Q4 2021 Starbucks Corp Earnings Call
Good afternoon, My name is Alex and I will be your conference operator today.
I'd like to welcome everyone to Starbucks fourth quarter and fiscal year end, 2020 One conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question answer session if you'd like to ask a question simply press Star then the number one on your telephone keypad.
If you'd like to withdraw your question press the pound key.
I will now turn the call over to Greg Smith, Vice President of Investor Relations. Mr. Smith, you May now begin your conference.
Good afternoon, everyone. Thank you for joining us today to discuss fourth quarter and fiscal year end 2021 results.
Today's discussion will be led by Kevin Johnson, President and CEO and Rachel Originary CFO.
And for Q&A, we will be joined by John Culver Group, President North America, and Chief Operating Officer, Michael Conway Group, President International and Channel development, and Leo Soy 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.
Our quarterly report on Form 10-Q, Starbucks assumes no obligation to update these forward looking statements or information.
GAAP results in fiscal 2021 include several items related actions, including restructuring and impairment charges transaction and integration costs and other items. These items are excluded from our non-GAAP results for non-GAAP financial measures mentioned in today's call. Please refer to the earnings release on our website at Investor Starbucks Dot com.
To find a reconciliation of these non-GAAP measures to corresponding GAAP measures.
This conference call is being webcast and an archive of the webcast will be available on our website through Friday November 26 2021.
Your calendar planning purposes. Please note that our first quarter and fiscal year 2022 earnings conference call has been tentatively scheduled for Tuesday February one 2022.
Before we begin there are four reminders I'd like to make with respect to the numbers that will be discussed on today's call.
First as noted in our earnings release, we have realigned our fully licensed Latin America, and Caribbean markets to our international segment as a result, we renamed the Americas segments North America, all discussions in comparisons today are reflective of the re segmentation.
Second a reminder, that Starbucks fiscal year 2021 is a 53 week year instead of the usual 52 weeks.
Full year 2021 results on today's call are on a 14 week basis for the quarter and 53 week basis for the year, except year on year comparative metrics, including revenue growth comp growth EPS growth and margin expansion, which are based on a 13 week or 52 week basis to exclude the impact of an extra fiscal week third.
All references on today's call are on a non-GAAP basis, unless otherwise noted.
And lastly, effective in the first quarter of fiscal 2020 to certain international integration related expenses previously excluded from our non-GAAP results will be included as they are expected to be representative of ongoing operations.
Please refer to the reconciliation of these measures and a schedule showing adjusted fiscal 2021, EPS bridge year on year impact of this recast as well as reconciliations of 53 weeks to 52 week metrics at the supplemental financial data section of our website at Investor Starbucks Dot Com I will now turn the call over to Kevin.
Well, thank you, Greg and welcome everyone to today's call.
I'm very pleased to comment on the record Q4, and FY 'twenty one results Starbucks reported today.
Im, particularly pleased that we were able to deliver these results and Starbucks 50th anniversary year and in the face of increased costs and unprecedented operating challenges, resulting from the global pandemic.
Today's results reflect very strong operating and financial performance across the board with.
And full year, non-GAAP EPS up 168% over prior year.
This was a record Q4 that punctuates, a very strong FY 'twenty, one performance with record highs in revenue.
Non-GAAP operating income and non-GAAP EPS.
Our performance accelerated throughout FY 'twenty one.
<unk> revenue growth of 21% non.
Non-GAAP operating income grew 139% and translated to a non-GAAP earnings of $3 24 per share near the high end of our guidance for the year.
Perhaps more persuasively than ever the strength and resilience of the Starbucks brand and the power and opportunity afforded by the authentic connection and the deep trust and loyalty, we have built with customers around the world is resonating.
Today's results demonstrate that despite the pandemic Starbucks long term double digit growth at scale model remains solidly intact.
Today's results also underscore the passion and dedication of our over 400000, Starbucks Green apron partners, who.
Who served nearly 100 million customer occasions around the world every week.
And I am humbled by our partners commitment to each other and to our customers as we continue to navigate through the pandemic.
Their resilience and service honors the company and our history.
And I could not be more appreciative of their efforts.
Finally, today's results demonstrate the success of the investments we have made and will continue to make ahead of the growth curve and our people digital beverage and food innovation and store experiences.
These investments are driving and strengthening our global business and setting us up for even greater success in the future.
Starbucks longstanding view is that our partners guide this company and we applaud other likeminded companies, who are following our lead.
Starbucks has been at the forefront of investing in our people since we opened our first store in the Pike place market in Seattle and $19 71.
We offer paid company healthcare 25 years before the Affordable Care Act.
Equity ownership in the form of being stock to eligible part time partners.
Free College tuition through the Starbucks College achievement plan with Arizona State University.
And mental health support through our partnership with Lira.
Investing in our people is the cornerstone of our storied 50 year history and tradition.
And these investments continue to deliver real measurable value to our partners our customers and our shareholders.
I'll be providing granularity around the incremental partner investments, we made beginning last year.
And the additional partner investments, we will be making in fiscal 'twenty two in a moment.
On today's call I will highlight Q4 performance in our key markets.
We provide detail around some of our actions and investments since the pandemic first surfaced in Q2 of 2020.
That are contributing to our performance today and setting us up for accelerated growth in the future.
I will also open a window on our exciting holiday plans and several initiatives that will launch over the near term.
Then I'll turn the call over to Rachel to provide a deep dive into our Q4 and fiscal year performance and share our guidance for fiscal 'twenty two.
We'll then move on to Q&A.
Over the last 18 months Starbucks like most global retail operators has been confronted with a seemingly never ending wave of consumer and business headwinds.
Many businesses in our space have not through us.
From day, one of the pandemic Starbucks leaders around the world. We're determined to use the company size and scale to navigate whatever challenges lie ahead.
With steadfast commitment to our people our mission and values.
Set of principles guided us through the pandemic every decision was rooted in our core purpose and reason for being.
These decisions have made the Starbucks of today stronger and better positioned to profitably grow.
Extend our coffee leadership around the world and create more value for our shareholders more than ever before in our history.
Last year, we made significant pandemic driven strategic investments.
<unk>, providing our partners with financial support and economic certainty.
Avoiding layoffs, while most of our stores were temporarily closed.
And accelerating our U S store portfolio transformation by Opportunistically repositioning 500 stores to better locations with more favorable economics.
This last point, we expanded our portfolio of drive throughs introduced new store formats to meet our customers, where they are and turbocharge growth in our digital customer relationships in the U S and China.
As a result of the successful investments we are entering fiscal 'twenty, two with strong momentum around the world.
In the U S. Our largest global market are key growth driver is comparable sales.
We grew a strong two year comp to 11% in Q4, despite variance across the country that created a dynamic set of city by city Covid restrictions, which we had to navigate.
We made significant progress addressing supply chain issues and experienced an overall improvement in inventory availability as we move through the quarter by increasing production at existing suppliers onboarding, new suppliers and strategically prioritizing key holiday Q1 merchandise.
While we made significant progress addressing supply chain challenges as fiscal 2021 progressed.
We remain cautious and vigilant as we entered fiscal 'twenty two given the dynamic nature of the situation.
The recovery in Q4 surged forward as evidenced by the sequential acceleration of two year comp growth.
We exited Q4 with even stronger 14% two year comp growth in September.
And close to a record average ticket.
Given by the strength of our fall beverage lineup, a shift in customer behavior towards more premium beverages and strong food attach.
We have great confidence for the year ahead, given the comp momentum throughout the quarter combined with holiday plan certain to excite and delight, our customers and increasing consumer demand around the world today for everything Starbucks.
Yesterday, we made an important announcement to raise wages across the U S. In fiscal 'twenty two to ensure we continue to attract and retain talented partners as consumer mobility continues to increase.
We believe this investment combined with our industry, leading benefits program will enable us to remain an employer of choice.
This builds on the historic partner investments and meaningful wage increases we made in fiscal year 'twenty one and.
And prioritizes significant additional investment to address inflation and wage compression that our tenured partners have experienced.
While also increasing our wage floor.
In December of 2020, I announced our intention to provide a starting wage of at least $15 an hour our store partners across the country and by the summer of 'twenty. Two we will have delivered on that plan.
Effective in January partners, with two or more years of service will get up to a 5% raise and partners with five or more years, we'll get up to a 10% raise in keeping with our long standing history of investing in our partners.
And next summer hourly partners in the U S will make it averages nearly $17 an hour.
With barista rates, ranging from 50 to $23 an hour across the country.
In total the FY 'twenty, one and FY 'twenty two investments represent approximately $1 billion.
Mental annual wages and benefits.
We continue to build a great and enduring company by investing ahead of the growth curve not just in wages, but in training and technology and the overall Starbucks experience for both our partners and our customers.
And as we have seen in the past we expect the investment in the partner experience will be accretive to profits over time.
We believe the U S market is that a unique inflection point.
Stakeholders and companies, whose leaders correctly identify emerging trends.
Thoughtfully shape strategic action and invest in the future will be big winners over the long term.
In the quarters ahead, Starbucks will continue to target investment in high returning assets that we believe will accelerate our double digit growth at scale model driving long term sustainable and profitable growth.
We continue to build and leverage our technology <unk>.
Mobile and digital capabilities and accelerate growth in active Starbucks rewards membership.
We grew our 90 day active Starbucks rewards members, representing our most loyal and engaged customers by approximately 30% in fiscal year 'twenty, one to $24 8 million members.
Noteworthy is that in Q4, 51% of U S tender for company operated stores was generated by this loyal customer base.
We continue to nurture and deepen our direct personalized digital relationship with our members with enhancements to the program like stars for everyone to expand reach and through payment partnerships with Paypal and back where a customer can now reload their starbucks card with a range of crypto currencies, including bitcoin.
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Through blockchain or other innovative technologies, we are exploring how to token I start.
Create the ability for other merchants to connect their rewards program to Starbucks rewards.
This will enable customers to exchange value across brands engage in more personalized experiences enhanced digital services and exchanged other loyalty points for stars at Starbucks.
An example of this innovation is evident in the recent launch of our Canadian loyalty program with Air Canada.
Over the next year, you will see the first instance of this loyalty points exchange with other consumer brands.
This approach will also serve as a foundation for a more aspirational concept for new.
Modern payment rails that align payment expenses with the value received by customers and merchants we.
We intend to be at the forefront of this disruptive innovation, which will unfold over the next few years.
Finally, a rich pipeline of innovation will elevate the Starbucks experience in our stores and drive in store productivity gains exam.
Examples include our MS strainer to espresso machines that more efficiently Paul's triple shots of high quality espresso.
Our deep brew artificial intelligence platform that has automated daily inventory management and store staffing and training improvements designed to reduce complexity in our stores.
Simplifying this workflow helps reduce the strain on our partners, resulting from the ever increased demand in our stores.
And enables our partners to connect and engage with their customers.
Which is at the heart of the Starbucks experience.
Starbucks is entering fiscal year 'twenty, two with strong customer demand and solid momentum in our U S business and expanding and accelerating in store channels and digital flywheel and green apron partners eager to deliver an elevated starbucks experience to their customers.
Having navigated through so many challenges over the past year, we are excited and optimistic about the year that has just begun.
While remaining humble and mindful of unknown challenges.
On to China.
Starbucks, China extended our market leadership position in Q4, despite pandemic driven disruptions propelled by an accelerated pace of store development and significant growth in digital customer relationships.
All while achieving record customer engagement scores in the quarter and in the year.
Starbucks has built one of the most respected consumer brands in China.
With one and two concern tumors, preferring starbucks to any other brands and away from home coffee.
Our growth strategy in the market continues to differentiate us and position us well for the long game.
We continue to invest meaningfully in all aspects of our China business, including accelerated investment in our partners. The creation of award winning experiential store designs.
Unprecedented benefits like health care for partners and their parents.
Rent assistance and programs that offer career path for young people from rural and remote provinces.
Together these investments further elevate the Starbucks brand and partner experience instill pride in our China partners and deepen our customer engagement and connection.
Starbucks continues to be in a strong market expansion cycle and as such much of our growth in China comes as we aggressively expand our store footprint and introduce more customers to the Starbucks experience.
We expanded our store footprint with 225 net new stores in Q4, and we are going deeper and broader deep.
Deeper into existing cities and broader by opening in new cities.
For the full fiscal year, we opened a record 654 net new stores and ended the year with 5360 stores in 208 cities throughout China.
As we noted on our Q3 earnings call a recovery in China will not be linear.
In Q4, we experienced COVID-19 related restrictions that constrained customer mobility and 18 provincial level regions.
At its peak in mid August approximately 80% of our stores in China were impacted by the pandemic.
With some stores fully closed or operating at different levels of elevated public health protocols, such as mobile ordering only limited seating our health stations a.
A recovering momentum was below expectation and pushed our two year comps to the minus 10% in Q4.
Cities with local Covid cases were impacted the most with stores relying on transportation and tourism also materially impacted during the quarter.
Notably, though much like the U S. China two year comp also accelerated in the month of September as we remain optimistic for the recovery.
Despite these strong headwinds China grew revenue, 11% year on year.
While our overall reported comp growth was minus 7% for Q4, if we exclude the lap of a VAT subsidy we received in fiscal year 'twenty.
Along with the stores in cities that experienced local COVID-19 cases or were in transportation and tourism zones, our core fleet of stores Comped positive.
Starbucks business and operating margins remained strong and.
And our commitment to China, and our confidence in our long term growth strategy in China is unwavering.
Yes.
In addition to expanding our portfolio of stores in China. We also expanded our digital footprint of 90 day Starbucks rewards active members, reaching an all time high of $17 9 million in Q4.
This represents a sequential increase of 5% over Q3, and an increase of 33% over prior year.
Frequency of purchases by our gold members remained at pre pandemic levels. Despite the mobility limitations in the quarter demonstrating the effectiveness of our efforts and up leveling member engagement.
One example was our star dash gift with purchase campaign.
To successfully lifted member frequency and spend and evolved into a highly anticipated activity for members to earn limited availability to Starbucks 50th anniversary merchandise.
With operations heavily impacted by Covid related safety restrictions in the quarter. We are laser focused on what we can control in China, while continuing to elevate our partner and customer experiences to further elevate the Starbucks brand and build on the loyalty that will continue to drive our long term growth.
Including the U S and China Starbucks presence in 84 markets around the World provides us with a unique perspective on the global recovery from this pandemic.
There is no doubt that we are seeing continued recovery in our markets.
Latin America grew system sales by 113% in Q4, driven by a strong recovery in Mexico EMEA.
EMEA posted system sales growth of 52% in the quarter and Japan navigated through a challenging quarter, turning the corner towards renewed growth.
We see positive signs in many other markets as well as reinforcing our belief that pandemic related headwinds are temporary.
In addition, our strategic channel partnerships with the North American coffee partnership with Pepsico, and our global Coffee Alliance with Nestle are on plan and have propelled Starbucks to number one share positions in the U S and throughout many other markets around the world further underscoring the strength and resilience of the Starbucks brand.
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And illuminating the decade's long runway of growth ahead.
As we enter fiscal year 'twenty two we are fully prepared for a record breaking holiday with strong growth planned around the world and our holiday campaign designed to build genuine human connection as only Starbucks can.
At a time when human connection is more important than ever.
In addition to new and iconic seasonal products, we are integrating brand building and transaction driving marketing programs to demonstrate our values and touch our customers' hearts.
We are prepared with inventory this holiday and we are also anticipating that nearly $3 billion will be loaded on Starbucks cards. This season by leveraging our digital and out of store distribution channels, and creating a promotional presence and drive through lanes, where we have seen significant channel shift during the pandemic.
We are ready for this holiday.
In closing Starbucks strong performance through the recovery as a direct result of the hard work and dedication of our partners as well as the investments we made both before and during the pandemic.
We remain confident in our future and steadfast in our commitment to deliver long term value to all stakeholders.
This confidence supports the plan, we announced today to returned $20 billion to shareholders over the next three years through dividends and share repurchases.
I'm, particularly pleased that hundreds of thousands of Starbucks partners, who are also startups shareholders through our stock program will also benefit from this plan.
50 years ago, Starbucks was founded as a different kind of company.
Accompany that with balanced profit with social conscious and embrace the ideal that doing good for one another and for society would actually be very good for business over the long term.
Our performance in 2021 demonstrates the wisdom and correctness of that founding principle.
As we enter our second 50 years, we continued to honor our history and heritage Justice, we boldly reimagining our future.
And with that I'll now turn the call over to Rachael.
Rachel.
Thank you, Kevin and good afternoon, everyone.
It's my privilege to share with you start with a strong finish to fiscal 2021 15 P. M.
Delivering the highest full year revenue operating income and EPS in company history, and accomplishment that is truly special containing the profound challenges we have navigated throughout the pandemic.
Please note that as Greg discussed at the capital call.
Fiscal 'twenty one results that we'll discuss today are non-GAAP unless noted and on a 14 week basis for the quarter and a 53 week basis city year effect year on year revenue comp operating margin and EPS growth metrics, which will be on a 13 week or 52 week basis to exclude the impact of an extra fiscal week for comparative purposes.
In Q4, Starbucks Global revenue reached $8 1 billion up 22% from the prior year setting another quarterly record along with a fiscal year record of $29 1 billion, primarily driven by the continued momentum in the U S and strong contributions from across the globe. Despite the severe headwinds at the closing Delta Arkansas.
<unk> operating margin was 19, 6% in Q4 of 580 basis points from the prior year increase was primarily driven by sales leverage across the P&L as we lap the COVID-19 impacts and related cost as well as pricing in North America, which were partially offset by rapid inflation related to logistics commodities and labor costs.
Across our supply chain.
Q4, GAAP EPS was $1 49 exclusive the 56 divestiture gain from the Starbucks Coffee Korea transaction, which yield a pretax proceeds of almost $1 2 billion.
Q4, non-GAAP EPS was $1 capping off the company's most profitable year ever with non-GAAP EPS of $3 20.
I will now provide some segment highlights for Q4, and then we will provide guidance for fiscal 2020.
North America segment delivered revenue of $5 8 billion in Q4, 27% higher than the prior year, primarily driven by a 22% increase in comparable store sales, including 18% comp transaction growth and 3% increase in average ticket.
In the U S comparable store sales reached 22% in Q4, driven by transaction comp of 19% delivering another sequential improvement in two year transaction complement base of current accounts of any disruptions.
Simultaneously, we maintained our strength in average ticket of 3% over the prior year in Q4 remaining near record levels and posting two year ticket comp of over 20% the sixth consecutive quarter cold beverages reached 75% of total sales in Q4 contributing try ticket strength, along with outstanding results from our fall promotion and another record quarter.
Through to cash now.
North America's operating margin was 22, 5% in Q4 2510 basis points from the prior year driven by sales leverage as we lap the impacts of Covid as well as continued strength in ticket including pricing the.
The segment's operating margin exceeded the pre pandemic level in Q4 fiscal 2019 by 170 basis points, primarily due to the leadership conference and labor are investments in Q4 fiscal 2019.
Ill take it and the benefit of trade area of transformation also helped offset the margin headwind of approximately 270 basis points over the past few years from sizable investments in wages and benefits as well as supply chain inflationary pressures.
Moving on to international the International segment delivered record revenue of $1 9 billion in Q4, great 18% over the prior year. The growth was driven by an 8% increase in net new stores over the past 12 months strong sales growth from our international licensee as well as a 3% increase in comparable store sale both.
Operator, and licensed markets across our international portfolio are contributing meaningfully with double digit sales growth in key markets like Japan.
Korea and Mexico.
Kevin noted that the COVID-19 related volatility drove comp sales down 7% in China. In Q4, However, our experienced tuning 22 year history continued to serve as well as operating income was only down 1% versus last year.
Our team in China and across the Globe has done a tremendous job of managing through the volatility in fact operating margins for the International segment was 22, 8% in Q4, extending 650 basis points from the prior year well above the pandemic level, mainly driven by sales leverage at the segment continued to recover from the pandemic.
Government subsidy lapping store asset impairments in the prior year as well as storing overhead labor efficiencies also contributed to the expansion, we expect margin to settle a bit in fiscal 'twenty two versus the levels of the past few quarters as government subsidies are not expected to repeat we have pressures relating to the impacts of inflation.
The opportunity ahead, coupled with tremendous experience and a strong diversified portfolio has us very optimistic for the future growth in China and other international markets.
On to channel development revenue was $438 million in Q4, a decline of 10% from the prior year, primarily driven by global coffee alliance transition related activity, including a structural change in our single serve business when.
When excluding approximately 20% adverse impact of this transition related activity channel development's revenue increased by 10% in Q4, primarily driven by growth in the global coffee alliance as well as other international ready to drink business.
As a reminder, Q4 was the last quarter, we will be lapping. This transition. So we expect channel development to return to more normalized reported revenue growth levels in fiscal 2022.
The segment's operating margin was 52% in Q4 of 960 basis points from the prior year normalizing for the 890 basis point impact of global Coffee Alliance transition related activities I, just mentioned channel Development's operating margin expanded 70 basis points in Q4, driven primarily by lower trade spending.
International ready to drink business.
Yeah.
Now I will turn to our fiscal 'twenty two outlet.
For fiscal 2022, we are expecting global comp sales growth reached high single digit as we lap prior year impacts of Covid and continue to build on our Q4 momentum.
This also reflects our thoughtful pricing actions, which are expected to further bolster our comp growth as we work to offset the impacts of inflation across our supply chain.
New stores will also contribute meaningfully to our growth in fiscal 2020, we expect to add approximately 2000 net new stores globally in fiscal 2020.
Up significantly from 1173 in fiscal 2021, as we successfully completed closures under our North America trade area of transformation program and we are now focusing on expansion.
We estimate that approximately 75% of our net new stores will come from outside the U S. As we continued to diversify our global portfolio across highly profitable market. This represents global net new store growth of 6% returning to our ongoing growth model.
With this powerful combination of global comp and store growth coupled with the continued strength in our channel development segment. We are expecting consolidated revenue to range between $32 5 billion and $33 billion in fiscal 2022 bring well above our long term guidance of 8% to 10% growth setting us up for another year of record performance.
As Kevin mentioned fiscal 2022 will be a pivotal year of investment marks by increase in wage investments to further support our store partners. In these critical moment, helping to ensure we have one at very best talent to drive our business forward in Q, the ability to continue capturing and maintaining meaningful category share gain.
Accelerating our growth and sharing of steel for future margin expansion as sales leverage as one of the most meaningful expansion opportunities. We have so while we will see an impact to operating margin in fiscal 2022, resulting from these investments increasing our share of customers now will drive long term earnings and value for all Starbucks stakeholders the success.
To start let's start with our partners and we are committed to continuing to invest in them as a critical strategic differentiator for our business with these investments we expect fiscal 2022 operating margin to be approximately 17% below our long term target driven by approximately 400 basis points of impact related to the wage investments coupled with an.
<unk> headwind of approximately 200 basis points from a combination of inflationary pressures other growth investments and gift continuation of depth and intensity further our fiscal 2022 margin expectation reflects factors unrelated to our core performance with an approximately 40 basis point dilutive impact from a combination of the Starbucks Korea.
Transition as well as the change in non-GAAP reporting treatment, both representing a one time step down in margin.
However, we will meaningfully offset these margin impacts from fiscal year 2020 with benefits from pricing leverage on our expected strong sales and productivity gains importantly, given our continued proactive actions to continue to drive margin expansion and leverage accelerated sales growth, we expect our operating margin to return to the ongoing.
Targeted 18% to 19% in fiscal 2023.
While fiscal 2022 margin represents a departure from our long term growth algorithm. We believe the value of these strategic investments will create for our partners our business in all of our stakeholders will endure for many years to come.
We are pleased that as we had previously committed we successfully managed our leverage ratio back within our target at the end of fiscal 2021 as a result, we plan to reinstitute our share repurchase program beginning this quarter and are committed to returning $20 billion to shareholders or approximately 15% of our current market capitalization over the next three years with <unk>.
Starbucks will have returned over 45 billion to shareholders since fiscal 2018 or approximately 35% of our current market capitalization, while simultaneously delivering on our algorithm for double digit EPS growth at scale Approx.
Approximately two thirds of this 20 billion will come in the form of share repurchases with the proceeds from the Korea transaction, pushing fiscal 2022 repurchases a bit higher than the following two years. The remaining one third will come through a very competitive dividend targeting an approximate 50% payout to support this plan we plan on issuing a moderate amount of ink.
Your mental debt, while retaining leverage below our target of three times ranked adjusted EBITDA consistent with our existing triple B plus rating.
As a result, we expect interest expense to be between $490 million and $500 million in fiscal 2022 versus $470 million in fiscal 2021.
Capital expenditures in fiscal 2022 are expected to total approximately $2 billion up from $1 5 billion in fiscal 2021 and back to pre COVID-19 levels, reflecting increases in new store development and technology initiatives in our stores as always we plan to focus on capital spending in fiscal 2020 on opportunities that drive Sigma.
<unk> returns across our global retail portfolio.
We expect our non-GAAP effective tax rate to be between 24% and 25%.
This range translates to an EPS headwind of roughly 4% year on year and is meaningfully higher than the non-GAAP tax rate of 21, 3% in fiscal 2021, which benefited from certain discrete tax benefits that are not expected to repeat repeat to the same degree in fiscal 2020, Kim when you add it all up on a 52 week comparative basis we.
Fiscal 2022 of GAAP EPS to decline by 4% and that we expect our fiscal 2022, non-GAAP EPS growth to be at least 10% from the base of $3 <unk> in fiscal 2021 and that excludes the extra week and is adjusted for the change in non-GAAP treatment of certain integration costs.
With the phased rollout of wage investments and the ongoing global recovery from Covid throughout the year, we expect fiscal 2022 quarterly non-GAAP EPS to be the lowest in CQ before peaking in Q3 to form a strong back half of the year.
Recognize that this earnings guidance the temporary change from the outlet discussed at our Investor Day in December 2020, driven by wage investments as well as faster than expected recovery in fiscal 2021.
We continue however to stand by our commitment to the growth algorithm over the longer term the strategic investments in our partners are the right thing to do for our business and all of our stakeholders and we are confident this provides the foundation necessary to continue to grow our coffee leadership position for many years to come.
To summarize here are the three key takeaways for my discussion today first we are thrilled with what we accomplished in fiscal 2021 far surpassing the pre pandemic performance levels can deliver record high revenue operating income and EPS, even as global consumer market mobility remains suppressed and inflationary headwinds.
Pressure on our business.
Second fiscal 2022 will be a year of outsized investments prioritizing our store partners and ensuring we have the very best talent to drive capture and maintained lasting category share gains, while still delivering double digit EPS growth and initiating our return of $20 billion to our shareholders over the next three years and finally.
We remain fully committed to our ongoing growth model and expect to progress towards our algorithm with an operating margin of 18% to 19% in fiscal 2023, while continuing to balance returns and investments necessary to sustain this performance over the long term.
Of course, all of this is made possible because of the significant efforts of our Starbucks partners around the world, who proudly wear the green apron.
Their unwavering commitment to serving our customers that drives the financial results and outlook and I'm sure today with that Kevin and are happy to take your questions joined by John Culver, Michael Conway and real slate. Thank you operator.
Thank you.
As a reminder, if you'd like to ask a question Press Star then the number one on your telephone keypad.
Order to allow as many questions as possible. We ask you to please limit yourself to one question at a time.
We will come back for follow up questions as time allows.
Our first question comes from the line of David Tarantino with Baird. Please proceed with your question.
Hi, Good afternoon. My question was on the margin outlook that you gave 17% this year and then growing to 18% to 19%.
In 2023, and I'm just wondering if you could sort of paint the picture of how you get from this year's margin outlook for next year's margin outlook are there certain offsets that are going to develop throughout the year that that will be.
Leads to better performance or is there something one time and the cost structure. This year anything you can do to help provide some visibility on on that path would be great.
Yes. Thank you for the question.
When we look at our.
Good margin that we're guiding position, we think about where we're headed next year. As you know there are over 640 basis points of dilution to our margin. This year given the investments, we're making as well as some of the inflationary headwinds and changes as outlined in my prepared remarks, we're going to work this year to offset the majority.
40 of that through pricing through sales leverage to productivity and other efficiency measures as we move into FY 'twenty. Three we will continue those efforts and thats going to allow us to return back to the 18% to 19% margin that we guided for the long term, we feel confident that given that our growth at scale agenda.
And our focus on pipeline of innovation, our ability to continue to grow our digital customer memberships and our ability to continue to accelerate the service experience through new stores into the experience, we're creating in stores, coupled with productivity and efficiency throughout our global network is really good allows us to continue on that path towards 18 to 19.
Margin in line with our long term guidance.
And David This is Kevin let me just add to Rachel's comments.
The strategic investments, we are making in wage tiers, here's how to think about it.
First our Q4 and FY 'twenty one revenue results demonstrate that we are growing faster than the coffee addressable market as estimated by Euro Euro monitor we are taking market share.
And then if you look at consumer mobility, it's going to continue to increase and we want to recruit and retain the very best talent for our stores. The most important investment we can make is in our green apron partners. We know this to be true because it has been proven time and time again throughout our 50 year history.
When we take care of our partners they always rise to the occasion and create that unique Starbucks experience for our customers.
Clearly from my perspective, this investment in our partner does not only the right thing to do for them. It's also the right thing to do for all stakeholders, including our shareholders.
We're on the front foot right now and we have this opportunity to accelerate.
Investing into the growth curve.
This means with this investment we predict higher market share gains as consumers return to our stores and these share gains will be permanent.
And these share gains will create long term shareholder value. If you think about it in your model. This those permanent gains we know we get operating leverage as we get more customers. So if you just take the share gains.
And you run the spreadsheets on operating leverage that is what's going to create this is actually going to increase the terminal value calculation for Starbucks and we're so confident in this strategy.
And this investment that's why we're committing this $20 billion returned to shareholders over the next three years. So this is all about leaning into the growth taking market share that is going to be permanent and the benefit of that market share is going to create significantly more shareholder value than we would've created without the investment and we're so confident were $20 million return.
To shareholders in dividends and buybacks.
That's how I think about it and that's how I think every shareholder ought to think about this investment.
Great. Thank you.
Yes.
Thank you. Your next question comes from Andrew Charles with Cowen. Please proceed with your question.
Great. Thanks, I have a two part question, Kevin what do you attribute to the U S acceleration in September I think investors are trying to get a sense. If this is something more enduring like opposed to plug a larger post labor day return to office.
That's something more transitory like a successful PSL season, and Rachel just to clarify the guidance does the non-GAAP EPS guidance of $3 40, plus does that incorporate share buybacks or is that excluded from EPS guidance. If you can just provide a share count that guidance is contingent on to help flesh that out that'd be very helpful. Thanks.
Yes, Andrew I'll take the first part of your question I'll hand, it to Rachel.
With Covid cases in this case the Delta area. It creates this variability in consumer behavior. So as you saw in the United States more government restrictions in many of these were done state by state City by city that we had to respond to.
That I think was the impact in August and as we responded to those and certainly as I think consumers start to see the delta variance to curve starting to slow consumer mobility.
Unfolds. So these are all transitory.
They are unpredictable it is all related to the pandemic. So does the acceleration that we saw in both the U S and China are the exact same reason, it's just C. It's the variable is dealing with a global pandemic and when these these delta various of these other things.
Hi, Bob It does it does have some impact on consumer mobility, but the one thing we know for sure absolutely we see in every market around the world that as you know as the spread of Covid gets under control and it's market by market customers returned to our stores immediately that's why this investment in ways and ensuring we staff our stores with a very.
Best most talented green apron partners. We can is so important this is the right time to make that investment and we're confident.
That investment is going to return significant value to shareholders.
Briefly going to take the second question answer the second part Andrew what I would say generally we're looking at about approximately 1% impact to EPS from the share repurchases, which is in line with our long term guidance slightly elevated this year just given that this year's repurchases will be a little bit higher than 23% and 24, given the impact of the prestige from <unk>.
But approximately 1% and that's provided in our guidance.
Thank you. Our next question comes from the line of John <unk> with Jpmorgan. Please proceed with your question Hi. Thank you just looking at the numbers. It seems like one of your biggest opportunities is bringing back the U S traffic counts I guess to at least.
What they were in 2019, if not even above what they were in 2019.
I wanted to get your sense of the visibility of that happening.
If there are any green shoots for example, suburban drive throughs. For example that are seeing that increase in traffic and we are doing.
Thank you had the staffing today in the stores that would allow that return to traffic or would it be necessary to.
To add a step function change in some of the labor hours.
To reach.
Breach that increased consumer demand. Thank you.
Thanks, Joe Mahindra, John Culver to share perspective on your question, Yes, John we're seeing.
Obviously, a record number of customers coming back into our stores and that signaled by the significant transaction growth, we saw quarter over quarter at plus 18%.
What we're seeing from a behavior standpoint are very similar behaviors from customers.
As we've had in prior quarters and pre Covid. So routines are beginning to normalize and I think it speaks to a little bit around what Kevin said that as people become more mobile and particularly as we launched our fall campaign normal routines entered with kids going back to school our peak hours.
Have returned to pre Covid behavior. They started in Q3 and it continued into Q4. Good morning day part very strong growth on a year over year basis as well as mid day and then into the afternoon, we're seeing a very high beverage and food attach and really a shift.
Too cold beverages that we talked about on the last earnings call cold beverages actually accounted for.
475% of our beverage sales in the quarter, but food equally was strong we were up 35% of espresso was up 34% and we are seeing larger tickets come through as well. So when you look at it from a store standpoint.
We're very pleased with what.
The performance has been first in rural and suburban areas, where our drive throughs are most common and which helped carry us through the COVID-19 period and over the last 18 months were very strong and they continue to show strong performance, our urban stores have reached recovered status and where.
We're very encouraged by that and then from a central business District recovery has been slower but it continues for the second quarter in a row.
Business District is returned to a positive comp performance as well and then the last thing I would just leave you with is is what we're seeing on the convenience aspect of Starbucks and in particular the growth of drive through and the growth of MLP and we've done a lot of this during the trade area of transformation work.
We did around the stores.
Today drive through an MLP accounted for 70% of transactions, which is up 15% versus pre pandemic levels. So we're very encouraged with the momentum that we've been able to build and then obviously with the investments that we're making in our people.
From a wage perspective, we expect to continue to increase staffing levels continue to increase the training for our partners and we are very very well positioned for a very strong holiday season.
Okay.
Good.
Thank you.
Our next question comes from Sharon Zackfia with William Blair. Please proceed with your question Hi.
Hi, just kind of building on John's question could you kind of quantify where U S. Staffing is relative to pre pandemic and maybe then some metrics around where your hourly turnover and managerial turnover is relative to 2019 would be helpful.
Good.
Yes, what I'd say Sharon is couple of things, obviously like all other retailers, we're navigating a very complex and unprecedented environment and yes, we have seen some staffing challenges in certain parts of the country, but I think from the results we've been able to deliver it.
<unk>, our ability to navigate through these challenges whether it be staffing whether it be any of the supply chain challenges or any of the inflationary pressures. When you look at it one of the things that we've done. During this time is as we've looked at adjusting staffing levels and how do we manage through this as we have also taken.
Action to adjust store operating hours and when I say that we've really looked at the evening day part and pulled that back from an hours perspective, and that has enabled us to redeploy staffing into other stores, where we need it. So we're continuing to do that in.
In terms of your question around attrition.
We are over the last year, we have approximately 70% of our hourly partners are new to Starbucks and we continue to make investments in them from a training standpoint, as we announced yesterday for all our partners. In addition, we've made investments now and we announced this.
Yesterday around recruiting and adding recruiters more recruiters into the regions to really focus and rig.
Hi.
And attract new talent and then also at the same time, we continue to work very closely with our partners to understand how we can continue.
To make them.
Effective as well as reduced complexity in the store and complexity is a big thing for us a big focus and then that we're looking at two things number one is driving automation in the stores we've driven.
Automated ordering for food and merchandise that will be fully rolled out across all of our U S company owned stores by the middle of this quarter and then in addition, we continue to make investments in equipment.
And from an equipment standpoint, whether it's Australia, whether it's our warming ovens or whether it's our cold brew system. All of these all of these equipment investments also make our partners more effective and free up time for them as they do their task. So a lot of work going on and very proud of the way in which.
Our partners have navigated over the course of the last year in particular and as we've experienced some of these challenges.
And we feel as though we are in a very good spot and managing through this and we will continue to make investments in this area. It's an area we're watching very closely.
Thank you. Our next question comes from the line of Sara Senatore with Bank of America. Please proceed with your question.
Okay.
All right.
Please proceed with your question.
Hi, sorry can you hear me now.
Okay.
Okay, I'm sorry about that.
A question and then a follow up the first is on China.
It sounds like you are.
The impact of the pandemic, rather than say slower macro growth or.
What others have.
A little to no competition, so I guess good.
If you could just kind of talk about that.
In the context of what Youre seeing there in terms of transaction and kicked off given back a little bit of the ticket I Didnt note there sort of an underlying dynamic there outside of just the pandemic that might be playing out and then my follow up was on the investments you're making holistically I certainly understand.
Why and to your point the payoff is been visible.
Why not sort of approach it more ratably as opposed to.
A lot of upfront in the coming year, just given the volatility in the operating environment and Youre coming off of.
Obviously depressed earnings growth from the pandemic.
Can you just talk about the timing and sort of the front loading of it. Thanks.
Yes, Thanks, Sarah for your first question on China latest joining us on the call from Shanghai, So legal why don't I hand, the question over to you.
Thank you Kevin Hi, Sarah.
At present, the Pistons question Anthony in Q4.
Last year fiscal year will be impacted by the way.
Decisions.
The prior quarter with 42 cities in total across the quarter now.
We saw a bit of public health measures.
Implemented with significantly reduced a couple of mobility and disrupted the come from some patents.
As you know the board is also with new codes.
What we see.
It means that over half of our stores were located in <unk> keeps the buy local cases.
And 80% of our stores were operating under the elevated safety protocols at the peak operating segments.
So thats why why weighted down by.
In Q, both the neighborhood that 11% revenue growth EMEA as Kevin pointed out and that means.
<unk>, the chromebooks, Nick minus 7% or minus 3%.
Excluding the Latin over FY <unk>.
Andrew.
Let's say that you know.
Good.
And the team with local people as well as transportation and tourism scope.
Comm was absolutely policy excluding.
FY 'twenty and more importantly.
Rachel pointed out.
Operating income was minus 1% versus last year.
If we exclude the one off.
Colby, we reconfirm, our putting FY 'twenty, we actually achieved.
Improved.
On the operating income. So this is moving so demonstrating absolute.
Population that duty.
So we are seeing pandemic dynamics.
And in the market.
I'm confident in saying that this is short term.
Theyre going to recover we're going to recover and this is why our focus right now is focused on what we can control to navigate.
Short term volatility with our teams and good while capturing the key opportunity by for example.
Total ABL.
And the building of employee engagement.
For next year.
I think it's all going to power, our future, Colorado into growth and sustainable competitive advantage of startups framework.
Thank you. Thank you Leo let me, let me take the second half of your questions back half of your question regarding these investments.
Wanted to start by just sort of looking back at some of the strategic investments that we made through this pandemic starting with the decision we took in March of 2022.
To give our partners economic certainty and pay them.
With no layoffs, no furloughs pay them, while we closed all of our stores in the United States and just kept drive throughs open.
That was a big strategic decision and we made that decision certainly staying true to our mission and values and taking care of our partners, but we also knew that as this pandemic began.
And the recovery came back our partners would be there and they were and so why do you think we drove a faster recovery than people expected why did we drive a faster recovery than than others in the industry answer because we had the courage to make that strategic bet at that time in March of 2020.
Then in June of 2020, we made the strategic decision to transform the trade area portfolio the store portfolio in the United States, We basically reposition nearly 600 stores to reposition them to better serve our customers and to give us better economics and to elevate the customer experience.
That strategic decision, we had the courage to make that and that strategic decision today is giving us margin expansion, an elevated customer experience and that too is contributing to a recovery I.
I think about this decision on this wage investments the very same way we have in the past, we're going to stay tuned our mission and values and we know we know for certain because we've seen it time and time again that when we invest in our partners. They rise to the occasion and we also know this pandemic is transitory we know vaccines work we know that.
When we see markets.
As governments.
<unk> reduced restrictions customers are back into our stores.
So this is an opportunity for us to move now we can't wait. This is the time to take that market share that we know we can take.
And that market share gain is permanent that market share gain will build costs long term customer engagement long term customer loyalty and that market share gain will also drive operating leverage in our stores.
In addition to that we also know that we have a combination of in store productivity innovation, that's going to help offset that we also have pricing power and we're very thoughtful about how we take price, but we are taking price and we will continue to take price in an inflationary environment.
So.
We just believe this is the absolute right thing to do at this moment in time.
And this investment like the other two that I, just described will return value to shareholders because of that and that's why we reinforce our confidence with this $20 billion returned to shareholders in the form of repurchases and buybacks.
Thanks for your question.
Thank you.
Our next question comes from the line of John Glass of Morgan Stanley. Please proceed with your question.
Thanks very much.
The wage pressure.
Called out the supply chain pressures I'm wondering how transit you think those or is that something you anticipate over the next couple of quarters and maybe specifically what are those issues with specific items is it coffee is it food and supplies for stores.
How do you are you are you confident with certain you've got the supplies needed I guess to get through this holiday season, given you're expecting such a large increase in sales.
Okay, Let me, let I'll have Rachel.
I'll, let John Colbert to give you sort of the perspective on where we're at supply chain, but Rachel good jobs.
With the perspective in terms of how we think about it within our guidance now I'll turn it over to John and some steep market specifics, but from a guidance standpoint as I talked about in my prepared remarks here that 200 basis points margin dilution related to a combination of supply chain pressures.
<unk> related to the supply chain pressures as well.
After a number of government subsidies from prior year investments.
When we look at this past quarter Q4, we had about a 90 basis point impact from inflationary pressures across the globe through the combination of logistics labor as well as commodity as we move into Q1 and Q2, we would expect that to increase and that will start to settle in Q3 and Q4.
But we've included that as part of our guidance throughout the year, because we really don't know when these there Dennis.
Inflationary pressures will subside and to that point, we've got planned in this year.
Of course, they could increase we don't know what's going to happen, but we feel confident we've got at least that.
Based on what we've seen in Q3 and Q4 this year and we've accounted for that into next year, but it does impact us more meaningfully in Q1, and Q2 and what we would have originally thought and then again settled in Q3 and Q4.
Margin perspective, and so with that I'll turn it over to John for specifics, Yes, John just real quick on the inflationary impacts from a supply chain standpoint.
We are seeing the impacts.
Evidenced.
Some of the inventory levels in our stores and I feel very good about the way in which we've been able to navigate it.
Those.
Supply impacts began in mid fiscal 'twenty, one and we would expect that they will continue into this coming year, alright, and what we're seeing as headwinds on commodity pricing challenges around transportation and also the ability for our.
Distributors and manufacturers to find labor to work in their factories and distribution centers a couple of things that we've done with the team is number one we've worked very closely to add new manufacturing and supply partners across our critical categories.
And that is paying dividends for us and we're seeing inventory ease in those categories I E oat milk.
Breakfast sandwiches.
Hey, good buys et cetera.
Building throughput and production capacity, we have suppliers, adding new lines.
So that they can increase their safety stock.
We've worked with suppliers to invest in wage for their workers.
And many of them have done so and the last thing I would say that what we've done is we've really focused our production efforts on high volume items and some of those lower volume items, we pulled back on and de prioritize so all of that work and the actions that we've taken we started early on as we.
We began to see these challenges.
We've addressed them.
We're not out of the woods, yet, but we feel very good about the path we're on.
And as Kevin highlighted we're very confident that as we head into holiday our inventory position is very strong and we will continue to watch it very closely and we will continue to work with our supply network to ensure we've got an adequate supply of products in our stores and then the last thing I would say.
Hey is that clearly like other retailers.
We're seeing customers come back into our stores at record levels and the strength of our business is very strong. So we're very encouraged around the progress that we're making and the growth opportunities that we see going forward.
Essentially raised coffee John were 14 months.
Price Lockdown coffee with several months of inventory in the warehouse, so there's not a risk on coffee.
Thank you.
Thank you. Our next question comes from Jeffrey Bernstein with Barclays. Please proceed with your question.
Good.
Great. Thank you very much.
Follow on to that return of cash discussion, which is obviously, a bullish sign that $20 billion investment youre, making but.
With that said, Kevin just thinking bigger picture.
So in your press release that you are currently 50 50 company owned and licensed.
Wondering what the thoughts are around increasing that licensing mix overtime, which would seemingly generate a higher margin annuity stream of royalty income allow for greater balance sheet leverage maybe return incremental cash.
Sure whether that would require a change in the China ownership structure, but we've obviously seen that at your largest multinational <unk> peers.
Essentially looking for an update the thoughts on that 10 2030 scenario from the 2020 Investor day, just to kind of get your sense for the outlook on the ownership structure. Thank you.
Yes, Jeff. Thanks for the question I think clearly our growth at scale agenda identifies the U S to China as our two lead markets and we're very happy with that agenda I think.
China still has a significant long runway of growth and Youll see us continue to expand and accelerate the number of new stores. We're building in market as Leo highlighted and so we're very bullish on the long term in China U S continues to.
Comp growth that we're seeing and the opportunities we see to continue to grow the U S. In terms of new stores and comp growth still very very bullish on that as well as.
As we said in December 2020, we're always evaluating.
<unk> markets and you saw that the Korea joint venture, we did sell our 50% stake to a long term.
License partners and say who's been operating that market will continue to operate that market. So we're always we're always evaluating that but we're happy with where we are today.
And I guess, that's how this is what I would say think about U S and China. Our two lead growth markets. I think we're very happy with where we are today, we see long term growth ahead of both of those markets.
Thank you.
Final question comes from Jon Tower with Wells Fargo. Please proceed with your question.
Great. Thanks for taking the question.
Kevin You had mentioned a couple of times on this call pricing action and the idea that you have a good about pricing power kind of pent up in your business. So I was wondering if you could give us some guide on what Youre expecting for fiscal 'twenty two given.
Good away from home inflation is in that mid single digit range right now and obviously the inflationary pressures are going to remain and then just following up on the guidance piece. Rachel I was hoping you could give us a little bit more clarity on the EPS that you had offered I think you'd mentioned about 10% EPS growth of the non-GAAP.
21 of 310, and I think based on the metrics that you offered I'm, having a hard time getting to that 340 plus range in 'twenty. Two so maybe some more clarity on some of the line items would be great. Please.
Okay.
Alright, Jon let me take the first part of your question and then ill hand to Rachel and the second part liquid when it comes to pricing, we continue to be very thoughtful and very strategic in how and how we look at pricing and we're actually using machine learning and some of the deep brew technologies that inform our pricing team on where and how to take.
That price.
I prefer not to say hey, here's the amount of price we've built into this plan, but I think we certainly have more upside in price if we need it but it is a dynamic thing because we're watching inflation and we and we really want to do this in a way that stays true to the thoughtfulness that we've always had in the past.
And part of this is how do you take how do you take the right amount of price at the right time.
And not have customer attrition, where the share we want to grow share of customer occasions, right now and so that's the balance that we strike and it's really a fairly dynamic things so for.
We just I prefer not to say here's what we built is because I think we actually have more we need it and we can take less if we don't need it.
All I will say is that I think we've got a world class pricing team backed up by World class analytics and insights and we are we were very good at this in fiscal 'twenty, one and we're going to be very good at it going forward.
Rachel and John what I would say is if you look at our non.
Non-GAAP EPS for FY 'twenty, one to $3 24.
From a baseline perspective, we're removing the additional week. So thats about 10. In addition to that we have a change in our treatment.
Non-GAAP reporting for purposes of integration costs related to acquisitions Thats Another force.
So that combination of the 2014 centers.
We are reducing this year's non-GAAP EPS of $3 24 down to an adjusted FY 'twenty, one non-GAAP EPS of $3 <unk>.
We're encouraging our growth rate off of that baseline of at least 10% and again that 10% is given the dynamic operating environment that we're in this unprecedented level of investment that we're taking as well as the pressures we still see related to.
The supply chain and the inflationary pressures as well as the pressures we're seeing.
From the KOL data vaccines are federal Covid environment, we think the combination of that in a dynamic environment, where in that that at least 10% growth reflects a lot of confidence and optimism for where we're headed even nellix quite a challenging environment ahead.
Thank you at this time there are no further questions I will now turn the call over to Kevin Johnson for closing remark.
Well, thank you and before we close today's call I want to take this opportunity to welcome Tiffany Willis to Starbucks as our new Vice President of Investor Relations and I also want to congratulate Greg Smith on his new role, leading finance for our international channels business.
Tiffany brings great experience in finance and IR of multiple industries, including food and beverage consumer products and technology and we look forward to introducing her to our investment community as she begins her journey at Starbucks with us. So Tiffany welcome I also want to reiterate for all of you that consumer demand is strong.
And this moment of time is an inflection point its an opportunity for Starbucks to invest ahead of the growth curve and deliver long term gains for all stakeholders. I think was the strategic actions that we've made we are well positioned to grow share of customer occasions, and dramatically strengthen engagement and loyalty or long term.
Sustainable growth in.
And with that we look forward to welcoming all of you to our stores. This holiday season. So that you can enjoy your seasonal favorites and with that have a great evening. Thanks everybody.
This concludes Starbucks fourth quarter and fiscal year end 2021 conference call you may now disconnect.