Q3 2021 Starbucks Corp Earnings Call
[music].
Good afternoon my.
Hector and I will be your conference operator today.
I would like to welcome everyone to Starbucks coffee coffee companies 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. If you.
You'd like to ask a question simply press Star then the number 1 on your telephone keypad.
If you'd like to withdraw your question. Please press Star then the number 2.
I will now turn the call over to Greg Smith, Vice President of Investor Relations. Mr. Smith, you May begin your conference.
The name is hernia, everyone. Thank you for joining us today to discuss Starbucks third quarter fiscal year 2021 results.
Today's discussion will be led by Kevin Johnson, President and CEO and Rachel Ruggieri CFO.
For Q&A, we won't be joined by John Culver Group, President North America.
Good that's all operating officer.
Mike Conway Group, President International and Channel development, and Belinda Wong Chairman and Chief Executive Officer, Starbucks China.
This conference call will include forward looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements.
Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on form 10-K, and quarterly report on form 10-Q.
Starbucks assumes no obligation to update any of these forward looking statements or information.
GAAP results in fiscal 2021 include several items related to strategic actions, including restructuring and impairment charges transaction and integration costs and other items.
These items are excluded from our non-GAAP results for certain non-GAAP financial measures mentioned in today's call. Please refer to our website at investor.
<unk> dot com to find the reconciliation of those non-GAAP measures to their corresponding GAAP measures.
This conference call is being webcast and an archive of the webcast will be available on our website through Friday August 27.2021.
For your calendar planning purposes. Please note that our fourth quarter and fiscal year end 2000.
'twenty 1 earnings conference call has been tentatively scheduled for Thursday November 4th.
Finally, I want to take a moment on behalf of the company to recognize the contributions of Durga Doris Hanmi is Starbucks Investor relations partner of 7 years, including as the head of IR for the past 2 and a half years Durga recently left Starbucks for an exciting.
Ill start attunity overseas and we extend our deepest thanks for all she has done on behalf of the company our partners and our shareholders.
I'll now turn the call over to Kevin.
Well, thank you, Greg I too want to wish Durga and her husband well they began a new adventure in London.
<unk> believes the team and our Investor community in Greg.
Great hands with you Greg and thank you for stepping in to lead Investor Relations, while we search for a permanent replacement for this important role.
Well good afternoon, everyone and thank you for joining us today.
Connection.
Which has always been at the heart of Starbucks.
Theres any lesson, we can take from this past year.
It is that our promise to uplift the everyday through authentic human connection over coffee is enduring.
And has never been more valuable and sought after.
As humans.
We belong together.
And Starbucks was built for this moment.
Now with customer mobility, increasing we are at the beginning of what we describe as the great human reconnection.
The reopening of markets is translating to incredible increases in demand for Starbucks as people are again.
Again on the go reconnecting and socializing with 1 another.
Human connection is the very foundation of the Starbucks experience.
The differentiated experience, we create for our customers strengthened through the actions we've accelerated over the past year enables us to meet our customers.
<unk> ever they need us to be.
That experience is core to who we are at Starbucks and it drove significant momentum through Q3.
That experience is also a direct reflection of the 400000 Green apron partners, who continue to make every moment right.
It is our partners.
Who deliver the elevated and uplifting experiences for each of the millions of customers. We serve every day.
Our partners make the difference they are the heartbeat of Starbucks and for that I'm.
I am incredibly proud.
Now let me take you through Q3, which is highlighted by record breaking results.
Were fueled by the continued strength of the Starbucks brand around the world.
The impressive momentum Starbucks saw in Q2 accelerated through Q3 in which we delivered record revenue of $7.5 billion.
Up 78% year on year, and a record non-GAAP EPS.
Of $1.1 set.
Additionally, 2 year comparable store sales improved sequentially led by an incredible overall performance in the U S as well as significant net new store growth in China, where we reached over 5100 stores during the quarter.
And the double digit growth.
<unk> and continued share gains that our channels business delivered in the at home market.
Our performance globally reflects the strength of our diverse portfolio and the benefits of scale.
As we once again exceeded our expectations for the quarter, despite inflationary pressures and ongoing pandemic related.
Elections in certain global markets.
Our focus combined with our unwavering commitment to innovating and elevating the Starbucks experience as our key differentiator has proven successful time and time again.
All of this gives us confidence to raise guidance for the balance of the year.
<unk> risk further positions the company for solid long term growth.
In the U S. Our momentum accelerated in Q3, posting year on year revenue growth of 90% and 2 year revenue growth of 16%.
Comparable same store sales grew 83%.
And importantly, 2 year comp grew 10%.
This is at the high end of our long term annual comp growth target of 4% to 5%.
We posted these results even with mobility restrictions still impacting some U S geographies.
With industry wide pressure in pockets of the supply.
Okay.
And with our in store cafe seating not yet fully reopened.
Not only have we posted incredible results as we emerge from the pandemic. Our internal research also confirm Starbucks has gained meaningful market share in the U S.
And the momentum we have created is sustainable.
<unk> in fact, Starbucks competitive share is the highest this year than it has ever been in the away from home coffee and tea category.
Simply put our green apron partners are delivering an experience that customers are craving.
And the growing opportunity to serve our customers with the unmatched experience Starbucks.
<unk> gives us resounding confidence in the strength of the brand and the growth potential ahead.
1 powerful example of innovation that is fueling our momentum as our beverage portfolio.
When coupled with our unparalleled ability for customizing handcrafted beverages separate Starbucks.
From the competition.
The investments we've made over the past few years innovating and expanding our coffee forward cold beverage platform continue to boost sales and draw new customers to Starbucks.
We continue to see strong demand for Starbucks cold Brew Nitro cold brew and.
Starbucks refresher beverages.
Shaken espresso alone contributed more than a third of the iced espresso growth in the quarter.
Cold category represented 74% of beverage sales in Q3.
Growing 10 percentage points over the past 2 years.
With the <unk>.
Of beverage options, both cold and hot our customers love personalizing their drinks.
Over the last 2 years, we've seen a meaningful increase in customization.
Such as adding cold foam or shot of espresso Adil.
Additionally, alternative dairy offerings represent nearly 25%.
<unk> of milk related beverage sales up from prior year.
These innovative offerings in cold and alternative dairy are particularly attractive to millennial and Gen Z customers and are aligned with our focus on the well being of people and the planet.
With premium customization of beverages.
<unk>, coupled with operational improvements the growth of both hot and cold beverages in stores is enabling margin expansion. Despite some continued inflationary pressures.
Which Rachel will discuss in more detail.
In addition to beverage platform innovation, extending the in store experience with digital customer relationships.
Relationships continues to extend our reach deepen engagement and enhance the customer experience.
Further differentiating Starbucks and offering customers ever increasing choice as to how they engage with the brand.
We again added over 1 million new active Starbucks rewards members in the quarter.
<unk>.
With over 24 million active members now representing 51% of all spend in our U S stores and up 8.
8 percentage points over pre pandemic levels, our ability to engage has never been higher.
More and more of these customers are embracing experiences that effortlessly fit their.
Our lifestyle.
With drive thru, representing 47% of transactions and mobile ordering for in store pickup delivery, our curbside at 26% of transactions, we are leveraging all channels to better serve our customers.
While it is very clear that our rewards program has accelerated.
Covered in a meaningful way, where Q3 really stands out and what adds to our confidence is the acceleration we saw in our non rewards customers.
While rewards spend grew at a rapid mid teens rate quarter over quarter.
For the first time in 11 quarters non rewards.
<unk> spend growth outpaced SAR spend.
This is further evidence of the great human reconnection.
The rapid re engagement of non rewards customers not only propelled our record results, but also underscores the strength of the brand and the growth potential ahead.
And finally, we continue to make meaningful progress to reposition our U S store portfolio through trade area of transformation, which is now nearly 80% complete.
In the past 12 months, we have opened 554, new stores combined with in store seeding and drive through service.
This portfolio repositioning and new store formats have increased drive through store performance to 75% of our total U S sales.
Number that continues to rise as we increase efficiency.
The improvements and additions, we are making to our portfolio today and will provide benefits.
For years to come.
With our focus on the customer experience, new beverage innovation and digital customer relationships, we continue to increase share of customer occasions.
While also contributing to a rapidly growing market for all things coffee.
Moving on to China, where.
<unk> posted a very positive result, with year on year revenue growth of 45%.
Remarkably total revenue in China has grown 23% in just 2 years as we continue to play the long game and we are on track to open more than 600 net new stores this fiscal year in.
In Q3 alone we opened 162 net.
Where we put ores that continued to deliver best in class new store profitability and returns.
We ended the quarter with 5135 stores and we are well on track to operate over 6000 stores by the end of fiscal year 'twenty 2.
In addition, we posted 19% same store comp growth in Q.
Newsfeed and saw sequential acceleration of our 2 year comp when excluding the impact of value added tax.
Furthermore, we gained strong momentum with sequential improvement on every key metric on a 2 year basis, including total revenue growth store traffic recovery and margin expansion.
Q3 health of our business in China is strong and we've never been more confident in the long term growth opportunity.
In addition to significant new store growth and sequential acceleration of 2 year comps in China, we are expanding digital customer relationships and engagement by creating new occasions and experiences that make mobile ordering even more.
The union and personalized.
This has resonated strongly with our customers in China, propelling mobile ordering to 34% of sales significantly higher than the 23% in the prior year and more than double pre COVID-19 levels.
Starbucks rewards continues to aggressively expand our digital.
Or can veto system across major platforms, driving 90 day active members to an all time high of $17 million.
4% increase over previous quarter, and a 71% increase versus prior year.
<unk> members are very important cohort are engaging starbucks at pre pandemic levels.
Our performance in China is a testimony to the unparalleled strength of the Starbucks brand and our enduring relationship with our Chinese customers.
Our rapidly growing store footprint market, leading digital ecosystem and customer engagement robust innovation pipeline and the enduring love and loyalty for the Starbucks brand in.
Our all unmatched.
I have full confidence in the strength of the Starbucks brand in China and across all our international markets. There should be no misunderstanding of how big and robust our business in China is and will be.
These are still early days and our strategies are clearly working Starbucks is uniquely.
China edition for success in China, well into the future.
With phenomenal strength and growing momentum in our retail business. Let me now move onto our channel development segment that also continues to exceed expectations.
Over the past 3 years, we have made significant progress expanding our.
<unk> and amplifying the Starbucks brand through CPG single serve coffee ready to drink and foodservice.
I attribute our success to the power of the Starbucks brand the bold innovation that attracts new coffee levers into our categories and the caliber of our strategic business partners Global.
Reaching.
In Q3, Starbucks retained our number 1 brand position in total U S at home coffee and further expanded our leadership position versus other brands.
The Starbucks brand continued to increase share in the total U S category impressively.
Impressively, adding 1 percentage point over the prior.
Global here, despite lapping a strong comp.
The global Coffee Alliance with Nestle is a powerhouse and we continue to see strong performance across all aspects of the key strategic relationship.
Earlier this year building on the success of the Starbucks by Nespresso platform, we expanded.
<unk> and introduced Starbucks by Nespresso on the virtual line.
Which is already exceeding 6 month distribution and velocity targets.
In addition, the combination of strong CPG performance combined with a steady recovery in foodservice gives us added confidence.
In.
Prior to drink.
Starbucks is the number 1 premium brand globally.
With our North American coffee partnership with Pepsico, growing, 19% and consumption and our international ready to drink business growing double digits in EMEA and China Asia Pacific.
These channels amplify our brand in more than 80.
Ready trips around the world.
Offering millions of customers at home and at work options that complement their Starbucks in store experience and.
And just yesterday, we announced plans to reach new markets and grow our Starbucks ready to drink portfolio with Nestle, who will now serve markets across southeast Asia and Latin America.
America.
Our channel development strategy to amplify the brand while growing share of at home occasions.
<unk> to attract new customers to Starbucks with unparalleled choice, while driving best in class returns.
The key takeaway from today's call is this.
We look to the future with as much conviction as ever in our strategy as this quarter represents the beginning of a multiyear tailwind for Starbucks that is powered by 3 factors.
First the total coffee addressable market is large and growing rapidly.
The market is expected to grow to well.
Over $400 billion in size globally over the next 3 years that.
That represents a compound annual growth rate of 8% to 9% as the market rapidly recovers from the global pandemic.
Second within this large and growing market consumer preferences continue to shift from <unk>.
Main stream robusta coffee to premium arabica coffee, where Starbucks is the leader.
Third and perhaps most important.
Starbucks has rapidly adapted to new consumer behaviors and strengthened key points of differentiation.
Our focus on the customer experience.
Relevant new beverage platforms and expanded digital customer relationships are translating to increased consumer preference and deeper customer engagement.
The combination of our highly differentiated brand experience.
Our continued consumer shift to premium arabica coffee.
Bull market.
Is a powerful trifecta that provides our business with a multiyear tailwind.
These factors reinforced by the results of this past quarter give us confidence that this is just the beginning of what is about to unfold.
And with that I will turn the call over to Rachel who will walk you through.
Details of our Q3 results.
Rachel.
Thank you, Kevin and good afternoon, everyone I'm thrilled to share with you. The results of this milestone quarter delivering record revenue and record non-GAAP EPS only 4 quarters. After the depth of the pandemic over the past year, we have proven our ability to differentiate ourselves to the unique and personalized.
<unk> experiences, we create for Starbucks customers, whether in our stores through our app or down the grocery aisle leading to this quarter's impressive results.
Starbucks Global revenue reached $7.5 billion in Q3 up 78% from the prior year far surpassing the pre pandemic quarterly record set in Q1 fiscal.
<unk> 'twenty driven largely by the incredible performance in the U S. Our largest market he.
Q3, non-GAAP EPS was 101 up from the loss of <unk> 46 in the prior year driven by faster than expected margin recovery in the Americas due to sales leverage from lapping prior year, COVID-19 impacts and the benefit from <unk>.
<unk> strength in average ticket.
Our Q3 EPS includes <unk> <unk> of benefit related to discrete tax items, most of which was originally anticipated in Q4 as referenced on our previous earnings call.
The investments we've made in our business have made Starbucks stronger more resilient and positioned for long term growth this powerful.
Momentum gives us the confidence to meaningfully raise our EPS outlook for the full year as I'll explain later.
I will now take you through our Q3 fiscal 'twenty 1 operating performance by segment, followed by an analysis of our consolidated margin performance.
Our Americas segment, which fueled our record quarter delivered revenue of 5.
<unk> 1 billion in Q3, 92% higher than the prior year, primarily driven by an 84% increase in comparable store sales, including 82% comp transaction growth as Kevin mentioned U S. Comparable store sales growth reached 83% in Q3, driven by a material improvement in transaction comp was 80%.
Average short transactions continued to grow and ended the quarter at nearly 90% of preterm vendemiaire levels, presenting further opportunity to return to and grow beyond FY 19 levels as transactions have grown we've maintained the strength in average ticket up 1% over the prior year remaining significantly.
<unk> elevated as many key post pandemic consumer trends have continued.
Growth of cold beverages, and customization, coupled with sustained strong beverage attach and record food attach in Q3, all contributed to the strong ticket and give us confidence in our ability to maintain a meaningful portion of the ticket gains over the coming quarters.
<unk> Americas Q3, non-GAAP operating margin expanded to 24, 7% of more than 200 basis points from Q3 of fiscal 2019, largely driven by sales leverage on our product and distribution costs, including waste favorability the benefits of SKU rationalization over the prior 2 years and favorable sales mix shifts.
Pricing and the benefits of trade area transformation also helped offset the sizeable investments in wages and benefits as well as higher supply chain costs due to inflationary pressures, while we're thrilled with our margin performance in Q3, we expect it to moderate slightly in Q4, primarily due to the growing impact of inflation coupled with increments.
Shifting to investments critical to our continued growth, which I'll discuss in a moment.
Moving onto international the International segment delivered revenue of $1.7 billion in Q3, excluding a 10% favorable impact of foreign currency translation. The segments revenue grew 65% over the prior year, reflecting a 40.
Increment per cent increase in comparable store sales inclusive of a 5% adverse impact from lapping the prior year VAT benefit.
Strong sales growth from our international licensees as well as 8% net new store growth over the prior over the past 12 months also contributed to this growth.
Kevin spoke to our performance in China.
41 addition to the international segment performance was adversely impacted by virus resurgence is in Japan with a state of emergency Sears vierling limiting consumer traffic during most of the quarter. It is important to remember that the vast majority of international markets in which we operate are behind the U S. In terms of both vaccination and mobility. So revenue recovery is predictable.
Any lagging in those markets still are partners in every market remained focused on what they can control and what they do best the moments of connection they are providing our customers. During these challenging times will support growth at vaccination rates improve.
International non-GAAP operating margin rose to 22, 5% from minus.
Minus 2.7% in the prior year, mainly driven by sales leverage from lapping the impacts of COVID-19, as well as store labor efficiencies across our company operated margin markets and larger and larger government subsidies.
On a 2 year basis. These temporary subsidies provided an approximately 200 basis point benefit in the quarter boosting the segments.
<unk> GAAP operating margin close to its pre pandemic level of $22.7 in Q3 fiscal 19.
On to channel development revenue was $414 million in Q3, a decline of 7% from the prior year, primarily driven by global coffee Alliance transaction transition related activities, including a structural.
Non or single serve business.
When excluding the approximately 20% adverse impact of these transactions transition related activities channel Development's revenue increased by 13% in Q3, mainly driven by growth in the global coffee alliance product sales and our ready to drink business.
The segment's non-GAAP operating margin expanded to 46.
Changed at 7% in Q3 from 35, 6% in the prior year.
Normalizing for the 700 basis point impact of global Coffee Alliance transition related activities I, just mentioned channel Development's operating margin expanded 410 basis points in Q3, driven primarily by the strength of our ready to drink business, we expect the impacts.
Points physician to be substantially completed by the end of fiscal 'twenty 1.
Finally at the consolidated level, our non-GAAP operating margin was 25% in Q3 up from -12, 6% in the prior year the year over year increase in our operating margin for Q3 was primarily driven by sales leverage across.
From the train now as we lap the COVID-19 impacts and related costs as well as pricing in the Americas. These were partially offset by additional investments in retail store partner wages and benefits, which remain a strategic priority for us to support our world class partners.
Given the strength of our performance in Q3, and the optimism we have for the fourth.
Fourth quarter, we're pleased to update our guidance across a number of key areas.
We expect the momentum we have seen in the U S. Underpinned by the ongoing great human reconnection to continue and as a result, we expect both Americas and U S comparable store sales growth in Q4 in the range of 22% to 25%.
This corresponds.
Off the T..2 year comp range for Q4 of 11% to 13%, reflecting further sequential improvement from an already strong level of 9% in the Americas in Q3.
As a reminder, the 2 year comps we are monitoring are calculated on a multiplicative basis instead of an additive basis as described in today's.
<unk> to release.
For the International segment were sporadic virus resurgence is continue to impair consumer mobility in some markets. We now expect comparable store sales to grow mid to high single digits in Q4 for China, We expect comparable store sales to be roughly flat in Q4.
Similar to the Americas.
Ernie can just for both international and China translate to a meaningful sequential improvement in 2 year comp from Q3 to Q4, despite the challenging market dynamics expected to linger in Q4.
Based on the outlook for this segment, we now expect Q4 consolidated comp growth in the range of 18% to 21% on a.
These rate basis. This equates to a range of 7% to 10% a considerable sequential increase from the Q3.2 year comp of 4%.
Moving onto retail store development, although we expect approximately 1100 net new stores globally in fiscal 'twenty, 1 we now anticipate a slight shift.
2 years between our segments for the Americas, We now expect that total store count in fiscal 'twenty, 1 to remain roughly flat to prior year.
As the new store openings are virtually offset by higher than normal closures, reflecting the continued progress of our accelerated trade area transformation initiative for international net new stores for fiscal 'twenty 1.
Shift expected to increase to approximately 1100 from 1050 in the original guidance.
With the updated comp sales and the store growth outlook. We are also tightening our guidance for full year fiscal 'twenty, 1 consolidated revenue to a new range of $29.1 billion to $29.3 billion from $28.
<unk> 5 billion to $29.3 billion. This includes channel Development's revenue, which is now expected in the range of $1.5 billion to $1.6 billion for full year fiscal 'twenty, 1 compared to the previous guidance of $1.4 billion to $1.6 billion, reflecting the segment's strong performance to date.
As a reminder, our fiscal 'twenty.
1 consolidated revenue guidance range is inclusive of approximately a half a billion for the 53rd week.
Additionally, given the faster than expected margin recovery to date, we are raising our consolidated GAAP operating margin outlook for the full year to approximately 17% up from the previous range of 15%.
Went to 16%.
Our consolidated non-GAAP operating margin is now expected to reach approximately 18% in fiscal 'twenty, 1 up from the previous guidance of 16, 5% to 17, 5%, reflecting the momentum we saw in Q3 and expect in Q4.
Our operating margin has tempered a bit by.
2 factors that we see growing in relevance in Q4 and into fiscal 'twenty 2.
The first is our latest view on rising global inflation, requiring continued incremental investments to support our growth the.
The second is our strong commitment to increasing wages of our store partners, making deliberate investments towards an hourly wage for $15 in the U S.
In line with the announcement, we made in November of last year as Kevin mentioned, our Green apron partners are fundamental to the Starbucks experience and a critical critical towards long term success. These important wage increases coupled with continued investment in digital initiatives and operational efficiencies will further solidify the foundation for our next stage of growth.
Given the accelerated timing of certain discrete tax benefits in Q3, I noted earlier, which were originally anticipated in Q4, we now forecast our Q4 non-GAAP effective tax rate to increase to the low 20% from our previous outlook of high teens.
For fiscal 'twenty, 1, our GAAP and non-GAAP effective tax.
Rates are expected in the low 20 percents range revised from the previous guidance of low to mid 20%.
Summing this all up driven by the tremendous momentum we've seen as customers returned to our stores propelling our record results. In Q3, we are raising our full year fiscal 'twenty, 1 EPS guidance, our new fiscal 'twenty 1.
Our EPS guidance range is $2.97 to 302 up.
Up from $2.65 to 275 previously.
Our fiscal 'twenty, 1 non-GAAP EPS is now expected to be in the range of $3.20 to $3.25 up from our prior range of $2.90 to $3.
This predominantly reflects our better than expected performance today.
1 guy as well as the improved outlook for Q4, barring any new significant and sustained waves of COVID-19 infections in any major economic disruptions.
As a reminder, our fiscal 'twenty, 1 GAAP and non-GAAP EPS guidance ranges include approximately 10 cents of benefit for the 53rd week.
Consistent.
Our practice, we will provide guidance for fiscal 'twenty 2 on our Q4 earnings call. However, I should note that the earlier than expected margin recovery. We saw in Q3 and expect in Q4 was not contemplated when we provided our fiscal 'twenty 2 EPS growth outlook at our December Investor Day, We are pleased with the strength of our business and will provide.
Our FY 'twenty 2 outlook during our Q4 call importantly, our ongoing commitment to the double digit non-GAAP EPS growth at scale remains strongly intact.
To summarize Q3 performance exceeded our expectations with record revenue and earnings underscoring the resilience and power of our brand which remains.
With our patent as ever while temporary marketplace dynamics will impact our business until the global pandemic is behind us the enduring strength of the Starbucks experience fueled by our incredible partners around the globe remains intact thriving in this moment of human reconnection and continuing to guide our long term growth as always the credit for our success this quarter.
Israel and in the future belongs to our Starbucks partners around the world, who proudly wear the green apron. They.
They have our greatest respect and appreciation.
And with that Kevin and I are happy to take your questions joined by John Culver, Michael Conway and Belinda Wong. Thank you operator.
Thank you.
Quarter Binder, if you'd like to ask a question. Please press Star then the number 1 on your telephone keypad.
Order to allow as many questions as possible. We ask you to please limit yourself to 1 question at a time, we will come back for follow up questions. As time allows we will pause for a moment to compile the Q&A the Q&A roster.
Your first question comes from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.
Great. Thank you very much.
A question specifically on China.
China market.
Kevin I know you mentioned, you've never been more confident.
With that said I think everyone would agree it's a very well.
A little market, whether you think about it politically or consumer wise.
Obviously competition is intense and we know what is your highest growth market for Starbucks and clearly 100% company operated so a major market for you.
With that said the third quarter comp shortfall and seemingly significant reduction in the fiscal 'twenty.
Items I'm, just wondering whether you're concerned at all about that it sounds like from your commentary not so much I'm just wondering maybe you can give some color.
Belinda perhaps in terms of what you attribute the slowdown which you expect to continue whether maybe Chinese thing of arris uptick or whether I know some people are fearful that this consumer pushback on certain U S brands, just trying to get a sense for whats.
<unk> got it Blake.
China market and yet still confidence quite high longer term. Thank you.
Yes, Jeff. Thanks for the question, let me share some thoughts and then I'll hand, it over to Belinda to comment a bit further.
Jeff we've been in China now for over 20 years and.
Every.
Change the way, we have built Starbucks in China for China.
And the brand resonates with our customers in China.
So I think that's number 1 number 2 we are in a market building mode right now where most of our growth comes from the new stores that we open and the fact that the new stores.
Stores that we have been opening are performing at some of the highest <unk> levels. Prior generations gives us confidence that we are continuing to expand our reach and presence in China.
I think those 2 things certainly from a geopolitical standpoint, you know we've.
Got businesses in 84 markets around.
Step at all so we constantly.
Deal with geopolitical situations I'd say, there's not a geopolitical situation that has really impacted us in China over the last couple of years and I don't really foresee that.
Happening as long as we continue to stay focused on what we do and what we do well, which is create a great experience for.
For our customers in China.
Take care of our Starbucks partners, who proudly wear the green apron in China.
And we're bullish we continue to invest whether it's the investment we're making in new stores, whether it's the.
Coffee innovation Park, the first sustainable roasting plant that we're building in China.
Work, we're doing with.
Coffee farmers in Yunnan.
And.
I sort of look at navigating.
Navigating.
Some of the implications of Covid is just being short term.
And so that's why I kind of look at it is very.
From a very bullish perspective long term.
So let me hand, it over to Belinda.
Belinda I'll, let you comment a bit further on geoffrey's question.
Thank you Kevin.
We achieved 19% comp in Q3, despite COVID-19 resurgence in itself now if you exclude the adverse impact.
Impacts from lapping prior year.
Sampson benefit outcome.
True actually.
24% in the quarter.
Our previous guidance assumed a shorter timeframe for the lifting of travel restrictions and also less of the uncertainties that we have faced in the market.
And hence we are adjusting our comp guidance to reflect the uncertainty now make no mistake.
Scott the short term volatility that we're facing today are only temporary the recovery as we've always said, we will continue to be non linear.
Now 1 point that you have to fully realize is that we have fully regained our pre COVID-19 pace of store development and Kevin spoke about the achievements that we have.
<unk> achieved in Q3, and we are well on track to open more than 600 net new stores. This fiscal year and operate 6000 stores by the next fiscal year.
And on top of that yes, we are delivering best in class growth profitability and returns.
Our meeting the year, 1 new store performance guidance.
But we provided during last Investor day.
And please note that our focus in the past decade has always been about total revenue growth and reaching new customers for them to trial, the Starbucks experience and coffee in China market and majority of our total revenue growth and close to 70% of that.
<unk> comes from new stores.
Huge runway for growth in China due to growing coffee consumption in the addressable market rising middle class population and disposable income. So we are still in very early chapters of our growth story here in this market.
Personal.
On the ground experience on what I see here in the market gives me full confidence in the resiliency and the dynamic of.
The Chinese consumer economy.
F&B retailer, our specialty coffee brands puts us all speed quality and coverage of our national footprint.
Our market, leading digital ecosystem and customer engagement, a robust innovation pipeline and the strength of our brand.
All unmatched in China, and we are well position than ever to continue to win in this market. We will focus on what we can control our strategies are clearly working.
We're playing the long game here and ready and excited to capture the additional growing growth opportunities.
Once the international travel restrictions are lifted and the pandemic is behind us. Thank you.
Thank you Glenda I think Rachel add 1 other comment to add Jeff answer. Your question, Yes. Thank you Jeff I just wanted to reiterate 2.
Points, 1 of which is our double digit EPS growth at scale that we've committed to as you know is is 1 of the key building blocks to that is our unit growth as well as our comp growth and so that unit growth in China continues to be important not only for this year, but for our long term equation. The other thing that I would point out is.
The guidance that we gave for Q4 on comp for international and China. It implies a sequential improvement on a 2 year basis from Q3 to Q4. So I think it's important to show that were.
Continuing to be optimistic and showing continued momentum in the business for the remainder of this fiscal year.
2 quick.
Your next question comes from the line of David Tarantino with Baird. Please proceed with your question.
Hi, Good afternoon, I wanted to ask about margins and I think at the analyst day.
Back in December.
You laid out.
<unk>.
Long term for.
Operating margins in the 18% to 19% range and now.
This quarter that you just reported very comfortably above that so I wanted to ask Rachel if you had an updated view on what what the right profile for the business should be as we think about looking forward and how are you.
Look for sort of.
A factor in some of the investments that you talked about earlier.
Sure. So the way I'd think about it is it's let me put it into a little bit of context is in Q3 or more of our margin was incredible I mean, we from a for me.
Standpoint.
Both across all of our markets, we saw margin expansion versus prior year and even against our 2019 and a big driver of that was our sales leverage as well as comping over COVID-19 impacts.
Broadly pricing, but it did help to offset some accelerated investments we've made in wage as.
Point ablation Herrick pressures when you think about Q4, we would expect as we've guided we guided our margin to increase from 16, 5% to 17, 5% going to 18% for the balance of the year. So this this shows our optimism and the continued momentum in the business, but my caution is there's a.
Well as you know.
Slightly lower relative to the performance we saw in Q3 based on increasing cost that we see related to inflation as well as the continued investments that we need to make in the in our business. Those investments were critical to our recovery, but they're more important even foundation for growth and so as we.
FY 'twenty 2 we're not going to provide guidance for FY 'twenty 2 today that will be on our Q4 call to give us time to complete our annual operating plan, which we're in the process of right now.
But if you think about that some of what we guided at Investor day from that growth in FY 'twenty..2 has been pulled forward into FY 'twenty 1.
Think of that I want to be clear that we remain committed to double digit EPS non-GAAP EPS growth. So we're committed to that when you think about that margin that we laid out at investor day that 18% to 19%.
That was up from 17% to 18% that we had guided previously that accounted for the benefit that we're seeing.
The investments, we're making so just again reiterate the importance of those investments and so when we think about that guidance at Investor day, what it allows us to do is modestly expand margin, while continuing to invest and again, we'll provide further guidance on FY 'twenty, 2 and our Q4 call, but that's how I would put it into perspective.
From the desk.
Your next question comes from the line of John <unk> with Jpmorgan. Please proceed with your question Hi.
Hi, Thank you it's actually an average ticket question both for the U S and for China.
I mean, I think it probably would've been a rational expectation to think.
Lapping at 27% ticket from.
The second quarter excuse me the third quarter of 'twenty would have basically been impossible and yet you were able to do that.
For all the reasons that you pointed out yet I would've thought as people came back in the morning and migrated more towards single order transactions just by definition that would have fallen so it could be.
Can you kind of give some more color around maintaining that average ticket I think there was a comment made in the prepared remarks about.
Excuse me about maintaining that maintaining a significant portion of that that pricing, but whether it's whether in fact it can be.
100% of the ticket.
Lift that you got.
Over the past 5 quarters, or so and secondly, China was the inverse of that even if I adjust for the VAT benefit from the previous year. The ticket was actually down in China, which isn't.
Isn't very common, especially in an inflationary environment, if you could talk about the.
China ticket as well.
For both businesses just your attitude on overall menu pricing given what is your inflationary cost pressures thats something that consumer may expect as well as higher pricing, whether that's something.
That may may accelerate as well on the menu for both businesses.
John Thanks for your question, we'll have John John <unk>.
Take a take the U S and then Belinda can take China, and Rachel you can add any.
Additional so John John.
John I appreciate the question. It's a great question, let me give you a little context, we continue to see strong sales recovery in the rural and suburban areas of the.
Over to Jim particular drive thru.
We're drive throughs are most Tom that is dry and helping us to drive larger orders and a higher ticket we saw record ticket in the quarter.
From an overall U S perspective now we're also at the same time as customers become more mobile and start.
Start coming back into the Central business district in the urban core.
Did achieve a positive comp for the first time in that trade area. Since Q1 is that FY 'twenty.
Which gives us even more optimism for the future recovery of the business now as that recovers.
In the Central business district in urban core, but we do expect.
That.
Customers.
We will begin frequent in those stores in those areas and as part of that transactions will increase but ticket will moderately decrease and then it will balance itself out.
Over time, we see.
Great opportunity to continue to drive transactions in our stores right now broadly across the U S business, we're operating at about 90% of pre Covid transaction levels. So we've got a lot of room to go to grow back to a more normalized rate of prepayment.
Pre pandemic wise as it relates to transactions and.
As we do that we do expect the ticket.
It really declined during that time.
Glenn do you want to take China.
Hi.
Hi.
My turn right Kevin Yes.
Okay, Great Q3.
9% drop but majority of that 6% is really from what you just said John on.
6%.
Labs so.
The AP drop it's really.
Just a negative 3%.
So.
1 thing that you have to note is that we're seeing the acceleration of our digital mobile ordering sales mix.
Livery portion of it we're seeing great uplift on our 80 versus the store transaction so that is.
That is a good thing.
<unk>.
And in terms of your question on the inflationary pressure.
It does make sense, but to a much lesser extent is comparing to the U S and in this fiscal year, we're able to.
Net of any increases by our own operational inefficiencies or any savings that we were able to achieve.
2 our volume increase.
So thank you.
I just I just want to add a little further clarification around that I mean, both good points from Belinda and John what I would say is broadly in the U S. Part of the function of our comp and our ticket are going to 1 person.
<unk> is just our year over year lap our actual ticket continues to be at 1 of our highest levels and it's our third consecutive quarter and we continue to see as John mentioned as we see more single beverage transactions, we expect our ticket to moderate but we do believe that our ticket will remain elevated slightly elevated.
Were sent compared to where from a pre pandemic level and drivers of that are the attach that John spoke about as well as the continued attach we see in food our ability to continue to move customers to our cold beverages, which have a more premium.
Price in addition to our promotion offerings in our customization those or other ways.
That were further evolving our ticket across the U S and Americas space and what I want to just point out is that the margin that were guide.
<unk> 2 for the balance of the year, saying increasing to 18% again up from the 16.5% to 17% on a 17, 5% on a non-GAAP basis that.
We previously guided part of that growth is really coming from an elevated ticket. It's not the only thing, but it's 1 of many and it continues to be 1 of many levers to help us support not only inflationary pressures and the headwinds that we have from that but the continued investments that we need to make in our business. So it.
It continues to be a critical part of our equation and it's reflected in the guidance that we've provided.
Let me just sort of close I know, there's been a lot on the.
Written in the press about the cold weather that hit Brazil, and the implications on the seed price of coffee.
And so just to give you some context on the increasing.
<unk> see price of coffee you should know that over the years, we've created a very thoughtful approach.
To how we source warehouse and use hedging techniques to ensure we always have supply of premium arabica green coffee at an attractive cost basis. In fact, we purchase green coffee 12.
10 months in advance and we never stopped buying green coffee through the pandemic.
So as a result, we currently have over 14 months.
Forward coverage, which means we have price locked on our coverage for the next 14 months, which gets us to the.
The rest of fiscal year 'twenty 1.
To aid to fiscal year 'twenty 2.
And I think we may be the only large buyer of green coffee that uses this approach and that will serve us well as it gives us a significant advantage relative to our competitors, who if they don't buy this far in advance will certainly.
Certainly not have that cost structure that we put.
And so I just wanted to comment on that since it's been in the press and kind of relates to your question John on inflation.
Your next question comes from the line of John Glass with Morgan Stanley. Please proceed with your question.
Great. Thanks, very much my question, Rachel maybe others just on what is the.
Put in place and get them out if inflation youre actually facing in your P&L I think you've talked about inflationary pressures, but some companies talking about the aggregate inflation. Some you can talk about wages is there inflation coming in the supply chain, if there's a way to quantify that.
And how do you think about pricing in that context are you willing to take an unusual amount of pricing relative to history.
At offset that or do you find as other places in the P&L.
It is notable that some of your peers are taking significant amounts of pricing that they feel like they have the power we put Starbucks how about power maybe use it more judiciously, but is your frame of how you think about pricing changing because of this environment.
Scott I'd start first with the.
History, the inflationary pressures that we saw so inc. In Q3, we had outstanding performance, but within that we covered headwinds in the Americas business of about 70 basis points, and we expect headwinds related to rising costs and inflationary pressures to continue into Q4, which is reflected in the guidance.
We've given now some of the ways that we not only offset headwinds such as inflation, but also the investments, we're making are price and we've always been very thoughtful and measured and the pricing actions. We take so that we don't inhibit growth and I would say, our credit or pricing strategy hasn't fundamentally changed.
Changed we're very surgical in nature, we look on a store by store basis, and we leverage analytics and insights and importantly, what our analytics and insight shows us that we do have pricing power and we see that in.
The premium amortization of our beverages.
Gravitation towards our promotional offerings and this is our opera.
Does that need to be able to leverage pricing those waves, which is 1 of the reasons why we talk about our ticket continuing to stay elevated not at the rate that we have today, but a slightly elevated.
<unk> will be 1 of many levers that we use to offset these headwinds for example will continue to.
Drive customization with our customers continue to.
Drive our customers to our cold beverage offerings, where we have a more premium nature continue to drive our beverage and food attach when and where possible. Those are ways to continue to have an elevated ticket so through pricing and elevated ticket will.
<unk> will continue to look at efficiencies in our supply chain as well as efficiencies in G&A. So this particular quarter, we saw our G&A returning to pre pandemic levels and we'll continue to find efficiencies in G&A over time with our goal to be able to grow G&A less than our revenue growth.
<unk> is another way in addition to that we're seeing benefit from trade area of transformation, our trade area of transformation in the Americas more broadly in the segment delivered almost 80 basis points on margin that's meaningful and so we continue as we optimize that portfolio. That's yet another lever that we're using to help to offset.
Offsetting not only headwinds related to inflation, but also the investments that we know we need to make that are critical to our growth in the future and those are investments both in wages for our partners as well as investments in our service experience and our throughput as well as investments in digital initiatives all of those are critical for our growth.
Growth in the future and really are that are fueling our not only our recovery, but will fuel the growth.
For years to come so those are important investments for us broadly and those are the ways. We think about how we will offset those increasing cost while still modestly expanding margin.
Your.
Our next question comes from line of Sharon Zackfia with William Blair. Please proceed with your question.
Hi, good afternoon.
Tom I appreciate you're not kind of redoing the analyst day guidance, but I did want to ask a question about development because I think the.
Analyst day, you had committed to kind of reaccelerate.
6% to 7% unit growth in fiscal 'twenty, 2 I wondered if that is still held and what the pushes and pulls are there, particularly given the labor environment.
We continue to see unit growth as a meaningful driver of our double digit non-GAAP EPS growth. So we'll we'll remain committed to.
Alright.
Expanding stores both in our international markets in our company owned markets are licensed and company owned.
That'll be a continued driver of our growth even with the pressures that we're seeing in labor.
And to date we've.
As Belinda mentioned, we're on track to open more.
600 stores in China, We've opened 500 stores in the Americas segment and broadly we're going to open a net 1100 <unk>.
Net new stores this fiscal year, so still continuing to have meaningful growth in our stores not only this year, but into next year now the detail.
Details of what that growth will look like again, we'll have to come in Q4, when we provide in our Q4 earnings update when we provide more detailed guidance on FY 'twenty 2 but you can expect.
Specced, our unit growth continuing to be not only a driver of our earnings but also of as a critical part of our growth in the future.
Yes sure. This is Kevin I'll, just remind you commented in my remarks that we're 80% through the Americas trade area transformation, which as we as we get into fiscal year 'twenty 2 that puts us back on the front foot for net new store growth.
In.
In North America, and certainly Belinda and her team in China have already gotten there so.
So.
Be very helpful. As we go into FY 'twenty 2.
Your next question comes from the line of Chris Carroll with RBC capital markets. Please proceed with your question.
Hi, good afternoon. Thanks for the question.
Kevin I wanted to follow up on your comments around non reward.
Reward spend outpacing rewards spend I think you noted for the first time in 11 quarters do you expect that to persist in the near term or would you expect that relationship to shift back to where you would seen recently as mobility and routines further normalized and then on the elevated non rewards spend or are you also seeing.
Increasing conversion of those non rewards guests.
<unk> rewards members.
Yes, Thanks, Chris I mean, that's the key point you look at the fact that we've grown our active 90 day active Starbucks rewards members significantly to over $24 million.
And where are we getting those.
As active rewards members they are coming from the non rewards customers that return into our stores. So I actually think the increase in non rewards customers is going to be very helpful to continue to fuel that that base of active rewards members, we know that customers when they join Starbucks rewards they spend more theres more frequency.
<unk>.
And more engagement from those customers and that's why you think over a multiyear period. We have this aspiration to double the number of active rewards members in North America, John Let me, let you comment a bit further if you'd have anything else to add on the U S. Yes, Chris the 1 thing I would add to what Kevin St is the.
Success of the stars for everyone program that we launched.
Little over 3 quarters ago. It makes it easier for people to join the Starbucks rewards program. It enables customers to make purchases by adding alternative payment options. In addition to utilizing stored value.
And really what we're seeing there is that has helped to drive the 49% increase that we're seeing year over year in membership across broadly the Starbucks rewards program to put that into context.
We have added nearly 5 million 90 day active members since.
Since the beginning of this fiscal year.
And what this has done it's driven a meaningful increase in the conversion rate for those who joined the Starbucks rewards program.
And really while we're not seeing a material shift from customers, leaving the store valued program.
2 alternate payment methods the vast majority of the customers who use these alternative payment methods are new or re engaged members that were tracking back into the program. So going forward, we're going to continue to double down on both our rewards members.
<unk> as well as our non rewards members. We see that this has been highly accretive to driving frequency as well as spend and we see this as being 1 of the biggest opportunities we have for the long term program growth.
In attracting those occasional customers into our stores.
If I could add just 1 thing to that what I would add is that.
What we see is we've raised our Q4 guidance for if you look at the guidance, we've given for Americas and U S. In Q4, it implies that we're going to improve on a 2 year basis or on a comp from Q3 into Q4 and as I mentioned in my prepared remarks.
That's that's implying about an 11% to 13%.
2 year comp growth, which is above the 9% we saw in Americas. This quarter on a 2 year basis and above the 10% we saw in U S. The driver of that is really the fact that in this quarter, we saw our customer counts.
Overall customer counts in line with pre pandemic levels, FY, 19, but where we have opportunity as frequency and so that frequency is really what helps support our optimism and and aligns with the guidance that we provided in Q4.
Next question will be from Dennis Geiger with UBS. Please proceed with your question.
Great. Thanks for the question I'm wondering if you could talk a bit about how important throughput and operations have been most recently and in driving sales and I am curious sort of on some of the operational adjustments that you've made within the U.
The new service channels that you've launched in recent quarters.
Where do you stand right now from sort of a drive through throughput perspective, what curbside.
<unk> right now and then maybe just to kind of look ahead, how much more opportunity. There is for these service channels.
And then the throughput opportunity from from here. Thank you.
John you take that.
Thanks for the question Dennis very excited to talk about this because the U S team has done a remarkable job in terms of driving throughput and operational efficiency overall.
1 of the big things to note is that we have returned to pre pandemic.
<unk> levels in terms of over our overall operating efficiencies within our stores. So that's very encouraging to see.
The other thing that we've done to drive productivity and operational efficiencies in that store a couple of things first we significantly upgraded our play builder.
<unk> <unk> program, which allows us to be more effective in how we deploy our labor we've.
We've also made good investments strong investments in customer service training and if you look at it over the last 18 months or.
So since Covid has hit about 70% roughly 70%.
Our partners have been hired in these last 18 months and they've been operating in this COVID-19 restricted environment. So we're reinvesting now and.
Customer service training for our partners as customers become more mobile and frequent our stores now in addition to.
Of our ongoing operations and how our stores and partners are operating we have also made equipment innovation investments as well as driving throughput as well as efficiency, Australia to espresso machines.
Big investment that we're making we haven't deployed 70% of our U S company.
The weighted stores, we'll complete the rollout in fiscal year 'twenty, 2 we've introduced a new warming oven the Mary chef warming ovens, which is an upgrade to our current ovens.
Currently in 20% of our stores will be in 35% in the stores by the end of the fiscal year and then with the success of cold.
Any op bridges and in particular cold Brew, we've developed a proprietary cold brew system drilling system through our Trier Center. That's currently in 2000 U S stores and we will have another 75% of our stores by the end of the year that make brewing into the product.
More efficient.
<unk> is also a more efficient use of partner time and it fits within the back of the house.
The other big thing that we're rolling out, which I'm excited about in our supply chain team has worked with the operations team on is automated inventory ordering and this is.
<unk> system that we have been testing.
We just recently expanded the test we're now rolling it out to 500 stores. This past week, if basically removes the inventory tasks from our store partners and allows them to focus on their customers and the customers.
<unk> experience and we expect that this will be fully rolled out in all company operated stores for food and merchandise items.
By the end of the calendar year.
And then just 1 other thing that you asked about about drive thru, we're doing a lot of work on drive thru and revolutionary Revel.
<unk> organized the drive through experience, so really focusing on.
Decreasing the out the window times through the drive through experience, we've introduced new equipment and technology with handheld order points to target to improve the speed of service. We've also introduce.
Evolution improvements to make the orders more easily managed through consolidation and handoff.
And we're going through and renovating about 150 constrained drive through stores.
To design, a new engine, removing pace your cases or reposition in it and really.
<unk> dedicated a Pos system to that drive thru location and then we're not stopping there we're continuing to innovate around what is the next evolution of the drive through store for our customers. So a lot of great work by the teams broadly across the operation store development supply chain and the technology.
<unk> de teams, so hats off to all of them.
Yeah.
The last question comes from David Palmer with Evercore ISI. Please proceed with your question.
Thanks, just a follow up to John Culver earlier comments, he mentioned the urban areas getting going.
Knowledge.
<unk>.
Dynamics around traffic and check out.
I'm wondering.
As you think about going back to school and people, perhaps going back to work. This fall is that in any way tied to what Rachel his comment was about the 2 year trend.
Perhaps.
Improving.
Proving by 1 to 3 points as contemplated in the guidance.
And then and then sort of Relatedly looking back at this last quarter anytime you've done in the past.
Type of performance you have done in cold beverage and rewards user growth I would expect a sequential acceleration in March you were doing 11% 2 year.
It was remarkably similar this quarter any insights about factors you saw that might've been headwinds that could help us think about how youre going to be doing after this quarter. Thanks.
Rich you want to take the question on the trend David.
Sure.
David just to clarify we delivered.
We delivered a 10% 2 year comp in the U S business, our largest market this quarter that we're incredibly proud of that performance and even with that we're guiding now to our 2 year comp from Q3 to Q4, showing sequential improvement. So we're showing that we're expecting we're implying that will have.
And above the 10% and we've given a range of about 11% to 13% on a 2 year basis. So that's certainly reflects the momentum we've seen in the business and the momentum we're expecting as we see more customers returning to the stores as I mentioned, we had a very similar.
Adam customer count overall count in terms of this quarter versus pre pandemic, but our opportunity really continues to be we certainly have the ability to bring more customers in but our opportunity is the frequency of those customers. We ended the quarter at about 90% of where we then from a transaction standpoint prior to.
The pandemic so in FY 19 levels, and that's really our opportunity and we we reflected that in the guidance, we've given but I'll give it to John to add some further commentary on that.
Thanks.
Optimistic in terms of number 1 customers returning to our stores and.
In our stores being ready with relevant.
And that resonates very strongly with our customers and nowhere or we've seen that more than with Coles and cold beverages as we shared record 74% beverage sales in Q3, that's 13 percentage points higher than what it was in the previous quarter and it's.
It's important to note and Rachel mentioned this but I just wanted to emphasize cold beverages are generally ticket and margin accretive. So how do we classify cold beverages cold brew Nitro cold brew its ice shaken espressos and its refreshes and then you couple those products with the ability.
To customize and personalize to the customers' desires, we've got a wide range of beverage ops options for customers that are both hot as well as coal and we're seeing meaningful growth.
And the customization of our beverages and the modifiers.
People are adding to their products such as express those shots cold foam alternate dairy.
Really driving awareness of the.
Of these personalized offerings and our customers are resonating with that and so we're very.
<unk> leveraged by by what we're seeing we're very optimistic but we realize also at the same time that we've got to earn our customers' trust loyalty and respect each and every day and our partners are doing yeoman's work in terms of.
Creating that great experience that customers have come to.
Incorrect so congratulations to them that's right and that's why I would add that the investments we continue to make critical they are critical for our growth and they are critical for us to be able to continue to make it easier for partners to serve our customers as well as making it better for our partners overall.
<unk>.
I will now turn the call over to Kevin Johnson for closing remarks.
Well I want to thank you all for joining US today I think this quarter amplifies. The fact that Starbucks is on the front foot and we are optimistic about the future.
I think we're operating in a large.
Growing addressable market for coffee and within that market is a shift to premium arabica coffee and you combine that with the strength of the Starbucks brand I think that creates the trifecta for a multiyear tailwind and this is just the beginning so thank you for joining us today.
This.
<unk>.
Starbucks coffee coffee companies third quarter fiscal year 2021 conference call you may now disconnect.