Starbucks Corporation (SBUX)

“Putting this all together, we are raising our EPS guidance at both ends of the range to between $2.55 and $2.65.”

“We're also raising our full fiscal year 2026 consolidated margin guidance to greater than 11%.”

“That's why we're accelerating our pace with the intention of completing at least 1,500 uplifts by fiscal year-end 2026 and accelerating further in fiscal 2027.”

“Finally, from a unit count perspective, our expectation for approximately 600 to 650 net new coffee house openings in fiscal 2026 remains unchanged.”

“For tax, we assume our effective tax rate in Q4 returns to a more normal level in the mid-20s.”

“We continue to expect our fiscal 2026 consolidated G&A dollars to run below fiscal 2023 levels.”

“In coffee, we expect coffee price pressures to continue easing in Q4 and become largely immaterial to the year-over-year margin comparisons.”

“We expect the same fundamental drivers that supported margin expansion in Q3 to continue in Q4.”

“We expect full fiscal year 2026 consolidated net revenues to be flat to slightly higher year-over-year as we continue to account for the impact of our new China structure.”

“This implies full fiscal year 2026 U.S. comp growth of a little more than 6% and global comp growth nearing 6%.”

“With 1 quarter left in the year, we expect our fourth quarter comp growth in the U.S. to be 6.5% or better.”

“It is still early, but we remain confident in the joint venture's ability to reinvigorate sustainable growth in China and to reach up to 20,000 coffee houses over time.”

“We remain on track with our $2 billion cost savings plan.”

“And in North America, while overall performance has strengthened, we are gaining deeper visibility into some underperforming coffee houses, which could result in some closures.”

“Meaningful step-up in '27, and we'll see how it goes from there.”

“So we're building the capability in order to do more than we did this year, and then we'll see how we scale that up because I also don't want to go fast and be sloppy.”

“As the joint venture moves beyond this transitional period and scales, we expect our economics to build over time.”

“While net new company-operated unit growth in North America may remain modest through fiscal 2027, we expect international to be a meaningful contributor to unit growth.”

“In technology, fiscal 2027 will be an important modernization year with new inventory ordering, staffing and scheduling and point-of-sale systems to improve execution and make our coffee houses easier to run.”

“Putting this all together, we are raising our EPS guidance at both ends of the range to between $2.25 and $2.45.”

“and earnings per share to $2.25 to $2.45.”

“Positive comp trends have continued through April, and this gives us the confidence to take up our fiscal 2026 guidance for global comp growth to 5% or better and earnings per share to $2.25 to $2.45.”

“As Brian said, we'll annualize Green Apron Service in August. We'll start -- it started rolling out, remember, in a couple of like 2-week waves in August. And so we're about the same level each quarter until then. And then obviously, it will come down quite a bit from there.”

“So the back half, we should see better on both of those.”

“We are seeing first half of this year continued coffee elevation, price elevation year-over-year. It's almost not quite, but I think it's almost $1 a pound year-over-year change. And then the implications of tariffs as they run through our inventory, obviously, both of those we expect to abate toward the back end of the year.”

“We also continue to assume 150 to 175 net new U.S. company-operated coffeehouses this year, and we will continue to assess our existing portfolio as we rebuild our development pipeline.”

“We expect International to accelerate its growth over the next 2 quarters to achieve 450 to 500 net new coffeehouses in fiscal 2026, of which China still comprises close to half.”

“Finally, from a unit count perspective, we still expect to add approximately 600 to 650 net new coffeehouses this fiscal year.”

“China's transition to a JV structure is now expected to be relatively EPS-neutral this fiscal year.”

“We continue to expect our consolidated G&A dollars to run below fiscal 2023 levels even after incorporating greater performance-based compensation related to better-than-expected financials.”

“Third, our China JV structure is expected to be margin accretive with roughly half of its revenues flowing to operating income.”

“Second, as I mentioned earlier, we expect coffee and tariff pressures to start easing as we move into the back half of the fiscal year.”

“First, we expect sales leverage to build over the next 2 quarters as we execute with discipline and advance our cost savings initiatives.”

“We continue to expect slight year-over-year growth in our fiscal 2026 consolidated operating margins driven by the net effect of a number of factors.”

“we now expect our consolidated fiscal 2026 net revenues to be roughly flat year-over-year.”

“But as we look to the rest of the fiscal year, we're well positioned together with our international licensee partners to return to net unit growth.”

“While market dynamics can change, we expect these tariff and coffee pressures to moderate in the back half of fiscal 2026, especially given recent trends in coffee prices.”

“We're accelerating this work over the next 2 quarters and expect to have more than 1,000 uplifts completed in our top 20 markets by fiscal year-end.”

“We remain on track with our $2 billion cost savings plan. These are gross savings, which we expect to realize through fiscal 2028, and balanced across product and distribution costs, OpEx and G&A.”

“On the EPS guide. So what would you have to believe, as you said, we're trying to be prudent given that we still have the macro backdrop that we do. But what would you have to believe? Well, first of all, we start with top line. So we said 5% plus, it would need to lean on the plus.”

“I would say we're really not changing our FY '28 targets at this time.”

“You should expect it to come through in '27 and into '28 as well.”

“And that's going to ramp up to well over 1,000 stores by the end of this year. And then we've got ambitious goals to get that across 8,000-plus stores in very short order.”

“with plans to expand Starbucks footprint from over 1,000 county-level cities today to more than 1,500 in the next 3 years.”

“why I'm confident we're on the right track to deliver improved growth in fiscal 2026 and beyond.”

“the tariff in coffee, we do expect to abate in Q3 and Q4.”

“I obviously envision that earnings will continue to pick up as we maintain the top line momentum that we have.”

“the thing that gets us to the higher end is maintaining the performance on comp.”

“Collectively, we expect the transaction to have a $0.02 to $0.03 dilutive effect relative to our current EPS guidance.”

“if we assumed a joint venture structure for 2026, we expect slightly lower consolidated revenues and comps, partially offset by slightly better consolidated operating margins relative to our original guidance.”

“Our EPS guidance of $2.15 to $2.40 reflects our measured approach investing strategically in the first half to establish momentum then building on our work for growth in the second half.”

“we expect fiscal 2026 consolidated G&A dollars to run below fiscal 2023 levels”

“third, while market dynamics can change, we continue to expect coffee prices and tariff pressures to peak in Q2 and find some relief in the back half of the fiscal year.”

“Second, we expect sales leverage builds as we continue to refine and our Back to Starbucks initiatives and improve our supply chain.”

“First, we will anniversary our Green Apron service investments in Q4.”

“We expect consolidated operating margins to grow slightly year over year, driven by improvements in the back half of the year.”

“We expect our consolidated net revenues to grow at a similar rate to global comp growth for the full fiscal 2026, as our portfolio repositioning at the end of fiscal 2025 offsets our new store openings.”

“This includes 150 to 175 net new U.S. company-operated coffee houses, a slight decrease in North America licensed coffee houses, and 450 to 500 net new international coffee houses, of which China comprises close to half.”

“In fiscal 2026, we expect approximately 600,000 to 650 net new coffee houses as we work to rebuild our development pipeline.”

“For fiscal 2026, we expect 3% or better global comp sales growth, led by 3% or better comp sales in the U.S. as well.”

“As our fiscal year progresses, we are expecting these pressures will begin to abate.”

“plans to surpass 1,000 coffee houses in Mexico this year.”

“We've got a clear plan in place to basically track down about $2 billion of cost.”

“on an annualized basis, we believe that the new structure could be approximately 40 basis points accretive to our consolidated margins.”

“I think it's gonna unfold over the next two years in front of us.”

“we're on track to complete more than a thousand by the end of 2026.”

“We will be nearly complete with the rollout of our Clover Vertica brewer in our U.S. company-operated coffee houses by the end of Q1, making it easier than ever for customers to get a fantastic and freshly brewed cup of coffee of their choice.”

“But we do believe there's the opportunity for us to grow from a unit standpoint.”

“On the product inflation, expect coffee to continue to be a headwind at least through half a year. All of our best thinking would say that we're going to start to see some relief at the backside of the year.”

“So we don't foresee additional investments, I would say, to be able to make the Green Apron Service standard come to life.”

“While we have good reason to believe that our U.S. company-operated comps should build through the year, we also know that recoveries are not always linear.”

“As such, we expect that our consolidated G&A in fiscal 2026 will run lower than fiscal 2023 levels, serving as a partial offset to our Back to Starbucks investments.”

“We also expect the impact to operating margins to be slightly accretive.”

“As a result of these closures, we expect a reduction in our baseline North America company-operated revenues, partially offset by sales transfer to nearby coffee houses that remain open.”

“We are working to complete more than 1,000 of these uplifts by the end of fiscal 2026.”

“As I've said before, we expect to grow the top line first and then earnings will follow.”

“As I have shared before, obviously, earnings are going to lag as we continue to annualize now that Green Apron Service investment that we've been making.”

“In the near term, however, we expect that the cost reduction related to streamlining our support structure will have more immediate impacts to our P&L.”

“A lot is happening today behind the scenes, and these efforts will come together more visibly by the end of next year. And when they do, I am highly confident that our financial performance will follow: first, in our comps; then in our earnings.”

“We are pleased to be ahead of schedule with key foundational programs like Green Apron Service, and we are confident that 2026 will continue to improve as we see the effects of our Back to Starbucks strategy begin to scale.”

“The good news is, once both of those things stick, we see transactions move in the right direction from there.”

“As a part of this work, we plan to sunset our mobile order and pickup-only concept in fiscal 2026.”

“We have a new stand-alone prototype that will open in fiscal 2026 that has 32 seats, a drive-thru and a roughly 30% lower cost to build.”

“Once all elements of Green Apron Service are fully implemented together and customers come to appreciate the improved experience, we believe these trends will continue to improve.”

“As we progress on our Back to Starbucks strategy, we will invest over $0.5 billion of additional labor hours into our U.S. company-operated portfolio over the next year, beginning with our Green Apron service rollout in mid-August.”

“In early 2026, we'll launch significant innovations in our Starbucks Rewards program, addressing key customer feedback and introducing exciting new features designed to grow loyalty, brand love and engagement.”

“Our margins in the near term are impacted by critical investments in our stores, partners and customers. However, the early signs of progress we're seeing in partner engagement, transactions in our critical dayparts and customer feedback give us confidence that these investments will yield the returns to drive much healthier margins over time.”

“Taking into account that we have a lot in flight, combined with the uncertain consumer environment, we are conservative on how the current year-over-year trends will change in Q4 for the U.S. company-operated business.”

“As I've stated before, our intention is to not move on pricing for the balance of this fiscal year.”

“Looking forward, we're on track to fully roll out Clover Vertica brewers in the US, with equipment already installed in 70% of our company-operated coffeehouses.”

“I'm confident, based on our pilot work and spending time with store managers and Green Apron partners across the country, that this new model will create more flexibility within our operation, improve peak throughput, better capture demand, deliver a more premium customer experience, and accelerate transaction growth.”

“I think margins will be part of that growth story in the longer term.”

“You're going to be seeing us on the pricing front also roll out in the app here in the next couple of months, easier ways for people to navigate and get pricing transparency into their transaction”

“Although I expect our third quarter FY '25 top line to follow normal seasonality.”

“And this summer, we'll begin to push an update to the Starbucks app that lets customers schedule their mobile order pickup and improves price transparency throughout the order process.”

“We'll begin to bring reworked coffeehouses online soon, and we think they will truly deliver an exceptional experience.”

“I have high confidence that we can double the store count as I've mentioned before.”

“Considering the stage of our turnaround, we may have additional restructuring costs in the near term as we evaluate our store portfolio and operations. However, we still expect that any additional restructuring initiatives will be completed within a finite period of time”

“Yes, we expect that margin and earnings will -- on an absolute basis, will be the lowest in Q2. That's based on seasonality, but it's also reflecting the organizational restructure as well as the elevated investments. What that means is earnings year-over-year pressure will intensify and that's largely driven by the organizational restructure.”

“While there is a near-term impact there is a near-term unfavorable impact as we make these types of investments, they will be accretive to the business longer-term as these investments will drive traffic to Brian's point.”

“And then, of course, we will expect this will drive leverage over time.”

“But I think what's important to remember is that we're also lapping lower performance-based comp this year and that starts to take an even greater impact in Q3 and Q4. So, net-net G&A this year will still be higher than prior year as a percentage of revenue, largely given that lap of lower-base performance comp from last year.”

“as I think about the full year, we would expect, while we'll have the spike in Q2, as I shared in my prepared remarks, we would expect to see -- start to see some savings in Q4 related to that particular effort.”

“We currently estimate Q2 EPS to be pressured by approximately $0.01 net of hedge gains.”

“EPS is then expected to improve in the latter half of the fiscal year 2025, both sequentially and year-over-year.”

“EPS is expected to be the lowest in Q2 on an absolute basis due to seasonality, the organizational restructuring I just spoke about, and elevated investments with year-over-year pressure also intensifying in the quarter.”

“For fiscal year 2025, we expect our G&A percentage to be higher than prior year as we lap lower performance-based compensation.”

“We will continue to secure additional efficiencies to help fund investments as we leverage a disciplined and data-driven approach to our turnaround.”

“we continue to target a full rollout of Clover Vertica brewers by the end of fiscal year 2025.”

“Lastly, we're planning to fully deploy digital menu boards in cafes across our US company-owned stores over the next 18 months to make our offerings more easily understood and to better show customization add-ons.”

“In the coming months, you'll see us begin to optimize our menu offerings, resulting in roughly 30% reduction in both beverages and food SKUs by the end of fiscal year 2025.”

“we made a new commitment to promote from within 90% of retail leadership roles over the next three years, helping thousands of partners grow their careers and their incomes.”

“Although we can pass this cost to our business partners, higher prices to an already pressured consumer will likely impact our segment volumes and ultimate revenue and profitability.”

“I'm confident this early work will start to stabilize the business.”

“And in the future those efficiencies will help us not only support incremental investments, but they'll lead to margin expansion and earnings growth.”

“But we are definitely not going to be moving at the speed you probably saw over the last two years.”

“But we expect that the traffic will return and that we'll see customers coming back into the stores and that will help to balance so that we see gradual momentum in the back half of the year.”

“So we'd expect that the back half of the year will be stronger as the investments and our strategies start to take hold.”

“When you think about G&A for next year, the one thing to remember is while we'll continue to focus on being as efficient as possible, we will be lapping lower performance based comp in fiscal year 2024. So that will have an impact on our G&A in fiscal year 2025.”

“I think it's important to note that in the near term we may see some incremental investments that will have an impact on our financials, but we do expect they'll be accretive, particularly as we balance that with increased transactions, so I'd look at it from that perspective.”

“We're also investing in our customers with an intent not to increase menu prices at company owned and operated stores in North America through fiscal year 2025.”

“And over the coming months, we plan to take steps to better separate mobile order pickup from the cafe experience.”

“We plan to bring back condiment coffee bars in all our cafes by early 2025.”

“We are encouraged with our progress this quarter, and we're pleased to reaffirm all metrics of our full year 2024 guidance.”

“Our significant efficiency runway, coupled with sales growth gives us confidence to drive margin expansion over time.”

“As we look to the out years, we will continue to drive leverage in our G&A as part of our overall efficiency focus and efforts.”

“In line with prior guidance, we remain on track to deploy equipment in less than 10% of company operated stores by the end of FY 2024 and about 40% by the end of FY 2026.”

“And just to remind that comp guidance range is a low-single-digit decline to flat.”

“But what I expect is that these actions that we're putting in place will position us stronger to see growth in FY 2025.”

“Now as we look towards next year, we'll continue on our path of efficiency efforts. Those efforts will help us to be able to unlock the capacity to be able to reinvest back into our business in a sundry of different areas, but it will also allow us to drive margin expansion.”

“We continue to target an earnings payout ratio of approximately 50% near the top end of growth companies of our size and scale, resulting in a significant portion of our earnings going directly back to our shareholders.”

“We're pleased with the SR member growth across both the US and China and expect to see the benefit from this growth in future quarters as new members provide a longer-term benefit.”

“As we open our app for all with MOP Guest Checkout, which launched earlier this month, we expect to create and deliver value across a broader population, expanding our universe of known customers to deepen engagement, driving increased frequency and spend.”

“We believe these enhancements to the digital experience, coupled with more effortless ordering will continue to drive Starbucks Rewards membership over time with customers increasing frequency and spend.”

“In turn, these savings will enable us to target investments that drive value for our customers beginning later in Q4, reigniting our North America flywheel for growth.”

“We expect our productivity to drive efficiency and unlock capital from areas that don't touch the customer.”

“We're also accelerating the rollout of digital storyboards with target deployment across most US stores in the next two years, a year earlier than originally anticipated.”

“Later this quarter, we will begin rolling out a simple refit to our espresso machines, which we expect to improve espresso throughput by up to 15% without compromising quality.”

“Early assessments demonstrate the capability to drive a 10-second to 20-second wait time reduction and a resulting comp opportunity range of 1% to 1.5%.”

“Second, our efficiency efforts are tracking slightly ahead of our expectations. Year-to-date, we achieved 170 basis points of in-store operational efficiencies along with great progress out of store, positioning us to deliver our $3 billion savings target through fiscal year 2026 with line of sight to even more opportunity beyond that.”

“Starting in May, we will add new and exclusive in-app offers that create additional value for our customers.”

“Everything we've seen, I know that we had a tough quarter. But everything we see in terms of the opportunities that lie ahead...we believe we'll be back [indiscernible]. And we see no change in the long-term outlook that we set earlier in this [ business ].”

“The segment's operating margin is progressing in line with our original expectations, continuing to target the full year range of high 40% to low 50%, a very attractive financial model.”

“Lastly, we continue to expect approximately $3 billion in CapEx, most of which is ring-fenced for our direct investment in our global store portfolio, which, as we have shared, continues to drive highly attractive returns.”

“We continue to expect our full year effective tax rate in the mid-20% range.”

“As an additional insight into our fiscal year 2024 guidance, we expect sequential revenue growth from Q3 to Q4 with pressure on margin and earnings easing in Q4 as our action plans take hold.”

“We continue to expect our U.S. store count to grow by approximately 4% and now anticipate approximately 12% store growth in China from our previous expectation of approximately 13%;”

“global net new store growth of approximately 6% from our previous expectation of approximately 7%.”

“China comp of single-digit decline from the previous expectation of low single-digit growth in Q2 through Q4;”

“This year, we will design and build more than 3,000 new stores globally, and we continue to do so in a financially accretive manner.”

“And later this year, we will add up to 5 sugar-free customization options to our menu in response to both partner and customer requests.”

“Notably, we're also making strides to cut our average product development cycle in half from our current time table of 12 to 18 months.”

“In stores where we've used the Siren craft system to optimize operations, we have already seen an increase in peak throughput, which we estimate to be worth nearly 1 comp point annually.”

“As we expand to Honduras and Ecuador, our global footprint will grow to more than 39,000 stores across 88 markets, putting us well on the path to 55,000 stores by 2030.”

“We are on track to operate 1,000 stores in India by 2028, translating 1 new store opening every 3 days.”

“We also plan to invest $600 million over the next 3 years to further digitize our stores and better target customers in more personalized ways.”

“Building on this strength, we are mapping additional ways to engage customers as we work to double SR members over the next 5 years.”

“We are aggressively pursuing options to build a $2 billion business over the next 5 years.”

“With our experience, our team, our operating muscle, and track record, I have full confidence in our store expansion plan and we're on target to achieving 13% store growth in FY ‘24.”

“So we are on track to reach 9,000 stores, so many opportunities out there.”

“but we're going to have three new beverage platforms coming in the next six months, and you will see how important that is for us over time.”

“Just to be clear, we continue to expect to deliver full year global store growth at approximately 7%, progressive operating margin expansion on a full-year basis, full-year EPS and non-GAP EPS growth in the range of 15% to 20% as we have multiple paths to such earnings growth as we demonstrated in the first quarter.”

“We are well on track to hit our 9,000 store target by 2025 and continue to have full confidence in the market opportunity.”

“Starting this week and continuing over the next few months, we will be introducing three new beverage platforms, each of which is squarely aimed at our Gen Z and millennial customers across a range of coffee and cold beverages and compelling for the afternoon.”

“In the coming weeks, we will also launch Chocolate Covered Strawberry Creme Frappuccino and a Chocolate Hazelnut Cookie Cold Brew in time for Valentine's Day.”

“I do think it's just worth noting is that our buybacks are expected to be nearly 1% of our earnings growth net of interest, so small in the scheme of things.”

“But in addition to that, what we're expecting is that we'll continue to see the strength in our in-store and out-of-store operational efficiencies.”

“The team is ready, obviously, as the market [turns] (ph) and we see things come back, you're going to see the kind of economics get even better.”

“While we continue to expect our effective GAAP and non-GAAP tax rates in the mid-20% range, they are expected to be meaningfully higher than our fiscal year 2023 tax rate of 23.6%, which benefited from certain discrete non-recurring tax items.”

“These metrics are then expected to rebound and stabilize in the second half of our fiscal year.”

“In terms of quarterly shape, we expect growth rates for our global revenue, comp, operating margin, as well as GAAP and non-GAAP EPS to be the lowest in Q2 and meaningfully below our full fiscal year guidance ranges due to the pressures we discussed in today's call.”

“Although there was contraction in the first quarter, we continue to expect the segment's full-year operating margin to expand to the high 40% to low 50% range and be accretive to our total company margin.”

“When you think about the operational efficiencies that continue to manifest both in and out of stores, we expect to continue delivering progressive margin expansion.”

“To further expand the reach and impact of mobile ordering and rewards, we now offer Starbucks Connect in over 40% of our more than 6,700 US licensed stores with further expansion planned for this year.”

“And as we continue to open more stores, growing by approximately 4% this year in the US on a base of over 16,000, including licensed stores, we will further invest in purpose-built stores to meet our customers where they need and want us to be.”

“We are on track to have on-demand single-cup brewers installed in nearly 60% of our US company-operated stores in fiscal year 2024.”

“We remain on track to have approximately 10% of our stores equipped with a Siren System by the end of this year.”

“The outstanding financial returns of new stores give us confidence we will reach our goal of 9,000 stores by 2025, opening nearly 1,000 net new stores every year.”

“Our new store performance, combined with our strong China comp guidance, will give another year of double-digit revenue growth in the market, delivering on our momentum.”

“So, we expect to see improvement in our return on invested capital, much like what we saw this year where we achieved nearly 25% on our ROIC, given the very disciplined approach we took to investments last year.”

“And we'll expect that improvement to continue in FY '24, as well as we'll continue to expect an improvement in ticket as we very purposely innovate around customization, more premium beverages as well as ensure we're able to continue to drive attach.”

“Regarding tax rates in fiscal year 2024, we expect our effective GAAP and non-GAAP tax rates to be in the mid-20% range.”

“We also expect to continue our stable dividend approach and remain committed to targeting an approximate 50% dividend payout ratio, displaying our confidence in our long-term growth and attracting a broad investor base, which benefits all stakeholders.”

“We expect our CapEx in fiscal year 2024 to be approximately $3 billion, with over 85% of our CapEx directly invested in our global store portfolio.”

“Equally important, we expect this upward trajectory to continue in fiscal year 2024.”

“In addition, we expect our Channel Development segment to continue to be accretive to overall operating margin, with operating margin expanding to the high 40% to low 50% range from their favorable portfolio mix.”

“Absent those impacts, Channel Development revenue is expected to be flat year-over-year.”

“We expect the foundational elements of our growth will be partially offset by an expected high single-digit revenue decline in our Channel Development segment largely related to the sale of Seattle's Best Coffee and broad optimization.”

“We -- of the approximate 7% growth, we expect our U.S. store count to grow by approximately 4% in fiscal year 2024, driven by our dynamic portfolio format, expanding our white space opportunity.”

“And we're going to ensure that we continue to increase these average hours through better staffing and scheduling but also work to accommodate their preferences, including the many that we attract to a keen on a part-time schedule.”

“Now in terms of answering your question about the long term, the – what I have seen in both top line as well as in the earnings growth gives me real confidence in the fact that what we’ve guided to previously, the 10% to 12% revenue growth and the earnings growth of 15% to 20%, we have multiple paths to getting to that.”

“As it relates to our remaining guidance, we are pleased to reaffirm full year guidance on all other measures. As a reminder, that includes revenue growth of 10% to 12%, global comp growth near the high end of 7% to 9% and solid margin expansion.”

“What I see is a durable iconic business with multiple paths available for us to deliver on our long-term revenue growth of 10% to 12% and earnings growth of 15% to 20%.”

“And so we're encouraged by what we're seeing today and we're looking forward to furthering the launch. We do expect it will help lead to margin expansion in the future.”

“From a Siren System standpoint, we're in the -- just the testing phase today. We're on track to be able to launch in conjunction with our renovations in new stores next year. And next year, we expect to be less than 10% of our stores will have the Siren System, reaching about 40% of our stores by the year 2026.”

“Now when you think about outside of North America, we'd say we expect our recovery to sustain in China, and that was through the guidance I gave around a low to mid-single-digit comp on a full year basis as well as contribution from International and the momentum we're seeing.”

“That leads us to solid margin expansion at the company level this year and progressive margin expansion in the future, which of course, will be driven in large part by North America.”

“so we're very intentional and being more directive around qualitative language on margins, saying this year would be solid margin expansion and the future would be progressive, which will allow us to continue to navigate the business and continue to invest where needed so that we can deliver on that 15% to 20% earnings growth that we've guided to.”

“You're going to see us make improvements month-over-month in terms of improvements that we're making.”

“As you look at the balance of the year, we feel that, first of all, the annualization of the pricing actions will continue. We don’t have any lagging significant comp impacts from the previous year. And we do expect pricing trends to moderate as we go into the final quarter, as you said, but we do expect to end the year in line with the comp expectations of 7% to 9% growth that we had set.”

“However, we expect margins will continue to be above the mid-40s range, driven by seasonality, leveling to a strong mid-40s margin business for the full year.”

“We continue to expect a low to mid-single-digit comp on a full year basis, consistent with our prior guidance as well as record-breaking year of net new store development.”

“we expect China's average weekly sales to continue to sustain the growth quarter-over-quarter, resulting in average weekly sales growth of low to mid-single digits in Q4, with similar sized comp growth as the market is lapping government stimulus for customers and favorable discounting from prior year coupled with the timing of difference of the Mid-Autumn Festival, which all contributed to prior year transaction growth.”

“As a reminder, we expect an unfavorable impact from foreign currency translation of approximately 2 percentage points to 3 percentage points on fiscal year 2023 revenue and earnings, respectively.”

“In the fall, we plan to open our Coffee Innovation Park, our single largest and most sustainable manufacturing investment outside of the U.S.”

“This includes this summer's launch of our Starbucks Refreshers frozen beverages, customization in our Oleato beverage platform as well as with our cold-pressed Cold Brew, which enters a testing phase across a few dozen stores this fourth quarter with a rollout across U.S. company-owned stores expected by the end of fiscal year 2024.”

“reaching about 40% of our stores by the year 2026.”

“While we continue to navigate our path to recovery in China, coupled with the heightened level of macro uncertainty around the world, we are confident that the Reinvention investments we are making in our partners, stores and customers will continue to guide our growth, delivering on our original fiscal 2023 outlook.”

“We also expect that our comp will improve, especially as we lap the mobility restrictions from prior year.”

“I think as we look at the remainder of the year for China, as I had shared previously, we expect that our average weekly sales will continue to improve sequentially quarter-over-quarter.”

“But in addition to that, while we recovered better than what we expected in China, when we look out towards the balance of the year, we expect our average weekly sales in China to continue and increase to improve sequentially quarter-over-quarter, but at a more moderate pace than what we saw in Q2.”

“Excluding the impairment, the segment's margin was nearly 40% for the quarter, and we continue to expect channel development margin to normalize in the mid-40s range towards the end of the year.”

“We continue to expect our G&A growth to be outsized in fiscal year 2023.”

“Our guidance continues to include the impacts of significant investments related to our Reinvention Plan as well as inflationary pressures, which are moderating.”

“We expect year-over-year EPS growth in Q3 to be meaningfully lower than our fiscal year guidance range of 15% to 20% with Q4 year-over-year EPS growth slightly above the high end of our guidance range.”

“We also expect EPS to step up in the second half of the fiscal year, improving sequentially in Q3 and Q4.”

“Regarding the shape of margin, we continue to expect sequential margin improvement in both Q3 and Q4.”

“Acknowledging the uncertain environment we expect China comp to improve in the back half of the year, driven in large part by the lap of mobility restrictions in Q3 of the prior year, coupled with the continued recovery, leading to low to mid-single-digit comp on a full year basis.”

“Third, as I discussed earlier, we expect China's average weekly sales to sequentially grow in Q3 and Q4, but at a more moderate pace.”

“U.S. comp has normalized as anticipated in March and into Q3 with expected annual comp continuing to be in the guidance range of 7% to 9%.”

“We now operate over 6,200 stores across 244 cities, keeping us on track to meet our goal of 9,000 stores by 2025.”

“Additionally, Asia Pacific, EMEA and Latin American markets, are also expected to contribute meaningfully, becoming an area of further emphasis and a more significant contributor to our overall global growth.”

“We expect China to remain on track to achieve our 13% net new store growth target for this year.”

“The Clover Vertica brewers also began to roll out in this quarter, and we'll be in nearly 40% of our company-operated stores across the U. S. by the end of this fiscal year.”

“We expect this demand to continue as we push the envelope with innovation.”

“Given the success we are seeing, we look forward to bringing this exciting new offering to more stores and more markets around the world this year.”

“And I'm so confident and more confident than ever of delivering the plan and strategies we shared during Investor Day and achieve 9,000 stores by 2025.”

“Lastly, we also remain committed to returning approximately $20 billion to shareholders by the end of fiscal 2025 between share repurchases and dividends.”

“Now even with that backdrop and taking into account the uncertainty of China's recovery timing, our fiscal 2023 guidance remains unchanged.”

“And Q1 headwinds will shift to tailwinds.”

“And we remain on plan to have 9,000 stores in China by the end of 2025.”

“ideally positioning us to successfully execute our ambitious growth agenda and have roughly 45,000 stores delivering best-in-class returns around the world by the end of fiscal 2025.”

“And if I would just add, we continue to believe that channel development will be a mid-40s margin business, which is really strong, and that's what helps us in terms of being able to reaffirm our guidance on a full-year basis.”

“Also, we had strong North American coffee partnership performance in the quarter. Some of that also had some one-to-time benefit as we were standing up a new Coleman. So that will benefit us going forward, but we won't expect some of that to continue.”

“The one thing I would add, just to finalize your question is that the Siren system is expected to be more of a '24, '25 implementation rollout.”

“So given that we're seeing inflation, we're still seeing inflation elevated relative to prior years below FY '22, but we're starting to see it soften slightly. So we don't have expectations that we'll have to further that pricing increase. And instead, what we'll see is, we'll start to see pricing normalize to more historical levels by the back half of the year.”

“But despite that, when you take China and where we're expecting from a recovery standpoint, both this year and beyond, that leads us to the solid margin expansion we're talking about for total company this year as well as the progressive margin expansion that we spoke about at Investor Day.”

“What I'd say, Andrew, is that we do expect to have margin expansion in China, and that will be driven by the recovery as well as the growth we're seeing beyond recovery.”

“So as we think about going forward in these markets, we see more tailwind. The international travel is just starting to come back as they start to go to other markets as well, we're going to see further tailwind going forward.”

“last year, we had expected China to be about 25% of the total company operating income, which is generally where it landed, we'll expect maybe closer to 50% based on what we know today.”

“which is an exceptional complement to our long-term EPS growth target as high as 15% to 20%.”

“Our repurchase program resumed in Q1 of this fiscal year and will accelerate as reinvention gains ground.”

“We continue to expect the quarterly EPS shape to roughly mirror the shape of operating margin with a sequential decline in Q2 and a meaningful step up in the second half of the fiscal year.”

“We still expect margins to expand in the back half of the year, improving sequentially in Q3 and Q4 as sales leverage, pricing, productivity gains from reinvention as well as recovery in China begin to contribute to positive margin expansion as the year progresses.”

“This reflects an improvement of approximately one percentage point on both revenue and earnings growth relative to our previous expectations.”

“Also, our guidance continues to include the impacts of significant investments related to our reinvention plan and inflationary pressures which largely remain comparable to what we had originally anticipated.”

“there was some pricing in that, and we think that's going to moderate through the course of the year.”

“Although we previously projected China recovery as early as Q3 of this fiscal year, we do not have clear line of sight into the timing of recovery and believe China's contribution as a percentage of our fiscal 2023 consolidated operating income to be lower than our original guidance assumed.”

“Despite the considerable pressure we now expect from foreign currency translation, which could abate, we remain confident in our revenue guidance range for the full year.”

“Our performance supports our confidence in the ambitious growth agenda we announced in September, in which we will be adding roughly eight new stores per day, delivering best-in-class returns around the world every day for the next three years, bringing us to nearly 45,000 stores globally by the end of fiscal 2025.”

“As I've shared before during Investor Day, we're going to open 2,500 greener stores by 2025 as part of the portfolio.”

“And considering the quarterly EPS shape, we expect it to mirror the quarterly shape of operating margin, which will also have a meaningful step-up in the second half of the fiscal year.”

“Despite that, we continue to expect fiscal 2023 GAAP EPS growth to be at the high end of the 15% to 20% range.”

“Importantly, we remain committed to our BBB+ credit rating and leverage cap of 3x rent-adjusted EBITDA.”

“In regards to interest expense, we expect between $540 million and $560 million of interest expense in fiscal 2023, up from $483 million in fiscal 2022.”

“We expect the buyback benefit on EPS to be initially limited until fiscal 2024, when the benefit is expected to reach approximately 1%, calculated net of interest expense.”

“We remain committed to targeting an approximately 50% dividend payout ratio as reflected in the recently announced dividend increase, and we'll also resume our buyback program in fiscal 2023.”

“As we shared during our Investor Day, we also expect to return approximately $20 billion to shareholders in the next three years between dividends and share buybacks.”

“We expect our CapEx in fiscal 2023 to be approximately $2.5 billion.”

“We expect headwinds related to supply chain and commodity inflationary pressures to continue in fiscal 2023, albeit to a lesser extent relative to fiscal 2022.”

“We expect over $1 billion incremental investments in fiscal year 2023, half of which will reflect the annualization of the fiscal 2022 investments.”

“In terms of a quarterly shape, we expect operating margin to be tempered in Q1 and Q2, with meaningfully higher margins in Q3 and Q4 as margin benefits accumulate from the continued unlocking of the reinvention plan, coupled with the expected recovery in China.”

“Within fiscal 2023, the unfavorable impact of foreign currency translation is expected to reach approximately four percentage points in the first half of the fiscal year, tempering to approximately one to two percentage points in the back half of the year.”

“We expect our U.S. store count to grow by approximately 3% in fiscal year 2023.”

“And global comp in Q1, reflecting negative comp in China, is expected to be at the low end of the annual guidance range, then expanding in subsequent quarters.”

“Given the quarterly shape of the fiscal 2022 baseline, we expect China comp to be negative in the first quarter, followed by outsized comp in the balance of the year.”

“Handheld POS is already helping us capture new and latent demand in support of our ambitious revenue expectations. And we expect to see further benefit as we extend the rollout for handheld POS into fiscal year '24.”

“The rollouts for these three items will be completed by fiscal year '23 for our company-operated stores.”

“We fully expect the momentum from our record fall launch to continue as our highly anticipated holiday at Starbucks launched just today and include some great seasonal offerings.”

“We expect mobile, digital, loyalty and delivery to continue to grow and drive our business.”

“Starbucks Connect enables us to capture demand across our broader portfolio and will be highly accretive to our business.”

“We anticipate the current COVID-related uncertainty to continue and repeat the view we shared on our Q3 call and our Investor Day, that while our long-term aspirations for China remain undiminished, we expect the recovery of our business in the country to be nonlinear.”

“We're seeing a strong positive correlation between comp improvement and the easing of COVID restrictions, giving us confidence that we'll see both a strong rebound in sales and improved flow-through once mobility restrictions in China are fully lifted.”

“Despite the COVID headwinds, we remain on track to operate 6,000 stores by the end of this year.”

“We are seeing some green shoots in improving retention overall, and we're optimistic that, that will carry into the coming quarter as well as, as we go into FY '23.”

“We have 60% of those deployed, and we'll have 75% deployed by the end of the fiscal year.”

“We don't anticipate store closures will be material in any way.”

“But in addition to that, more training hours, more labor hours to be able to support some of our production. What that does when you think about it is from a revenue standpoint on a consolidated basis, in Q3, that was about 2% of our overall consolidated revenue. It will be about 4% next quarter.”

“Additionally, we remain committed to sustaining an attractive dividend and continue to target an earnings payout ratio of approximately 50%, which is near the top end of growth companies of our size and scale.”

“Between executing on the reinvention plan and other investments such as increases in wage benefits announced earlier this year, we expect our U.S. investments to more than double from Q3 to Q4.”

“We now expect our Q4 margin and EPS to be lower than Q3 with greater year-over-year pressures primarily due to three reasons”

“Given the prolonged lockdowns in China with limited mobility recovery in Q3, the headwinds now extend into Q4 as the market continues to recover.”

“Although measurable benefits of the reinvention plan investments will begin to manifest in FY '23, we are encouraged by the investments made so far this year, as we've already experienced increased labor availability and stability, more predictable operating hours as well as higher partner engagement scores in the U.S.”

“We remain on back to have 6,000 stores in China by the end of this year.”

“We continue to expect our recovery in China to be nonlinear.”

“Each of these substantial actions are part of a multiphase path to reinventing the retail partner experience that we expect will have a direct positive effect on partner retention, customer connection and essential brand affinity metrics.”

“We also expect to roll out both the universal tipping and a new recognition and badging platform by calendar year-end 2022.”

“We're also looking forward to the launch of our ready-to-drink Starbucks coffees in Southeast Asia, Oceania and Latin America, which will begin rolling out in next quarter.”

“Looking ahead, we expect to see a closer Starbucks Nestle partnership.”

“In July, we committed to a planned expansion that will materially increase our roasting capacity in order to meet the rapidly growing demand for Starbucks Coffee across the region.”

“Given the success we are enjoying in Milan, we are now planning to open in Rome and in Florence.”

“Looking ahead, however, the International segment may face near-term challenges.”

“At our China Investor Day in 2018, we shared our aspiration to operate 6,000 stores in China by 2022. Despite years of COVID disruptions, we remain on track to do so, adding 97 net new stores in Q2, with our new stores continuing to deliver best-in-class returns and profitability.”

“We've identified over $200 million of investment that's incremental to the significant investments we've already committed to in our U.S. company-operated stores this year.”

“And relative to margins, I think as Howard spoke about, we expect that some portion of inflation will essentially abate.”

“In terms of what we're expecting for FY '23 and FY '24, we have near-term pressure in our business, and that's between the pressure we're seeing in, with inflation as well as what we're seeing in China and then the investments we're choosing to make.”

“As we've talked about in Q2, and as we've, seen going from Q2 and for the balance of the year, we're seeing increasing inflationary pressures across our supply chain, both in labor as well as freight and then across our commodities.”

“We expect share repurchases made earlier in the year to contribute at least 1% to our FY '22 EPS growth.”

“However, to provide additional insights, we believe our results for the balance of the year will be significantly pressured with heavier pressure in Q3.”

“This community will further strengthen the Starbucks brand, engage our partners and we expect it to be accretive to our business.”

“We expect an even greater impact on our Q3 results due to the timing of the Shanghai lockdown and a further resurgence of the virus in other cities, including Beijing.”

“We expect 75% of the net new stores we will open in fiscal '22 to be outside the U.S., further underscoring the enormous global and the opportunity ahead.”

“Given the materiality and the high level of ongoing uncertainty around China, accelerating inflation and the significant investments we are planning, the only responsible course of action for us to take is to suspend guidance for Q3 and Q4.”

“We will also be accelerating our new store growth with 90% of new stores being high-returning drive-thru.”

“We also continue to stand by our commitment to return $20 billion to our shareholders over the next three years and have returned more than $4 billion in Q1 between share repurchases and our quarterly dividend.”

“What we’ve seen too is following each COVID wave, we’ve seen customer demand strengthen. And we anticipate that’s going to happen following Omicron as well.”

“Now we also have additional pricing action that we have planned for the balance of the year that will additionally help offset the trends and some of the cost pressures that we’re seeing.”

“But overall, our inflationary pressures in FY2022 will remain elevated relative to FY2021.”

“Q4 is then expected to show continued recovery but at a more gradual pace, inclusive of the summer step-up in wage investments as we raise the U.S. average store hourly wage to $17.”

“While the intensity throughout Q2 is unknown, we expect Q2 quarterly non-GAAP EPS and margins to be below prior year levels, with significant improvement in Q3 coming from our margin enhancement actions materializing.”

“In terms of quarterly margin and EPS cadence, we expect headwinds to intensify in Q2 as Omicron disruptions escalated in January.”

“As a result, we expect fiscal 2022 GAAP margin to approach 16.5% and non-GAAP margin to approach 17%.”