- 2 months ago
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00:00All right, Brian, congratulations on the recent quarter. Obviously, investors had been looking for
00:04some sort of sense that there would be a return to growth under your leadership in the 13 months
00:09that you've been on the job, 1% on the same store sales basis. Do you have confidence that the
00:15performance that you saw in your fiscal fourth quarter is not only going to be repeatable,
00:19but more importantly, something that you can build on for the current quarter and beyond?
00:23Yeah, Romain, great to be here. And absolutely, we believe this was a critical moment in our
00:30turnaround plan of the back to Starbucks strategy. You know, it was great to see once we got the green
00:37apron service standard into the business, we saw a lot of really good things happen. You know,
00:42most specifically, our partners were set up with bigger rosters, more hours, and they were able to
00:48give customers better connection, great craft products, which then translated into transaction
00:54increases. As you saw in September, we have positive comps driven by those transaction gains
01:01that continued into October. And we believe we can build from here because we've got a strong
01:05operational footing and really excited about what we've got coming for holiday. So we think it was
01:11a critical moment in the fourth quarter for the turnaround of the U.S. business. And when you think
01:15about North America, the thing that's great is Canada had a great quarter as well. They were,
01:20you know, low, mid-single-digit comp growth driven by transactions as well. And they've done a really
01:25great job there. And then when you look around the world, we had terrific successes in many markets.
01:31And most notably, China had its second consecutive quarter of comp growth. So it was a critical moment
01:37for us. And we're optimistic about where we go from here. You've put a lot of emphasis on service,
01:41obviously, with the Green Apron project. What does that look like in terms of staffing, though? I
01:46mean, you obviously have to hire more people. But more importantly, you have to retrain a lot of
01:49your existing staff as well. How, I guess, receptive have they been to that? And have you faced any
01:55challenges? You know, I got to give our partners a lot of credit. They really have embraced both the
02:01back to Starbucks strategy and the Green Apron service standard. And when I'm in stores, you know,
02:08what I hear from folks is like, thank you. We're getting back to being a great coffee house again.
02:14Our baristas and partners, they love doing the craft. They love having the moments of connection
02:20with our customers. And our customers love it as well. And so the fact that we've staffed the stores
02:24up, and we've added more people, we've added more hours, it actually has set them up to be able to do
02:30their job, I think, with excellence. And, you know, it's always terrific to be able to hire more people.
02:36And when you've got great leaders in the store, they're able to train the new people,
02:40I think, really quickly. And we've tried to keep this very focused on what we're looking for,
02:44right? We want a great greeting when people walk in. We want a great experience at the handoff.
02:48We're working on doing these uplifts so then our customers have great seats if they decide to stay.
02:53And we've put some technology in behind the scenes to help put order to all those orders coming in,
02:59whether it's through the drive-thru, mobile order, or in the cafe. So, you know,
03:03we're seeing great responses from our partners. And I couldn't be prouder of the progress they've
03:08made in really short order. You know, we've only been doing this since the middle of August.
03:12Yeah. And with regards to the actual physical Starbucks locations, I mean,
03:15there are a lot of layers to what you're doing here. One, obviously, trying to make the
03:19interiors a little bit more accommodating and comfortable, but at the same time,
03:23also efficient. You're also looking to sort of create more, I guess, lower cost models for building
03:29and operating some of these locations. Are those two in conflict with each other, those strategies?
03:34No, actually, they can work really well together. You can have great design.
03:37You can have a great seat. You can have a great atmosphere and then also be very cost conscious.
03:42And that's what we're doing here is we want to make sure all our base costs go into giving the
03:48partner the back of house they need to be successful. And then the customer, the front of house experience
03:53where they love being in our coffee houses. And so that's what we're doing. You know,
03:57these coffee house uplifts, we're able to turn these around in a night or two. We don't have
04:01to close the store. And the transformation is meaningful. You know, the feedback we're getting
04:05from customers is really, really positive, both on the design as well as just the whole atmosphere,
04:11the vibe that they're getting. And I think the combination of the Green Apron service with this
04:16coffee house uplift just really gets people to a different place. And they believe now they're
04:21getting that Starbucks experience that, frankly, you don't get anywhere else.
04:25How much will the pace of those uplifts pick up? I mean, you've only done a few dozen stores,
04:30at least in the most recent quarter a year. I mean, you've got more than 10,000, you know,
04:35company operated locations right here in North America. So when do we start to see the other
04:39thousands of locations get that uplift?
04:42Yeah, so we've done about 70 so far. And we are focused on this fiscal year getting over a thousand
04:49done. And the good news is once we get that scale operation going, we build know-how. We will be able
04:55to then hopefully accelerate the build schedule accordingly into the out years because we would
05:01love to touch all the stores that need it. And then the good news is, too, as we build new stores going
05:06forward, we're building the new stores with the right design package, the right experience. So
05:11we have some work to do with our existing coffee houses, but I'm optimistic we will demonstrate
05:17that we're able to do this at scale. And then we'll build on our ability to do thousands of stores
05:21going forward.
05:22There is still cost involved in this. You had a restructuring charge in the most recent quarter.
05:26The sales growth is coming back. There are still some concerns about whether margins could be under
05:31pressure as you go through this transition. What do you tell investors who ask that question?
05:35Yeah, look, I think the margins will follow the top line success. And I see no reason why we can't
05:43get back to earning what we used to earn even pre-COVID. So I'm very optimistic for where we can get to on
05:51the bottom line. You know, kind of the way we've talked about it is our future is we're going to have
05:55more transactions, a bigger business, and every transaction is going to be more profitable than
06:00it currently is today. I love the fact that our culture has really adopted this mantra of we're going to be
06:04better tomorrow than we were today. And the same thing is true on the bottom line. So that's where
06:09we're headed. And I'm confident as we continue to put transactions into the business, customers
06:14continue to experience the Starbucks experience. They see the tremendous value. It will flow to the
06:20bottom line and it will reward everybody accordingly.
06:23You seem confident. You seem optimistic. I am curious as to why you didn't feel it was appropriate
06:30yesterday with regards to the earnings release in the call to reinstate some sort of guidance. I know
06:36your CFO, Kathy Smith, said you would probably do that in January at an investor day, but why not now?
06:42You know, we basically believe we want to do it at the investor day so that we can give people a
06:48comprehensive look of where we're going, not just for the fiscal year 26, but rather a long-term look
06:54on how we're resetting this business up for success. You know, I believe the reason why I'm here, why our
07:00leadership team is here is not about what happens next week or frankly next month. It is about where we are
07:06three years from now. So I'm optimistic about what's going to happen in the short term, but we want to use this
07:11investor day to really give people guidance on where we see this business growing in the future. So we'll see
07:16everybody in late January and I think we've got a great story to share with people and I look forward to seeing
07:22people there. I want to talk about the coffee and the food. Obviously, one of the biggest buzz right
07:27now around Starbucks is the add-on foam protein. I am curious. I mean, obviously it's in the zeitgeist,
07:35but is there any way you can articulate whether it's actually been accretive with regards to sales
07:39and the bottom line? I mean, what do transactions look like for those protein drinks? Yeah, so we're early
07:45days in the protein platform, but it's proving to be very incremental, which is terrific to see.
07:51One of the best early indicators is our rewards customers that had some low frequency, we're
07:58seeing their frequency pick up. We're also seeing our awareness build. And as the awareness builds and
08:04we see people try, whether it's a protein cold foam or the protein latte execution, we see them
08:10actually loving it and coming back and doing more often. And in some cases, even doing it in the
08:15afternoon. So they may get a different experience in the morning and then they come in in the afternoon
08:19and get the protein latte solution. So we're looking really promising on this protein platform.
08:26Obviously, we'll learn a lot. We'll listen to what customers say. But, you know, I love the fact that
08:31over 90% of the drinks now, you can get protein added. And it's very much on trend with how people
08:37want to eat and drink. And so, look, I think this is a piece of Starbucks getting into the right health
08:42and wellness frame of reference. Right. And then also giving customers the personalization that
08:47they want around protein. I am curious about price, particularly in light of some upstart competitors
08:53that have come into this space, like Dutch Bros, as well as Seven Brew, Luckin Coffee and a few others
08:59here. Do you feel like you need to compete with those names on price? Or can you sort of maintain this
09:04sort of a relative premium or luxury model that I think Starbucks has had a perception of being?
09:12Yeah, look, we're always going to compete. OK. And one of the things that I love is we're competing
09:18from a position of strength. And that strength comes from the fact that, you know, one thing I
09:23like to remind people is we are the biggest coffee drive-through business. We are the biggest
09:28mobile order or digital coffee business. Now, I think we're also the biggest delivery coffee
09:34business. And then obviously we are the biggest cafe coffee business. And when we provide people
09:39the experience, meaning the connection, the community aspect, the humanity of Starbucks,
09:46combined with the craft of our coffee and the personalization, we see customers saying this is
09:52tremendous value and it is well worth it. And so I always say to our team, like, we have to be on the
09:58offense. We have to recognize the scale that we have. And then we have to do the customer experience
10:03better than anybody else. And we are after being the world's greatest customer service company. And I think
10:08that's a place of strength when you, you know, compare a lot of the other competitors that you
10:14mentioned. Before I let you go, Brian, I do want to ask you a little bit more about the international
10:18strategy, particularly with regards to China. Starbucks has had a footprint there since at least
10:22the late 1990s. Bloomberg reported this week that you were close to finalizing the deal for a
10:28partnership with a private equity firm that would allow you to expand your footprint in China even
10:33further. How much further do you want to go with that? And how far along are you in sealing that
10:39partnership? Yeah, look, I'm really excited for our China business. You know, they've had two consecutive
10:44quarters of comp growth. The team, I think, is really doing a great job of listening to customers, reacting
10:50and building on the strength of the Starbucks brand. As it relates to finding a partner for our China
10:55business, this process, I think, has really, I think, validated what I knew, which is China is a
11:01tremendous growth opportunity. And the process has also demonstrated to us that the partners that
11:07we were fortunate that came to the table are excited about getting this brand to go from 8,000 stores to
11:1515,000, 20,000 stores. And their expertise is in the local China market. I think it's going to help our
11:20team get into those tier three, four or five cities faster and with the right execution so that we are
11:26able to build on this positive momentum that we have. So I'm looking forward to wrapping up the
11:32process. And I'm looking forward to our China team being 100 percent focused on just growing that
11:37business into the future in a big way. You think wrapping up that process will happen before the
11:42investor day in January? You know, you never know on the timing on these things. But, you know,
11:47I love the partners that we're working with. And I'm optimistic that we're going to get this deal
11:53done in the not too distant future.
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