WEBVTT - Starbucks CEO Brian Niccol Talks Strong Sales, Earnings 0:00:02.520 --> 0:00:06.479 Bloomberg Audio Studios, podcasts, radio. 0:00:06.680 --> 0:00:11.280 News, Chipotle, and Starbucks, both of them raise their guidance 0:00:11.480 --> 0:00:15.240 after stronger than expected quarters thanks to trending, new menu 0:00:15.280 --> 0:00:18.840 items and revamp loyalty programs. All those stocks up across 0:00:18.880 --> 0:00:21.799 the board, but let's dive deeper into Starbucks. Romaine boss, 0:00:21.840 --> 0:00:24.040 a co host of The Clothes, is joining us this 0:00:24.120 --> 0:00:27.640 morning alongside the CEO of Starbucks, Brian Nickel fromin That's right. 0:00:27.680 --> 0:00:30.040 Brian Nickel joining us right now, fresh off of last 0:00:30.120 --> 0:00:33.360 night's earning, supports seven point nine percent comp growth. Brian, 0:00:33.479 --> 0:00:35.920 Obviously the street likes what they hear, but I do 0:00:36.000 --> 0:00:37.599 need to get a little bit more color. I say 0:00:37.680 --> 0:00:41.479 exactly where that is coming from? Transactions? Four point two percent? 0:00:41.560 --> 0:00:44.440 That's foot traffic, Brian. Is that just favorable comps? Are 0:00:44.440 --> 0:00:47.839 you truly getting more people into the store? Yeah, No, 0:00:48.680 --> 0:00:49.400 great to be here. 0:00:49.440 --> 0:00:52.559 And look, the reality is what's terrific to see is 0:00:52.880 --> 0:00:55.600 the growth is coming from more customers coming into Starbucks 0:00:55.600 --> 0:00:59.400 more often. And you know, that's just a foundational strength. 0:00:59.560 --> 0:01:02.000 And the good news is we're seeing it across all 0:01:02.040 --> 0:01:05.560 income groups and really all age groups. So just really 0:01:05.680 --> 0:01:08.240 terrific strength moving through our stores. 0:01:08.640 --> 0:01:11.000 With regards to the tickets as well, that was also 0:01:11.160 --> 0:01:13.039 up about three and a half percent in the most 0:01:13.080 --> 0:01:16.280 recent quarter. So it's a function of both foot traffic 0:01:16.280 --> 0:01:19.320 coming into the store but also people spending more. Are 0:01:19.360 --> 0:01:21.840 they buying more? Are these add ons what gets that 0:01:21.880 --> 0:01:24.080 ticket price up to that three and a half percent jump? 0:01:24.480 --> 0:01:27.720 Yeah, So what you're referring there is we're seeing people 0:01:27.760 --> 0:01:30.840 add more food, so a higher attachmate. And then what 0:01:30.840 --> 0:01:33.440 we're also seeing is people modifying more of their drinks 0:01:33.480 --> 0:01:37.000 with things like our cold foam adding an espresso shot. 0:01:37.040 --> 0:01:40.160 So it really is terrific to see people using our 0:01:40.200 --> 0:01:42.959 menu to get them the customized experience that they want 0:01:43.280 --> 0:01:46.000 out of their drink, and then also attaching what is 0:01:46.200 --> 0:01:49.120 really some terrific food to go along with their beverage. 0:01:49.400 --> 0:01:52.720 Do you have any concerns about maintaining this momentum? And 0:01:52.720 --> 0:01:55.560 that don't necessarily mean that from an operational perspective. We 0:01:55.680 --> 0:01:59.160 just got a GDP report for the second quarter backwards 0:01:59.160 --> 0:02:01.800 looking much lighter than what folks had been looking for. 0:02:01.920 --> 0:02:04.440 Consumer spending holding up right now. But you've referenced in 0:02:04.520 --> 0:02:06.800 the past that you had seen some strain at least 0:02:06.840 --> 0:02:10.400 amongst the lower income in lower income consumers. Are you 0:02:10.480 --> 0:02:13.480 concerned that some of that weakness might be spreading beyond 0:02:13.560 --> 0:02:14.960 just the lower income folks. 0:02:15.560 --> 0:02:18.520 You know, actually, we're seeing strength across all income groups 0:02:18.560 --> 0:02:21.400 at Starbucks. And you know, what we continue to see 0:02:21.600 --> 0:02:25.280 is when we give people a great experience, they come 0:02:25.320 --> 0:02:28.760 back more often, and when we do it consistently, they 0:02:28.840 --> 0:02:31.320 really reward us with their business. And so, you know, 0:02:31.520 --> 0:02:34.720 we've not seen the customer move back as it relates 0:02:34.760 --> 0:02:38.040 to Starbucks have been really resilient. We're very optimistic about 0:02:38.040 --> 0:02:41.280 we're headed. You know, we exited the quarter with really 0:02:41.320 --> 0:02:45.000 strong performance, and we're excited about how we're heading into 0:02:45.000 --> 0:02:47.640 our fourth quarter, and we're really optimistic about the plans 0:02:47.639 --> 0:02:50.919 we have for twenty twenty seven. So you know, look, 0:02:50.919 --> 0:02:53.320 we're just getting started. It's great to see the strength 0:02:53.440 --> 0:02:58.440 across all of these customer you know, demographics, and we're 0:02:58.440 --> 0:03:00.359 confident we're going to continue to have success with them. 0:03:00.440 --> 0:03:03.560 Well, let's talk about twenty twenty seven. Obviously, we've seen 0:03:03.560 --> 0:03:06.040 the revenue numbers at least I say, the sales numbers 0:03:06.080 --> 0:03:07.960 start to come up a little bit. There's still some 0:03:08.000 --> 0:03:11.799 concerns about whether we can see more meaningful profitability. How 0:03:11.880 --> 0:03:14.720 much of the lag between those two is tied to 0:03:14.760 --> 0:03:16.720 the revamp of the stores. I mean, you've done one 0:03:16.760 --> 0:03:19.799 thousand so far for this fiscal year. I think you're 0:03:19.919 --> 0:03:23.040 what still guiding towards fifteen hundred for the next fiscal year. 0:03:23.080 --> 0:03:25.040 There's a huge cost attached to that, right. 0:03:25.720 --> 0:03:27.639 Well, you know, look, I think the thing that we've 0:03:27.639 --> 0:03:29.760 done here is we were really smart about what we 0:03:29.880 --> 0:03:32.560 spent on these uplifts and the implications on the store. 0:03:32.639 --> 0:03:34.280 So you know, we can do these things for roughly 0:03:34.320 --> 0:03:36.520 one hundred and fifty thousand dollars. We do not close 0:03:36.560 --> 0:03:40.320 the store at all, so operations continue to perform. And 0:03:40.360 --> 0:03:43.240 then the experience that our partners have because now they've 0:03:43.280 --> 0:03:45.880 got a new, really great looking coffee house, and that 0:03:45.960 --> 0:03:49.400 what our customers have results in frankly, more transactions. So 0:03:49.840 --> 0:03:52.320 it's been a great program. We'll continue to push the 0:03:52.360 --> 0:03:55.360 program forward. We're going to accelerate into twenty twenty seven 0:03:55.400 --> 0:03:57.800 because we know when we create a great coffee house 0:03:58.040 --> 0:04:01.760 and we have that great partner Barista to customer experience, 0:04:02.320 --> 0:04:05.840 we're rewarded with more business. And you know, it's not 0:04:05.960 --> 0:04:08.680 a big investment, but it's a meaningful investment. And then 0:04:08.680 --> 0:04:10.240 it gets us great results. 0:04:10.520 --> 0:04:12.400 Is there any way you can share with me what 0:04:12.440 --> 0:04:15.680 the difference in com sales is for a revamp store 0:04:15.760 --> 0:04:17.720 relative to the stores that haven't been uplifted. 0:04:18.440 --> 0:04:20.520 You know, we haven't shared that publicly, but what I 0:04:20.560 --> 0:04:22.360 can tell you is we see a move in a 0:04:22.400 --> 0:04:25.159 positive directions that it relates to transactions, and because of 0:04:25.160 --> 0:04:27.760 what we're seeing, we are accelerating the program. 0:04:27.839 --> 0:04:30.360 I think the last time we talked with regards to transactions, 0:04:30.400 --> 0:04:33.320 you talked a lot about improving the instore experience by 0:04:33.360 --> 0:04:36.320 also improving the speed of which those orders get out 0:04:36.360 --> 0:04:38.640 the door, whether it's in the cafe or in the 0:04:38.760 --> 0:04:40.719 drive through. I know there was some color on the 0:04:40.720 --> 0:04:43.479 conference call about some of the time that you shaved 0:04:43.480 --> 0:04:46.159 off of that we're talking seconds here, but it seems 0:04:46.160 --> 0:04:48.279 like those seconds matter to you. How much progress have 0:04:48.320 --> 0:04:48.920 you made? 0:04:49.240 --> 0:04:51.400 Yeah, well, look, this is one where I'm really excited 0:04:51.440 --> 0:04:54.359 because we set out right from the go that we 0:04:54.400 --> 0:04:59.080 wanted to improve the speed that our customers experience and 0:04:59.080 --> 0:05:01.800 then do it consist and kind of behind that is 0:05:01.800 --> 0:05:04.920 really this drive towards more throughput, and we've seen just that. 0:05:05.040 --> 0:05:07.560 So we've got better through put. In the mornings, we 0:05:07.560 --> 0:05:09.840 also have better throughput in the afternoons and frankly, as 0:05:09.839 --> 0:05:12.360 a result, all day long, our transactions are up throughout 0:05:12.400 --> 0:05:14.800 the day and when you kind of pull that back, yes, 0:05:14.880 --> 0:05:17.360 customers are loving the experience. But our partners are doing 0:05:17.400 --> 0:05:20.440 a great job of being staffed as a team, deployed 0:05:20.480 --> 0:05:24.880 correctly and then consistently executing the green Apron service model, 0:05:24.880 --> 0:05:27.479 which then results in better speed at the drive through, 0:05:27.720 --> 0:05:30.279 better speed in the cafe, more on time and mobile 0:05:30.360 --> 0:05:33.320 order pickup, and frankly, pretty good speed in the delivery 0:05:33.400 --> 0:05:35.760 channel as well. So it is having the effect that 0:05:35.800 --> 0:05:39.440 we would want. We're in totality the Starbucks business now, 0:05:39.520 --> 0:05:42.080 I think is providing people the great experience that they 0:05:42.080 --> 0:05:44.479 want at the speed that people need based on the 0:05:44.520 --> 0:05:45.960 occasion where they're visiting us. 0:05:46.160 --> 0:05:48.599 Is there any conflict though, with getting that number down 0:05:48.600 --> 0:05:50.920 in terms of the time down and this idea of 0:05:50.960 --> 0:05:53.760 these add ons and other things that I would assume 0:05:53.760 --> 0:05:57.440 would complicate the process for the barista's just a bit. Yeah. 0:05:57.440 --> 0:06:00.520 Look, we're very intentional, So everything that we do we 0:06:00.600 --> 0:06:02.760 have an eye towards what is the implication on our 0:06:02.800 --> 0:06:06.800 ability for our customers to get the products the food 0:06:07.640 --> 0:06:10.240 that they want. In the speed terms that they desire. 0:06:10.360 --> 0:06:12.480 And we also have a really close eye to make 0:06:12.480 --> 0:06:14.640 sure that our partners are set up to be able 0:06:14.720 --> 0:06:18.320 to provide the customization the drink, you know, the craft, 0:06:18.600 --> 0:06:20.680 the way that they would want to do it themselves. 0:06:20.680 --> 0:06:23.680 And so you know, that is part of our develop 0:06:23.800 --> 0:06:26.360 development process, and that's part of the rigor that we 0:06:26.400 --> 0:06:28.000 go through to make sure before it gets to the 0:06:28.040 --> 0:06:30.520 store it's been vetted such that we know we can 0:06:30.560 --> 0:06:33.279 still deliver on the great experience at the speed that 0:06:33.320 --> 0:06:34.359 our customers expect. 0:06:34.440 --> 0:06:36.720 You've introduced a lot of new products. I know you 0:06:36.760 --> 0:06:39.520 even talked on the conference call about a s'mores drink. 0:06:39.640 --> 0:06:42.039 Not necessarily my bag, but I can understand why some 0:06:42.080 --> 0:06:44.719 folks might like it. Here. Have you tried it, Yeah, 0:06:44.839 --> 0:06:46.520 not yet. I have tried the one cream and it 0:06:46.600 --> 0:06:49.159 is good here. And look, I mean probably the Smores 0:06:49.240 --> 0:06:52.120 drink isn't targeted towards my demographic. I mean, you've clearly 0:06:52.160 --> 0:06:54.599 gone after the younger demographic with the gen Z, the 0:06:54.640 --> 0:06:57.680 pink drinks, the s'mores, et cetera. Here, but with these 0:06:57.720 --> 0:07:01.200 types of drinks, you know the complexity that that maybe 0:07:01.240 --> 0:07:04.000 adds to the process. But also this idea if these 0:07:04.040 --> 0:07:06.640 aren't going to be permanent menu items, just sort of 0:07:06.680 --> 0:07:09.240 limited time offers, do you run into sort of some 0:07:09.440 --> 0:07:12.720 issue in sort of how you forecast out com sales 0:07:12.760 --> 0:07:15.480 growth if you know, Smores might be gone and you 0:07:15.520 --> 0:07:18.280 know whatever a few weeks or whatever. Yeah. 0:07:18.280 --> 0:07:21.520 Look, I think the menu innovation that comes out as 0:07:21.600 --> 0:07:24.760 like limited time offers versus the menu innovation that ends 0:07:24.840 --> 0:07:28.040 up being permanent on our menu, they serve two different purposes. 0:07:28.200 --> 0:07:31.160 And yes, we're able to forecast this with accuracy. I mean, 0:07:31.200 --> 0:07:33.200 as a result, I think you saw in the release 0:07:33.280 --> 0:07:36.160 our supply chain we're ninety nine percent of the time 0:07:36.200 --> 0:07:38.640 in stock with the items that people want, and I 0:07:38.680 --> 0:07:41.000 think if you look at our beverages, it's almost close 0:07:41.040 --> 0:07:44.520 to one hundred percent. So we are able to forecast correctly, 0:07:44.560 --> 0:07:48.000 supply it correctly, and then most importantly, we build it 0:07:48.040 --> 0:07:50.040 in such a way that our partners are able to 0:07:50.080 --> 0:07:53.200 do it consistently and give people the experience that they want. 0:07:53.920 --> 0:07:56.120 You know, as you mentioned like the orange cream cold 0:07:56.160 --> 0:07:59.679 foam that's going on the Cold Brew. I mean, look, 0:07:59.760 --> 0:08:02.360 the good news is, yes it's orange cream, but it's 0:08:02.400 --> 0:08:04.280 exactly the same way that we always do Cold brew 0:08:04.320 --> 0:08:06.360 it's exactly the same way that we always do cold foams. 0:08:06.400 --> 0:08:10.560 So the consistency, the standardization of the builds so that 0:08:10.600 --> 0:08:12.800 people can get to the quality experience that they want 0:08:13.200 --> 0:08:15.680 at the speed that we know they desire is really 0:08:15.680 --> 0:08:17.920 important to the work that we do on this. 0:08:18.280 --> 0:08:20.760 What's the best selling product out there right now? 0:08:22.080 --> 0:08:25.640 I mean, look, we still are selling you know right now, 0:08:25.880 --> 0:08:29.000 are ice shaking. Espresso is a huge popular drink. Our 0:08:29.520 --> 0:08:33.400 Americano is a very popular drink. Obviously, the ice caramel 0:08:33.440 --> 0:08:36.760 machiato is one of our top drinks. Macho Lattes is 0:08:36.760 --> 0:08:39.240 a top drink. So the good news is it's not 0:08:39.320 --> 0:08:42.800 just one item. We actually have the breath that I 0:08:42.840 --> 0:08:44.760 think really resonates with people's palates. 0:08:45.080 --> 0:08:47.480 I do have to ask you, Brian, about a report 0:08:47.720 --> 0:08:51.360 that Bloomberg had about three weeks ago, citing internal documents 0:08:51.880 --> 0:08:54.080 that you were actually looking to replace some of your 0:08:54.280 --> 0:08:58.520 in house software tools, particularly those made by Microsoft and IBM. 0:08:59.200 --> 0:09:02.400 Your chief technology offers are talked a lot about how 0:09:02.640 --> 0:09:05.040 you can maybe get some of those software costs down. 0:09:05.679 --> 0:09:07.199 Any credence to that report. 0:09:07.920 --> 0:09:10.080 Yeah, Look, I think you would expect us to be 0:09:10.920 --> 0:09:14.160 looking with a critical eye towards any product that we 0:09:14.280 --> 0:09:18.600 use and whether or not we're getting the best cost proposition, 0:09:18.679 --> 0:09:21.480 and also are we getting the best outcomes from that proposition. 0:09:21.520 --> 0:09:24.840 And that's basically what we're doing here is we've got 0:09:24.880 --> 0:09:27.440 some great partners, but at the same token, we need 0:09:27.480 --> 0:09:29.520 to make sure that we are getting the best output 0:09:29.520 --> 0:09:32.160 for the best pricing. And I think you know, as 0:09:32.200 --> 0:09:35.560 probably everybody's doing with the advent of AI, it gives 0:09:35.559 --> 0:09:38.079 you an opportunity to rethink what we're doing and how 0:09:38.080 --> 0:09:41.160 we're doing it. And you know, that's literally the exercise 0:09:41.160 --> 0:09:42.760 that we're going through. And I think you would expect 0:09:42.760 --> 0:09:46.440 that from all organizations to have the cost discipline tied 0:09:46.480 --> 0:09:48.640 to making sure that you're getting the right outcomes that 0:09:48.679 --> 0:09:49.040 you want. 0:09:49.240 --> 0:09:52.079 Well, that cost discipline is obviously also increased the amount 0:09:52.080 --> 0:09:54.120 of cash you have on hand. At the same time 0:09:54.120 --> 0:09:57.160 your debt obligations are down. Where's that cash going to go? 0:09:57.280 --> 0:09:59.320 Is that next dollar going to go to buybacks? Is 0:09:59.320 --> 0:10:01.440 it going to go acquisitions? Is it just going to 0:10:01.440 --> 0:10:03.480 go back into the stores? You know. 0:10:04.200 --> 0:10:06.760 So the good news is for us, as the business 0:10:06.760 --> 0:10:10.400 continues to recover, you know, the balance sheet gets stronger 0:10:10.440 --> 0:10:14.679 and stronger. It gives us terrific opportunities to invest in growth. Obviously, 0:10:14.720 --> 0:10:16.560 some of that growth is going to be the store 0:10:16.559 --> 0:10:19.880 remodels and then obviously building news stores, and then we'll 0:10:19.960 --> 0:10:22.079 look around to figure out what is the right next 0:10:22.160 --> 0:10:25.439 growth vehicle for us. You know, buybacks may be part 0:10:25.480 --> 0:10:27.600 of it. Obviously, we've got to divotend that you know 0:10:27.720 --> 0:10:30.600 has always been there. So we're always thinking through what 0:10:30.679 --> 0:10:32.400 is the best way to deploy that cash so that 0:10:32.440 --> 0:10:34.640 we get growth in the business and get a great 0:10:34.640 --> 0:10:37.680 return for our shareholders and all of our partners. 0:10:37.840 --> 0:10:39.880 Hey, Brian, appreciate it, but I need you to do 0:10:39.960 --> 0:10:41.960 one last thing for me and settle a debate that 0:10:42.000 --> 0:10:45.680 my niece wanted me to ask you. When officially does 0:10:45.720 --> 0:10:47.040 pumpkin spice season start? 0:10:47.200 --> 0:10:51.079 Sure, it's coming, get ready. We're not too far away, 0:10:51.160 --> 0:10:53.440 so I'm anxious for it as well. 0:10:53.800 --> 0:10:56.080 All Right, Brian, really appreciate you taking time for us. 0:10:56.080 --> 0:10:58.319 Brian nicklelare see over at Starbucks.