00:03:15 · Romaine Bostick, Brian Niccol
[00:03:15] S0: With regards to expanding the footprint, I mean, you still had something like 250 store closures in North America, yet now you're guiding towards an opening of 300. So what's changed now? Is that just sort of getting rid of the weaker stores or have the economics of store openings changed that gives you confidence on opening 300? Yeah. [00:03:34] S1: Yeah, look, we changed the strategy on what we wanted to build and where we wanted to build it in the U.S. And so we had to reset the pipeline. And then we also had to do some, you know, I think cleaning up of our estate. And that's exactly what we've done. Now I think we're in a great situation to continue the growth going forward. You're going to see us in fiscal year 28, you know, open roughly 300 new stores. That'll take us on our journey to hopefully 5,000 and more. And then when you talk about outside the United States, Romaine, it's pretty impressive, right? We've got 22,000 stores outside the United States. There's no reason why we can't double that to 40,000 plus just outside the United States. So, you know, there is just so much opportunity for this Starbucks brand around the world because the Starbucks promise is exactly the experience that customers want. Great coffee, great customization through great craft, and then obviously in a great place where they can build community.
00:03:34 · Brian Niccol, Romaine Bostick
[00:03:34] S1: Yeah, look, we changed the strategy on what we wanted to build and where we wanted to build it in the U.S. And so we had to reset the pipeline. And then we also had to do some, you know, I think cleaning up of our estate. And that's exactly what we've done. Now I think we're in a great situation to continue the growth going forward. You're going to see us in fiscal year 28, you know, open roughly 300 new stores. That'll take us on our journey to hopefully 5,000 and more. And then when you talk about outside the United States, Romaine, it's pretty impressive, right? We've got 22,000 stores outside the United States. There's no reason why we can't double that to 40,000 plus just outside the United States. So, you know, there is just so much opportunity for this Starbucks brand around the world because the Starbucks promise is exactly the experience that customers want. Great coffee, great customization through great craft, and then obviously in a great place where they can build community. [00:04:29] S0: Are the economics of the international business going to be enough to satisfy investors? I mean, your net new store growth is heavily weighted on the international side, yet we're still seeing softness in sales there. And some of the partnerships that you have struck, particularly in China, obviously are a little bit less impactful on both revenue and profitability.
00:04:29 · Romaine Bostick, Brian Niccol
[00:04:29] S0: Are the economics of the international business going to be enough to satisfy investors? I mean, your net new store growth is heavily weighted on the international side, yet we're still seeing softness in sales there. And some of the partnerships that you have struck, particularly in China, obviously are a little bit less impactful on both revenue and profitability. [00:04:48] S1: Yeah, look, I think the good news is it's going to be a capital light partnership as you look around the world. So what obviously happens in that is we get a really great return on the Starbucks business. And that's exactly what you saw even in this quarter. If you exclude China, the fact that we sold 60 percent of the business, our international business, the revenue grew 5 percent. Our operating income grew. And, you know, all the metrics you would want to see going up were going up. And the good news is our partnership in China with Boyu is off to a terrific start. I'm really optimistic about where we're going to get to in fiscal year 27 and well beyond. So I think it's a tremendous opportunity. When you think about growth and you think about a consumer company at our scale, I think we're category-defining. You are.
00:04:48 · Brian Niccol, Romaine Bostick
[00:04:48] S1: Yeah, look, I think the good news is it's going to be a capital light partnership as you look around the world. So what obviously happens in that is we get a really great return on the Starbucks business. And that's exactly what you saw even in this quarter. If you exclude China, the fact that we sold 60 percent of the business, our international business, the revenue grew 5 percent. Our operating income grew. And, you know, all the metrics you would want to see going up were going up. And the good news is our partnership in China with Boyu is off to a terrific start. I'm really optimistic about where we're going to get to in fiscal year 27 and well beyond. So I think it's a tremendous opportunity. When you think about growth and you think about a consumer company at our scale, I think we're category-defining. You are. [00:05:35] S0: Well, let's talk about some of the subcategories there, because, I mean, you've obviously made a lot of changes to the menu. I saw Kathy Smith was talking about how matcha has now become a billion dollar business. We've talked a lot about refreshers and merchandising and everything else. Not always as much as about coffee, Brian. And I am curious, do you still view Starbucks as a coffee led company?
00:05:35 · Romaine Bostick, Brian Niccol
[00:05:35] S0: Well, let's talk about some of the subcategories there, because, I mean, you've obviously made a lot of changes to the menu. I saw Kathy Smith was talking about how matcha has now become a billion dollar business. We've talked a lot about refreshers and merchandising and everything else. Not always as much as about coffee, Brian. And I am curious, do you still view Starbucks as a coffee led company? [00:05:57] S1: Yeah, look, our biggest category that grew this last year was espresso, both in hot and cold, primarily driven by cold. But yeah, what Kathy was talking about is we've had tremendous growth in these other aspects, right? And remember, Starbucks is the coffee company that originally had a tea business as well. So it makes total sense for us to be winning with matcha, you know, in cold matcha, like iced matcha lattes. That is what's driving that billion-dollar business. And then we've got a great platform called Cold Foam that just makes it really delicious. I personally love an iced matcha latte with a strawberry cold foam. It's a great afternoon drink. And I think that's what you're hearing our customers say. [00:06:37] S0: Well, I am curious, though, too, but as you kind of move into this next phase of growth, Brian, I mean, there's also been a focus, I know, on improving the food menu. Has there been discussions about the idea that maybe Starbucks could pursue a multi-brand model for Starbucks Corp.
00:06:37 · Romaine Bostick, Brian Niccol
[00:06:37] S0: Well, I am curious, though, too, but as you kind of move into this next phase of growth, Brian, I mean, there's also been a focus, I know, on improving the food menu. Has there been discussions about the idea that maybe Starbucks could pursue a multi-brand model for Starbucks Corp. [00:06:56] S1: Yeah, look, I think it's one of those possibilities. The good news is Starbucks is such a strong business and our scale presents an opportunity to go beyond just being a one brand company. That's not our focus right now, but is it an opportunity down the road? I would never say never. But look, I think when you've got a strong business like Starbucks, I think you put other businesses into a portfolio that could leverage the strength of Starbucks. That could be an interesting proposition down the road. [00:07:27] S0: How far have any talks gone with any other potential parties this year? [00:07:33] S1: You know, that has not been our focus. Our focus is first getting the turnaround and getting Starbucks into a growth situation. And I think that's what we demonstrated, you know, this quarter. And I think you'll continue to see us demonstrate in this fiscal year. [00:07:45] S0: Would you be open to pursuing M & A as a way to meet some of your growth targets beyond organically?