Speaker 1: Bloomberg Audio Studios, podcasts, radio.
Speaker 2: News, Chipotle, and Starbucks, both of them raise their guidance
Speaker 2: after stronger than expected quarters thanks to trending, new menu
Speaker 2: items and revamp loyalty programs. All those stocks up across
Speaker 2: the board, but let's dive deeper into Starbucks. Romaine boss,
Speaker 2: a co host of The Clothes, is joining us this
Speaker 2: morning alongside the CEO of Starbucks, Brian Nickel fromin That's right.
Speaker 1: Brian Nickel joining us right now, fresh off of last
Speaker 1: night's earning, supports seven point nine percent comp growth. Brian,
Speaker 1: Obviously the street likes what they hear, but I do
Speaker 1: need to get a little bit more color. I say
Speaker 1: exactly where that is coming from? Transactions? Four point two percent?
Speaker 1: That's foot traffic, Brian. Is that just favorable comps? Are
Speaker 1: you truly getting more people into the store? Yeah, No,
Speaker 1: great to be here.
Speaker 3: And look, the reality is what's terrific to see is
Speaker 3: the growth is coming from more customers coming into Starbucks
Speaker 3: more often. And you know, that's just a foundational strength.
Speaker 3: And the good news is we're seeing it across all
Speaker 3: income groups and really all age groups. So just really
Speaker 3: terrific strength moving through our stores.
Speaker 1: With regards to the tickets as well, that was also
Speaker 1: up about three and a half percent in the most
Speaker 1: recent quarter. So it's a function of both foot traffic
Speaker 1: coming into the store but also people spending more. Are
Speaker 1: they buying more? Are these add ons what gets that
Speaker 1: ticket price up to that three and a half percent jump?
Speaker 3: Yeah, So what you're referring there is we're seeing people
Speaker 3: add more food, so a higher attachmate. And then what
Speaker 3: we're also seeing is people modifying more of their drinks
Speaker 3: with things like our cold foam adding an espresso shot.
Speaker 3: So it really is terrific to see people using our
Speaker 3: menu to get them the customized experience that they want
Speaker 3: out of their drink, and then also attaching what is
Speaker 3: really some terrific food to go along with their beverage.
Speaker 1: Do you have any concerns about maintaining this momentum? And
Speaker 1: that don't necessarily mean that from an operational perspective. We
Speaker 1: just got a GDP report for the second quarter backwards
Speaker 1: looking much lighter than what folks had been looking for.
Speaker 1: Consumer spending holding up right now. But you've referenced in
Speaker 1: the past that you had seen some strain at least
Speaker 1: amongst the lower income in lower income consumers. Are you
Speaker 1: concerned that some of that weakness might be spreading beyond
Speaker 1: just the lower income folks.
Speaker 3: You know, actually, we're seeing strength across all income groups
Speaker 3: at Starbucks. And you know, what we continue to see
Speaker 3: is when we give people a great experience, they come
Speaker 3: back more often, and when we do it consistently, they
Speaker 3: really reward us with their business. And so, you know,
Speaker 3: we've not seen the customer move back as it relates
Speaker 3: to Starbucks have been really resilient. We're very optimistic about
Speaker 3: we're headed. You know, we exited the quarter with really
Speaker 3: strong performance, and we're excited about how we're heading into
Speaker 3: our fourth quarter, and we're really optimistic about the plans
Speaker 3: we have for twenty twenty seven. So you know, look,
Speaker 3: we're just getting started. It's great to see the strength
Speaker 3: across all of these customer you know, demographics, and we're
Speaker 3: confident we're going to continue to have success with them.
Speaker 1: Well, let's talk about twenty twenty seven. Obviously, we've seen
Speaker 1: the revenue numbers at least I say, the sales numbers
Speaker 1: start to come up a little bit. There's still some
Speaker 1: concerns about whether we can see more meaningful profitability. How
Speaker 1: much of the lag between those two is tied to
Speaker 1: the revamp of the stores. I mean, you've done one
Speaker 1: thousand so far for this fiscal year. I think you're
Speaker 1: what still guiding towards fifteen hundred for the next fiscal year.
Speaker 1: There's a huge cost attached to that, right.
Speaker 3: Well, you know, look, I think the thing that we've
Speaker 3: done here is we were really smart about what we
Speaker 3: spent on these uplifts and the implications on the store.
Speaker 3: So you know, we can do these things for roughly
Speaker 3: one hundred and fifty thousand dollars. We do not close
Speaker 3: the store at all, so operations continue to perform. And
Speaker 3: then the experience that our partners have because now they've
Speaker 3: got a new, really great looking coffee house, and that
Speaker 3: what our customers have results in frankly, more transactions. So
Speaker 3: it's been a great program. We'll continue to push the
Speaker 3: program forward. We're going to accelerate into twenty twenty seven
Speaker 3: because we know when we create a great coffee house
Speaker 3: and we have that great partner Barista to customer experience,
Speaker 3: we're rewarded with more business. And you know, it's not
Speaker 3: a big investment, but it's a meaningful investment. And then
Speaker 3: it gets us great results.
Speaker 1: Is there any way you can share with me what
Speaker 1: the difference in com sales is for a revamp store
Speaker 1: relative to the stores that haven't been uplifted.
Speaker 3: You know, we haven't shared that publicly, but what I
Speaker 3: can tell you is we see a move in a
Speaker 3: positive directions that it relates to transactions, and because of
Speaker 3: what we're seeing, we are accelerating the program.
Speaker 1: I think the last time we talked with regards to transactions,
Speaker 1: you talked a lot about improving the instore experience by
Speaker 1: also improving the speed of which those orders get out
Speaker 1: the door, whether it's in the cafe or in the
Speaker 1: drive through. I know there was some color on the
Speaker 1: conference call about some of the time that you shaved
Speaker 1: off of that we're talking seconds here, but it seems
Speaker 1: like those seconds matter to you. How much progress have
Speaker 1: you made?
Speaker 3: Yeah, well, look, this is one where I'm really excited
Speaker 3: because we set out right from the go that we
Speaker 3: wanted to improve the speed that our customers experience and
Speaker 3: then do it consist and kind of behind that is
Speaker 3: really this drive towards more throughput, and we've seen just that.
Speaker 3: So we've got better through put. In the mornings, we
Speaker 3: also have better throughput in the afternoons and frankly, as
Speaker 3: a result, all day long, our transactions are up throughout
Speaker 3: the day and when you kind of pull that back, yes,
Speaker 3: customers are loving the experience. But our partners are doing
Speaker 3: a great job of being staffed as a team, deployed
Speaker 3: correctly and then consistently executing the green Apron service model,
Speaker 3: which then results in better speed at the drive through,
Speaker 3: better speed in the cafe, more on time and mobile
Speaker 3: order pickup, and frankly, pretty good speed in the delivery
Speaker 3: channel as well. So it is having the effect that
Speaker 3: we would want. We're in totality the Starbucks business now,
Speaker 3: I think is providing people the great experience that they
Speaker 3: want at the speed that people need based on the
Speaker 3: occasion where they're visiting us.
Speaker 1: Is there any conflict though, with getting that number down
Speaker 1: in terms of the time down and this idea of
Speaker 1: these add ons and other things that I would assume
Speaker 1: would complicate the process for the barista's just a bit. Yeah.
Speaker 3: Look, we're very intentional, So everything that we do we
Speaker 3: have an eye towards what is the implication on our
Speaker 3: ability for our customers to get the products the food
Speaker 3: that they want. In the speed terms that they desire.
Speaker 3: And we also have a really close eye to make
Speaker 3: sure that our partners are set up to be able
Speaker 3: to provide the customization the drink, you know, the craft,
Speaker 3: the way that they would want to do it themselves.
Speaker 3: And so you know, that is part of our develop
Speaker 3: development process, and that's part of the rigor that we
Speaker 3: go through to make sure before it gets to the
Speaker 3: store it's been vetted such that we know we can
Speaker 3: still deliver on the great experience at the speed that
Speaker 3: our customers expect.
Speaker 1: You've introduced a lot of new products. I know you
Speaker 1: even talked on the conference call about a s'mores drink.
Speaker 1: Not necessarily my bag, but I can understand why some
Speaker 1: folks might like it. Here. Have you tried it, Yeah,
Speaker 1: not yet. I have tried the one cream and it
Speaker 1: is good here. And look, I mean probably the Smores
Speaker 1: drink isn't targeted towards my demographic. I mean, you've clearly
Speaker 1: gone after the younger demographic with the gen Z, the
Speaker 1: pink drinks, the s'mores, et cetera. Here, but with these
Speaker 1: types of drinks, you know the complexity that that maybe
Speaker 1: adds to the process. But also this idea if these
Speaker 1: aren't going to be permanent menu items, just sort of
Speaker 1: limited time offers, do you run into sort of some
Speaker 1: issue in sort of how you forecast out com sales
Speaker 1: growth if you know, Smores might be gone and you
Speaker 1: know whatever a few weeks or whatever. Yeah.
Speaker 3: Look, I think the menu innovation that comes out as
Speaker 3: like limited time offers versus the menu innovation that ends
Speaker 3: up being permanent on our menu, they serve two different purposes.
Speaker 3: And yes, we're able to forecast this with accuracy. I mean,
Speaker 3: as a result, I think you saw in the release
Speaker 3: our supply chain we're ninety nine percent of the time
Speaker 3: in stock with the items that people want, and I
Speaker 3: think if you look at our beverages, it's almost close
Speaker 3: to one hundred percent. So we are able to forecast correctly,
Speaker 3: supply it correctly, and then most importantly, we build it
Speaker 3: in such a way that our partners are able to
Speaker 3: do it consistently and give people the experience that they want.
Speaker 3: You know, as you mentioned like the orange cream cold
Speaker 3: foam that's going on the Cold Brew. I mean, look,
Speaker 3: the good news is, yes it's orange cream, but it's
Speaker 3: exactly the same way that we always do Cold brew
Speaker 3: it's exactly the same way that we always do cold foams.
Speaker 3: So the consistency, the standardization of the builds so that
Speaker 3: people can get to the quality experience that they want
Speaker 3: at the speed that we know they desire is really
Speaker 3: important to the work that we do on this.
Speaker 1: What's the best selling product out there right now?
Speaker 3: I mean, look, we still are selling you know right now,
Speaker 3: are ice shaking. Espresso is a huge popular drink. Our
Speaker 3: Americano is a very popular drink. Obviously, the ice caramel
Speaker 3: machiato is one of our top drinks. Macho Lattes is
Speaker 3: a top drink. So the good news is it's not
Speaker 3: just one item. We actually have the breath that I
Speaker 3: think really resonates with people's palates.
Speaker 1: I do have to ask you, Brian, about a report
Speaker 1: that Bloomberg had about three weeks ago, citing internal documents
Speaker 1: that you were actually looking to replace some of your
Speaker 1: in house software tools, particularly those made by Microsoft and IBM.
Speaker 1: Your chief technology offers are talked a lot about how
Speaker 1: you can maybe get some of those software costs down.
Speaker 1: Any credence to that report.
Speaker 3: Yeah, Look, I think you would expect us to be
Speaker 3: looking with a critical eye towards any product that we
Speaker 3: use and whether or not we're getting the best cost proposition,
Speaker 3: and also are we getting the best outcomes from that proposition.
Speaker 3: And that's basically what we're doing here is we've got
Speaker 3: some great partners, but at the same token, we need
Speaker 3: to make sure that we are getting the best output
Speaker 3: for the best pricing. And I think you know, as
Speaker 3: probably everybody's doing with the advent of AI, it gives
Speaker 3: you an opportunity to rethink what we're doing and how
Speaker 3: we're doing it. And you know, that's literally the exercise
Speaker 3: that we're going through. And I think you would expect
Speaker 3: that from all organizations to have the cost discipline tied
Speaker 3: to making sure that you're getting the right outcomes that
Speaker 3: you want.
Speaker 1: Well, that cost discipline is obviously also increased the amount
Speaker 1: of cash you have on hand. At the same time
Speaker 1: your debt obligations are down. Where's that cash going to go?
Speaker 1: Is that next dollar going to go to buybacks? Is
Speaker 1: it going to go acquisitions? Is it just going to
Speaker 1: go back into the stores? You know.
Speaker 3: So the good news is for us, as the business
Speaker 3: continues to recover, you know, the balance sheet gets stronger
Speaker 3: and stronger. It gives us terrific opportunities to invest in growth. Obviously,
Speaker 3: some of that growth is going to be the store
Speaker 3: remodels and then obviously building news stores, and then we'll
Speaker 3: look around to figure out what is the right next
Speaker 3: growth vehicle for us. You know, buybacks may be part
Speaker 3: of it. Obviously, we've got to divotend that you know
Speaker 3: has always been there. So we're always thinking through what
Speaker 3: is the best way to deploy that cash so that
Speaker 3: we get growth in the business and get a great
Speaker 3: return for our shareholders and all of our partners.
Speaker 1: Hey, Brian, appreciate it, but I need you to do
Speaker 1: one last thing for me and settle a debate that
Speaker 1: my niece wanted me to ask you. When officially does
Speaker 1: pumpkin spice season start?
Speaker 3: Sure, it's coming, get ready. We're not too far away,
Speaker 3: so I'm anxious for it as well.
Speaker 1: All Right, Brian, really appreciate you taking time for us.
Speaker 1: Brian nicklelare see over at Starbucks.