. that digital, And we're margins by better And performance that's to Andrew, we as And does in lower what more have I we're more we're a see which would way the we follow leverage, as encouraged margin drive so up China, margin through the with revenue. Yeah. than overall, percentage today. just healthy seeing no seeing it's a shift expansion driving

future on continue has progressive, see continues the year being been that, be In our saying to room, can margins, to we us margin one on which growth efficiencies earnings qualitative the guided XX% allows addition we've be would about to. and and China why challenges around us XX% structured solid said, reasons such that is do That navigate invest directive in judicious and very be very the are to there the intentional business creating that that deliver opportunity to would so future, we've it we're more the operational this the margin continue guidance so that language that to in we where expansion healthy. which allow if team needed to of will

Laxman Narasimhan

our advising business. business our I in work impressed. a extended time and passion that China, been Well, it's have. on unique spend was I of It's China, I And leading in this you, for with our very digital. a are the remarkable let in China, running built centers, do And I to chain. including looking me teams And got actually to this our got of in in couple China period an the close to at got observations. I and support time to with was spend market in I for supply our stores. just partners quarter. love, we partners been to terms with have a what China XX is with that's very going studying I've years. business tell been

still I at you as start think when large. early said, and you Belinda the mean, days. headroom is headroom it the is looking I have,

it's tea So by still course, way, capita. a like per we've lower to of of The and country much doing got they're coffee, over had been to Japan, has the higher for into drinking tea people essentially history we've remember, numbers, conversion which which come market, driving a than Shanghai, a years, XX of as cups XX significantly time. but in coffee culture house the

is the So really large. headroom

a of we these -- what connection. proudly look our points you customer at don't do with have serve we forget, also brand, If Starbucks we

the making In is significantly. so coffee for multiple our and partnership are digital ready-to-drink And strong. with being in addition, also is home, also growing across very our channels available investments we're brand we're at built

to chain, the greater greater more supply we're China making vertically a gives in and productivity. With our it investments also flexibility integrate

by terms improvement margin So addition stores I I the with opportunities look your on the the our at which productivity of cuts I on just what we options, whole in the confidence the regard margin think question both made. further have have in of out productivity, and in and way, as that, that have to see progressive us that, we we across business, other to all stores, gave

days productivity. to opportunities early expand to in get market further China, for us and going So

Operator

you. Thank

Please please. Your your Harbour state next from Brian question you. with question, Stanley. Morgan comes Thank

Brian Harbour

I Yeah. kind about afternoon. supply just ask and procurement. Thank wanted point you. to on of the chain Good

though is side, more and see that clear the go? where doing. I the labor on into think you you the opportunity what the you're there, Could there? on think where opportunity chain most How guys margins you have can been supply factors what just you pretty side elaborate

Laxman Narasimhan

I'll that. Great. take

over we productivity months it's what if would throughput yielding you you interesting see, to end very But the or think well everywhere, of efficiency Arthur services get. clear is investments that our how the the of we stores, what that we why Valdez at have what how that look we're making I we part As been buy, opportunities the pretty I we’ve technology so, working see the much reason stores business, we that we we is six end, in our that’s you to opportunities as buy to of look both have team. that flow the as in added we're everywhere. products making, last to we've the And terms it, on the investments the is kind provide

it. And the a you over just see And record example, up went course the availability rates the went last that the quarter. as a attach of an of is of sandwiches up what of consequence as result

of the as to examples is seeing us seeing. with we’re ability those just do And think I how the you so rethink freight it. we do large. of and benefits, cost regard for we know, Clearly, that the to are And of kind we’re improvements what

kind base is buying in terms there And opportunity in, so keep that better, flowing that plans up scale of better bringing growth can also and a us with automation there frankly, for products have. and the developing of supply we

Operator

Thank you.

question your comes from state Evercore next Palmer Your question. ISI. Please David with

David Palmer

XXXX, year growth membership. Rewards And active a time, a your and ago. and Rewards were XX% you you've transactions increase in ago. what you've insight seen your noted It's there's in And had down quarter I'm there that X% higher over wondering on I question four in since Thanks. than years membership. up versus an if had transaction over XX% the

using maybe bolstering is like Maybe items consumer looks orders, it more by the the frequency having down. So certainly order. consolidating check per is differently, you

solves But from very visibility are are into standpoint? you seeing marketing a your have good consumers You any of sort what doing.

they're over your your of know frequency have coming. the you and half you You what orders, doing see they're and consumer

growth. So I'm as been a you've some tools wondering about the talking side the to unlock of ways you stuff Thanks. about consumer operational from see versus more

Laxman Narasimhan

I let made In members. suggested comments all, you of about question, think first you of Rewards think just me clarify our Starbucks -- a I couple something. your

me Let you me give that. just just address let --

have growth. a million of We growth year-over-year. had It's XX% more them, we a so X

more in come members Rewards Starbucks Our frequently.

more they're come also sizes I as more said, come buy So in larger frequently. right? as they're And the frequently, choosing in. in joining not They coming they after less program, they

do. what pace we we're The terms we in changes of in marketing tells digital, doing investments you have what made and further we particular, even which that are is with at are what innovation bringing it increasing and we in the

a make, bring. taking whole agility we're benefits make we the us of even terms we company bigger will have this and which the help list in that And the up of in could We stronger. investments

a members. of Starbucks Rewards about growth. would way the area I that's So your key It's address question the

our The other connect, thing this our And scaled have I consequence as business we well this, and you stores stores. licensed is growth as think of should license XX% a have is we're all that. we of have our in licensed which scaled connect, to seeing be aware today as of

globally. this scaling Finally, we're

take very us. it license you is partners strong results, is and the which You're to seeing mean, with of strong Solutions our that. see, us Starbucks Digital our the geographic I announcing or are sharing are you results capable There adoption. And very see geographic Digital kind extremely of delivering partners Solutions. Starbucks

do to growth too. in as that to results we're we're investment And digital. because drive strengthen we seeing is also there, through China, our making big just fact, what real that relationship see digital we but way well a In in not as where a with

scaling overall, digital. a big us me. strengthening around for a second think So It's of priority And the of area. big is I this area for focus part it's big and

a last comment. make I’ll

a Deep It’s inside called have machine we Brew intelligence. learning amazing have where and made investments capability artificial fundamentally in the We company.

do in what me think going re-platforming will and key we all this what us. growth a on, of ability just in greater on gives innovations vanguard that are I to the going be to for at and digital. given in be the confidence that’s area we us adopt the of for furthermore, this the early do area This

Operator

you. Thank

question state your Ivankoe John with next from JPMorgan. question. comes Your Please

John Ivankoe

was hoping throughput? those customer. I hour type opportunities bigger be, the of specifically with same-store X%, to specific to do whether like -- you traffic up guess, regrow you of you opportunities daypart versus could kind of secondly, addressing or the biggest see as mean, peak XXXX? what Hi. feel you. same-store you kind if Thank And in transactions I I address that are

the specifically coming amount running In is all properly might orders Thank where be transactions, the you time. can of I it, at engine hour factory mean, that is peak those in set would short call of up? Starbucks, especially other words, such part you. as achieve you very mobile a

Laxman Narasimhan

think, for I you John, the thank question.

definitely We're how as before than question. did more ability what peak but sort refine make will think because that headroom. that the still further we we have we we we to investments the as in making, our scheduling your with of get start I think have even we further are and ensure right up we take flows staffing, doing that investments first of me Let the better And we about how store, further. we

the So really are and growing peak day parts actually growing well.

and opportunity coming, full Now our fully board. much opportunities -- look business, there's attack of afternoon. innovation, afternoon as to question strong yet innovation the If meet we Starbucks I If know, the but your do more could about doesn't the we big to And beverage it's us you at it across way have answer at for dayparts, we have pretty opportunities, a I needs come. in that. look in Refreshers terrific, beverage and a daypart. the to And is what sizable

it’s at a we in the level China, in had, at If early opportunity grab we to to Delivery I for at built U.S. innovate look highest If it’s there. look have that growing is further food food billion we’ve we’ve as also for just continue have and but elevate to enormously. just us the I attach, mean, that, us an $X ability order lag. said, opportunity the the days. I it’s And I that’s too,

a in we So terms delivery. do leg with we there can of have too what

we There’s our actually to also growth it, to regard looking have all of different in earlier with also customer growth, And locate smaller but we with towns, U.S. stores. the with not store said clearly the net see us where geographies. for we’re headroom I stores an at real stores licensed opportunity that furthermore, And our just own

America. and rich available get and us, this pretty I a at just what So that is as of areas look it’s is North could we for John, growth set

Operator

Thank you.

your question Peter BTIG. from Your with next Please state comes question. Saleh

Peter Saleh

you you I you. exceeding Does these going North that that, of North guess, America versus margins a forward, Do if give us pre-pandemic just path do of of to the maybe Thanks. levels? maybe up mix where wanted America pre-pandemic? to, a in of of push to not, see back back Thank were margins heavier levels? drive-throughs drivers like Great. then on come I operating And magnitude? sense operating within maybe some feel order back help and you drive-throughs margins. the operating you days pre-pandemic the Could above

Rachel Ruggeri

by reinvention about line Peter. the is driven sitting We've offset margin North we've expansion, And in we been Rachel. leverage, of productivity, about basis America, by expand sales see in which of margin the investments helping a year-to-date pricing, the to Thank on top the the line. for up America, made that's some and and the opportunity the continue and seen to the both encouraged points reinvention plan you at of long Hi, bottom on amplify. benefits performance combination benefits we've showing in is XX.X% the to to as XX from continue over with question. we're the North term (ph) This of

addition that's the is creating driver able be and so that look margin reinvention, that, business the a And capacity demand margin efficiency I in to reinvention to sales to expansion. of opportunity we're And also of to in terms we're that expansion. of really resiliency in as the unlocking our Through leads significant leverage. middle serve at would supporting

would today expansion year this of going margin to reinvention, company I the in about by already more expect what part in will expansion seen So what see America. and future, be to the North level which forward. it driven leads at at progressive us that with solid look we've we And margin progress course, large

Laxman Narasimhan

want I to thing. one say just

I top more are there questions online. a think few of but we're the the at hour

questions. to go we're and those over so And take going

Operator

your Thank with question. question you. state from Bank comes next your Please Sara Senatore And of America.

Sara Senatore

China. more a end Certainly, in Okay. But the of question in I guide perhaps some still even think then the other reopening in clarification. high full know, I of Thank markets the lot you've and about the on, Rachel, tailwinds with a sales you point you. talked same-store about X% past, there's X% travel. for A maybe talked year. going to

ability, substantially So higher will kind of looks like half. range, at it the end being as in the through kind be of insofar high -- guess I'm the was of U.S. to that half second think first I especially trying than the the

understanding So trying you're comp. to thinking ongoing make just I'm the how sure about

you And Laxman, unit the I mentioned then question have, growth.

when to been Starbucks change base in unit kind accelerated growth with has there your traffic conflict think unit around in I What this the traffic with have where make slower that it. ultimately coincided it's to growth, sure stores? time doesn't growth the existing of and the past, are in to or the need guardrails periods place a rationalize store continued reset

Rachel Ruggeri

related in Sara. at I'll take comp, Thanks, the comp. we year around just momentum balance when the look business And of Sure. to continue. the we first the the expect to question

combination comp in our America a think current encouraged quarter, growth about So when we was transaction that were growth. North the you this by in in of fact

as So we with only a daypart. balanced above attach. contribution in saw not well a an single pricing from transactions grow And ticket. prior every customization coupled was increased And of elevated year was but that record that as combination strategic

to have would that balance that, that I are That in the broad. year we continue And full perspective and a fundamentals the we would that basis. growth standpoint, momentum drove year look from as at on strong expect the quarter say, continue, a of from a to revenue going we revenue

will through capability increasing our as convenience, So membership in in that be fueled through around digital rewards as including growth to customer innovation well continue continued growth and our digital.

on So range support X% full signs of that comp to X% see we've help as all we year basis. guided that the to a

was year expect full Now think China, North our of on low sustain when we're as contribution International outside to comp from to recovery we'd America, basis say the about a well and gave in around seeing. and that you the as a momentum through we I mid-single-digit guidance

in board, and So we're gives the coupled to to at total confidence for of the able in maintain X% we're recovery momentum North then North the full be range the for a seeing, high the year X% basis company. range to seeing the China, with comp on the we us the end across America performance America strong think

Laxman Narasimhan

of would business What of small have network stores them. our Sara, I not would with your it, net presence there and store the say mean, more underpenetrated consider, may normal nothing we about to how course many and at of that would think the growth you further there's the to see exposed am normally concerned. from I consider that we looking number markets, there's look we very our me. challenge we of in that enhance in question store markets I are in in where have a that multiple but formats. standpoint I'm concerns some a our core at we opportunities also are But we

what this before bring into purpose-driven think have. I order meet formats needs markets that customers as we've can in referenced of terms to various in we

Operator

you. Thank

from question Joshua with Stephens. question. Long next state Your comes your Please

Joshua Long

like prepared referenced within A demand in channel me your somewhat in. would to Development. the sound Channel you you squeezing be commentary, for normalizing Thank Great. within coffee at-home of times couple

we seeing just or in of you're an any to if of attacking or there how into additionally, that return kind you kind sort can portfolio back capturing that as back terms curious office shift you're you side as the just within bit. and just unpack if unfold. chips that a shifts of to brick-and-mortar to get on could I'm commentary that's little the curious kind So of of share ongoing provide continue retail if

Laxman Narasimhan

Right.

coffee. very in share strong We out-of-home have

with North from have looking or customer customers that. like partnership stores, if American #X I And where seeing you on-the-go. think is clearly products the about have with our our more are from we with you customer licensed what are tied is or more the stop at we're coffee we so that stores At the good same on we our you becoming go. benefiting the feel frankly, we're is what channels seeing for time,

are coffee, shift of Go our place. So But shares some strong. see at-home that you very please. take ahead,

Rachel Ruggeri

are But add portfolio. seeing that the in would balance a I we

we we we're we're encouraged So guiding support shift to and quarter helping in are basis. year saw that's ready-to-drink seeing and domestically expansion margin an some, both a increase on while consumer by this seeing full And behavior to things one mid-XXs we're internationally. is of the the margin that that's our in that the

case, say I it's So would in to portfolio strength advantage. the this working our the of diversified that's

Operator

state with Your from question. Bernstein. your Danilo comes question next Gargiulo Please

Danilo Gargiulo

States. today? System expectations? Siren Siren How the your the margin United is productivity in hinting initial many the stores on question System number rollout And a this have what the on And uplift with Just in is kind track at? of internal

Laxman Narasimhan

Rachel?

Rachel Ruggeri

a of Siren next stores in be phase Yeah. System year. next XXXX. year, XX% expect our to stores the the reaching System, We're -- testing in on today. by standpoint, year of conjunction launch able And to be will we to than renovations in From with just we're the XX% the have our track about Siren new less our stores

to the we the lead results, it expect we're so And will we're seeing, in do margin good encouraged expansion seeing future. we're and help by progress

many, as we're staffing making our we're as and the of one say, in the the It as as the will be investments overall scheduling operational investments stores equipment what making well excellence well within I'd into well help The team North the lead that which of that all will combination a focus stabilized environment, the future. in has. margin America of will to more production expansion drive

to so we're we're today seeing looking forward furthering encouraged by we're the launch. and And what

Laxman Narasimhan

how it's in the cold our the of of around in like pipeline is look to foam you very add blender, terms one of the the I'd manage some And we history the commitments portfolio, it's all investments fastest thing portable we very strong. And equipment one at have the we stores. manage Just is the strong. innovation way way made our if is rollouts pipeline our reached of that

So we in have we the good when the that are when the making renovations, Siren we they do about actually new we managing stores feel And we System. investments getting them this I are of way in when the ready, area. portfolio have built automatically, are very

Operator

Please comes question Tarantino Your your from with state next Baird. David question.

David Tarantino

the I afternoon. the get more that. to going longer-term multiple But November the focus to have details this. and commentary earnings Good deliver on targets. that the on I know revenue in revenue part the both Hi. paths to to we're the were question targets. wanted of I follow-up related comments a have in on I you think And

continue guess perspective, to unless I that I'm revenue you the you previously to to growing need at from comp missing I if rate growth get maintain guidance, grow that the you're a unit think outlook to would you gave something.

any comp on guess you I change that element you the be the maybe I could could So is, helpful. maybe get clarification front growth there? unit question guess, element still that signaling could would and change are and the

Laxman Narasimhan

Great.

Let me the line. top take point this on

year, look iconic strengthened, and durability. a the all, geographies, very affinity of across segments, brand consumer The right? First of ranged the we appeal across is has across strong If just last in an brand our brand has Starbucks with occasions.

who historically So line, the the But stores. as to our your it's a even question we in around markets of China of many also recovers. visit high have world, number customers on top

kind dayparts and on across have and particularly more bring different mentioned innovation across are of we a and the models formats, it's on the to opportunities strong food saying, continue delivery with equipment, even this operating on can with that that pipeline that earlier, business a dayparts We we with innovation, world refocused and billion-dollar and beginning side lag, we operationally beverage, that delivery. there how and more I how focus with only of as across an model daypart ensure would new do built now help. and like We support actually

across And have strengthen learning in also earlier we're we that more mentioned agility even that digital just I in solutions our terms not it's the at in Connect we well scale intelligence world. and with digital. with how of terrific digital as as stores, just artificial it's and machine in it's stores the unleashing capabilities but Starbucks and

the we we're managing of great management, even terms done We these better have in make sizing terms strengthened and managing that's revenue terms in managing in investments, pricing to customization. capabilities. already in And going building of on get of as been mix, work

that we in terms is how grow. opportunity have lobby We us for further a of

just of think that, I terms in real there's opportunity. So

store of earlier, new builds, in net have even well do I terms as as as internationally. growth, both U.S. the store mentioned we headroom In more in

is milestone greater Our get the China number penetration. to even

the see Europe, that real. Asia, in of opportunities Latin and And some is America we the unit Africa see economics and we

formats in third experiential of powered can range where we a an omnichannel have but this place we also deliver by deliver way. convenience experience digital And

I to at its good revenue look So at XX% at its its get to XX% range, look of look we I will I I that the appeal, time. and XX% very brand, of earnings at at way, it to look XX%, the over feels growth to consumer look me strength, its a its durability, by I growth

Operator

next Fadem Fargo. question state comes question. Your Zack from your Please Wells with

Zachary Fadem

Hey. Good afternoon.

on So algo. the long-term up following

that your the comps to to you what would reason, could for If your XX% you were mid-single margin about And talk whatever so, and a say level digit slow keep on XX% still levers table? if to other is EPS that confident? you

Laxman Narasimhan

question. thank you for So your

improvement we investments store, will this, earlier, to significant later see work the set look we’re you a importantly, at said what come this I just I the We’ll see at as the I productivity. point. but appropriate As that margin about tell can we at store. opportunities But of making in details

opportunities. have We

very the earnings feel I to good about growth. XX% XX% So

Operator

last the was now That call will for you. Narasimhan closing the Thank question. remarks. to Laxman over turn I

Laxman Narasimhan

quarter earnings then, all look on in forward and you. Thank thank all appreciate this call. third you for XXXX deeply seeing us joining I it, to you Until November. I

Operator

today's This Thank parties you. conference. evening. disconnect. All great may Have a concludes

Starbucks (SBUX) 1 Aug 232023 Q3 Earnings call transcript