Starbucks Corp (SBUX) — Q1 2019 Earnings Call Transcript

Good afternoon, everyone, and thank you for joining us today to discuss our first quarter results for fiscal year 2019. Today's discussion will be led by Kevin Johnson, President and CEO; and Pat Grismer, CFO. And for Q&A, we'll be joined by Roz Brewer, Chief Operating Officer, and Group President Americas; John Culver, Group President, International Channel Development in Global Coffee and Tea. This conference call will include forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on Form 10-K. Starbucks assumes no obligation to update any of these forward-looking statements or information. GAAP results in fiscal 2019 include several items related to strategic actions including restructuring and impairment charges, transaction and integration cost, and other items. These items are excluded from our non-GAAP results. Please refer to our website to find the reconciliation of non-GAAP financial measures referenced in today's call with their corresponding GAAP measures. This conference call is being webcast and an archive of the webcast will be available on our website through February 22, 2019. I will now turn the call over to Kevin.

Well, thanks Durga, and good afternoon, everyone. I'd like to start by taking this opportunity to thank our outgoing VP of Investor Relations, Tom Shaw, for his leadership over the past couple of years and to wish him well as he pursues a new opportunity outside our industry. Durga is a 5-year Starbucks partner, and a 20-year veteran of Investor Relations and I'm thrilled that she is stepping up to lead our IR function in close partnership with Pat. Now last month we were pleased to meet with many of you in New York, not only to showcase our latest Starbucks Reserve Roastery but to also discuss the next chapter in Starbucks growth agenda, which we call growth at scale. We shared with you our strategy to streamline the business, drive growth in the key markets of U.S. and China, expand our global reach to the Global Coffee Alliance, while simultaneously returning significant capital to our shareholders. The strategy is working as evidenced by our Q1 results and we remain confident in the longer-term outlook for the business. Integral to our growth scale strategy is a higher level of focus and discipline to drive predictable, sustainable long-term growth and shareholder returns. The positive business momentum that we experienced in the fourth quarter of fiscal '18 clearly sustained throughout Q1. The strength of our results in Q1 has further reinforced the confidence and conviction we have, both near-term and long-term in our strategy. Now let me give you a few of the key financial headlines for the quarter. Record revenue is $6.6 billion representing 9% growth versus prior year. Comp sales growth of 4% including another quarter of sequential improvement in traffic comp. Net store growth of 7% on a global basis versus prior year with over two-thirds of our new store openings outside the U.S. Continued digital momentum with U.S. Active Rewards members growing 14% to 16.3 million, and return of $5.5 billion to shareholders through a combination of dividends and buybacks. These results were enabled in part by solid execution during our holiday season. Our holiday plan was informed by insights we gathered from customers who highlighted what they appreciate from Starbucks during the holidays. We leveraged those insights to reignite the customer connection in many ways; with improved brand and product awareness, sharper and cleaner holiday merchandising, relevant new offering such as our limited edition red cup promotion, and an enhanced in-store experience. This comprehensive insight-driven approach delivered results and importantly, created momentum that provides a solid foundation for future quarters, helped in part by strong performance in our gift card business. Taking a step back from the solid results in the quarter, I'd like to highlight the broader approach we're taking to sustain growth well into the future. And to update you on the progress we're making to advance this strategy. As a reminder, our growth at scale agenda is composed of three key building blocks; streamlining our business, focusing on three strategic priorities, and amplifying the Starbucks brand. Our streamlined efforts over the past six quarters are paying off by allowing us to bring more focus and discipline to our three strategic priorities of accelerated growth in our targeted markets of U.S. and China, expanding the global reach of the Starbucks brand, leveraging the Global Coffee Alliance with Nestlé and increasing shareholder returns. Importantly, we are doing all of this while staying true to our brand promise with the understanding that the foundational elements will remain pivotal as we continue to build our brand through the Starbucks experience, the quality of our coffee, and our corporate reputation for doing good. And as with any strong foundation, there are opportunities to amplify these cornerstones of the brand that we continue to demonstrate. Most recently, with the opening of our New York Roastery, and soon in February with the opening of the Tokyo Roastery. Now we will consistently use this growth at scale framework to guide our communications with investors going forward. So let me share a few more details about the progress we've made against our three strategic priorities and what to expect for the balance of the year. Starting with accelerating growth in our two long-term growth markets, the U.S. and China. In the U.S., we are focused on three operating initiatives; enhancing the in-store experience, delivering beverage innovation, and driving digital relationships. Enhancing in-store experience encompasses building customer connections and creating those best moments that keep customers coming back time and time again. Our Starbucks store partners who proudly wear the green apron are at the center of connecting with customers and we are on a mission to support them by simplifying work and reducing some of the non-customer facing tasks that historically have taken up to 40% of their time. This is freeing up more time for our partners to connect with customers. For example; we've shifted certain cleaning tasks to after-hours and we're automating product planning and replenishment which reduces store clutter and time away from customers. This work will span multiple quarters, and the actions thus far are already paying off as our customer connection scores continue to improve in Q1 on both a sequential and year-over-year basis. And importantly, across both the morning and afternoon day parts. We're also creating a new channel for customers to engage through Starbucks Delivers. Our partnership with UberEats is gaining momentum and we expect to bring delivery to nearly a quarter of our U.S. company-operated stores by April, including our second market in San Francisco which launched earlier this week. Our early experience is encouraging and has provided us the blueprint for how to operationalize this new channel, an important step to create a seamless workflow for our partners. From a customer perspective, Starbucks Delivers is being seamlessly integrated into the UberEats mobile app enabling full beverage customization and fully integrating into our store operations to ensure a premium Starbucks experience. Moving on to our second U.S. priority, beverage innovation. Our focus here is ongoing led by the momentum we are seeing with cold beverages across multiple dayparts. The focus of our latest beverage innovation revolves around iced espresso, draft nitro beverages, and refreshers. We have expanded the deployment of our nitro offering from about one-third of U.S. company-operated stores last quarter to 40% in just one quarter. And we remain on track to reach our goal of 100% penetration by the end of fiscal '19. Draft nitro beverages represent a significant opportunity for the brand. This platform is differentiated, provides theater, and drives incrementality. We also made great progress on our third U.S. priority driving digital relationships; our enabler of convenience, awareness, and value. To build our digital ecosystem we widened the aperture of digital reach and created a funnel of activation that is leading to increases in active membership in our Starbucks Rewards program. Since we've started these efforts last spring, we have acquired 13 million digital customer registrations, and we're excited about the potential this has to drive our Starbucks Rewards program. I'm pleased to share that in Q1 we expanded our active member base by an impressive 1 million customers, a 14% increase that takes active reward membership to 16.3 million. This result was driven by leveraging our increased digital reach, as well as a more seamless customer onboarding experience, greater mobile order and pay adoption, and enhanced personalization features. Between digitally registered and active reward customers, we are now approaching 30 million digital connections in the U.S. Starbucks Rewards continues to be a powerful enabler of loyalty and we are thoughtfully evolving the program to provide greater choice and flexibility for rewards members. We will enhance the program this spring to enable loyalty customers to earn and redeem more quickly, and redeem those awards across a broader range of items in our stores. We have leveraged learnings and customer insight from prior changes to the rewards program to inform our work ahead of this launch. This includes a robust marketing activation plan to drive not only awareness of the changes but overall awareness of the program and key customer benefits. As we've shared in the past, lack of awareness has historically been one of the limiting factors to customer adoption, and we had a significant opportunity to amplify a powerful message around loyalty. Having covered the U.S., let's talk a bit about our second largest and fastest growing major market, China. This month marks the 20th anniversary of Starbucks in China, and we continue to play the long game with our purpose-driven growth agenda. We've recognized the tremendous opportunity ahead requires navigating a rapidly evolving competitive landscape, changing consumer behaviors, and a dynamic economy. With a large and growing addressable market around coffee, we expect competition to remain highly promotional and disruptive. As we have done over the past 20 years in China, we will continue to learn and adapt as we create a broader coffee culture, expand our presence in both new and existing cities, and deliver a differentiated Starbucks experience throughout China whether it's serving customers in our beautifully designed stores or enabling new channels like Starbucks Delivers. China represents a large opportunity and a dynamic market which informs the low single-digit comp guidance that we outlined last month. The bigger story in China is total transactions driven by our store growth which underpins approximately 80% of our growth algorithm in China. This quarter our store base in China grew by 18%, comp stabilized at 1%, and we remained confident in the future opportunity. The launch of our China digital partnership with Alibaba, the rapid expansion of our Starbucks Delivers program now in more than 2,000 stores, and the added coverage of Star Kitchens and Hema supermarkets are just the beginning. Starbucks Delivers is already contributing mid-single-digit transaction mix in our key markets of Beijing and Shanghai which validates customer demand and reinforces the significant runway of opportunity ahead. The benefit from our unique Starbucks virtual store integrated throughout the Alibaba ecosystem is largely still ahead of us as awareness and adoption build. Along with the recent upgrade of our Starbucks Rewards program, new food and beverage offerings, and powerful new store economics, we remain bullish on our path in China and the growth that lies ahead. We are playing the long game in China. Moving on to our second strategic priority; expanding our global reach through the Global Coffee Alliance. This is the story of two leading global companies, with unique capabilities, coming together to accelerate growth of coffee around the world. The transition of the North America business to Nestlé has gone extremely well, and we are rapidly shifting our attention to growing the share of Starbucks capsules on Nestlé platforms, accelerating our leadership position in North America, and expanding the presence of Starbucks Coffee into international markets. We remain on track with our go-to-market approach strategies to bring Starbucks products to life across the Nespresso and Dolce Gusto platforms beginning this spring and progressing throughout the remainder of the year. Naturally, we will focus initially on strategic markets across traditional CPG and food services chains, and we look forward to sharing our progress with you in the months and quarters ahead. We are very pleased with the initial success of the strategic partnership and very optimistic about its potential. And finally, let me comment on our third strategic priority of increasing shareholder returns. As we first outlined last June, we are committed to return $25 billion of cash to shareholders through fiscal 2020 and we are on track to do just that. In fiscal '18, we returned approximately $9 billion of cash through buybacks and dividends. And with the additional $5 billion, accelerated share repurchase plan that was initiated on October 1, we have now returned over $14 billion of our total commitment of $25 billion. So in summary, our growth at scale strategy is working, and our leadership team is fully committed to the future growth and vibrancy of Starbucks. To the more than 350,000 Starbucks partners who proudly wear the green apron, I thank you; you have always been at the center of everything we do to create that warm and welcoming Starbucks experience in our stores. Because of you, we were able to distribute bean stock to nearly 200,000 partners in 21 markets around the world this past year. We hired over 21,000 veterans and military spouses, and nearly 65,000 opportunity youth over the past three years. And we welcomed more than 12,000 Starbucks partners into a pathway to a college degree through the Starbucks College Achievement program. I am proud to be your partner. And with that, I'd like to officially welcome Pat to his first Starbucks earnings call. Pat?

Thank you, Kevin and good afternoon, everyone. I too am pleased with the overall business momentum that we demonstrated in the first quarter with solid revenue growth of 9% driven by net new store growth of 7% over the past 12 months and global comp growth of 4%. 9% revenue growth for the quarter included an approximate 1% unfavorable impact of foreign currency translation, and an approximate 1% net benefit from streamline-related activities, primarily the acquisition of East China through Global Coffee Alliance, and the sale of Tazo. Non-GAAP EPS of $0.75 was up 15% versus prior year and included a net favorable impact of $0.07 related to discrete income tax items, primarily, the release of certain tax reserves. I'll now take you through our Q1 operating performance by segment. Our Americas segment delivered 8% revenue growth in Q1, primarily driven by net new store growth of 5% over the past 12 months, and 4% comp sales growth with flat comp transaction growth in the U.S., a sequential quarterly improvement as Kevin highlighted earlier. For the second consecutive quarter, beverage, our highest margin category was the primary driver of U.S. comp growth contributing three of the four points in Q1, followed by two points from food and a one-point decline in lobby. Beverage growth was led by our espresso and brewed platforms which delivered the highest contribution to comp growth in nine quarters. Of note, iced beverages continued to lead this growth across all dayparts with strong performance from Starbucks Refreshers, Iced Espresso and Iced Coffee, in particular, Cold Brew and Nitro. And although lobby continued to weigh on comp, due to our SKU rationalization efforts that are improving store-level profitability and streamlining the in-store experience, our overall holiday offerings performed well. From a daypart perspective, we saw improvement across the board with continued strong growth in the morning and afternoon performance that was the best in the last five quarters. Americas non-GAAP operating margin declined 60 basis points to 22.4% in Q1, primarily due to partner investments including tax reform funded investments, partially offset by sales leverage. Moving on to China/Asia Pacific, our fastest growing business segment. Capped segment revenues grew 45% in Q1 excluding the net 32% combined impact of streamline activities, notably, the acquisition of East China and foreign currency translation. Revenue grew 13% in the quarter, this was driven by 13% net new store growth over the past 12 months and 3% comp sales growth including 1% comp transaction growth. I'll now highlight the first quarter performance of two key markets in our CAP segment; China and Japan. China delivered comp sales growth of 1% in Q1 including a 2% decline in comp transactions consistent with the fourth quarter of fiscal 2018. 3% comp ticker growth was driven by our Starbucks Rewards Loyalty Program, food and merchandise. Importantly, we sustained our high rate of store growth in China entering 10 new cities in the quarter and with 18% growth in net new stores over the past 12 months we ended the quarter with nearly 3,700 stores in 158 cities. We are also pleased that our newest class of stores in China continue to deliver strong profits and returns on investment. Our Japan business delivered an outstanding quarter driving mid-single digit comp sales and transaction growth that lifted comp for the overall CAP segment. These results were driven by holiday marketing efforts which led to successful LT outperformance in both blended and brewed beverages. We are also pleased with a continued growth in Starbucks Rewards Program in Japan representing 22% of sales in Q1 and reaching 1.6 million active members, a 33% increase over the prior year. CAP's non-GAAP operating margin declined by 210 basis points to 23%, primarily due to the ownership change in East China, excluding the combined 220 basis point impact of the East China acquisition and unfavorable foreign exchange, the segments non-GAAP operating margin was essentially flat. On to our channel development segment which reported a revenue decline of 20% in Q1 including the impact of the Global Coffee Alliance which reduced segment revenues by approximately $130 million in the quarter, as expected. Excluding the impact of the Global Coffee Alliance, segment revenues increased 1%. Non-GAAP operating margin declined by 700 basis points to 35.9% in Q1 including a 770 basis point margin dilutive impact of the Global Coffee Alliance. Absent that impact, the segments non-GAAP operating margin improved 70 basis points. Finally, at the consolidated level, non-GAAP operating margin of 17.4% in Q1 represented the decline of 180 basis points year-over-year largely due to streamline related activities. Excluding the 110 basis point impact of these activities, non-GAAP operating margin declined by approximately 70 basis points reflecting the impact of partner investments including tax reform funded items, as well as strategic investments in our retail business which remains in the concept development phase. These investments were partially offset by the benefit of sales leverage. Now moving on to our guidance for fiscal year '19; we still expect fiscal 2019 GAAP EPS in the range of $2.32 to $2.37 because the $0.07 benefit from discrete income tax items in Q1 which I mentioned earlier is largely offset by a net increase in cumulative unfavorable tax items related to the 2018 Tax Reform Act. However, relative to our previous guidance, we do expect non-GAAP EPS in fiscal '19 to increase by $0.07 resulting in a range of $2.68 to $2.73, mostly because the tax reform related adjustment is excluded for non-GAAP reporting. Additionally, for fiscal 2019 we now expect our GAAP effective tax rate to be in the range of 21% to 23% and our non-GAAP effective tax rate to be in the range of 20% to 22%. Finally, in light of the ongoing earnings growth model that we shared at our 2018 Investor Day in December, we are confirming our fiscal year 2019 global comp growth guidance to be between 3% and 4%. All other full year 2019 guidance metrics including net new stores and operating margin are unchanged from what was communicated on our Q4 fiscal year '18 quarterly earnings call and reaffirmed at our 2018 Investor Day. Although it's not our practice to give quarterly guidance, I'd like to provide some qualitative commentary on the shape of our P&L for the balance of the year. As a reminder, we rollout the East China acquisition at the beginning of Q2 at which point we will no longer see the year-over-year benefit to our total revenue growth. At the same time, we will still bear the year-over-year revenue headwind from the Global Coffee Alliance. We expect these factors to yield significantly lower revenue growth in Q2 compared to Q1. And given the fact that Q2 is a seasonally low period for us, and with the continued substantial carryover of last year's U.S. tax reform related investments, we also expect our non-GAAP operating margin percentage to be lower in Q2 compared to Q1. We are in the early phases of our G&A reduction program having just started in Q1 and the benefits to the P&L will not begin to meaningfully materialize until the back half of the fiscal year. This is an area of continued focus for us and we remain committed to reducing G&A spending as a percentage of system sales over the next three years to drive profitable growth at scale while making the necessary investments in our business. As we start to lap the tax reform related investments in Q3, and with the benefit of our continued focus on improving G&A efficiency, we expect our non-GAAP operating margin percentage to be higher in the second half of the year compared to the first half, even with the one-time cost of our global leadership conference that will impact Q4. Please note, that all of this is consistent with our full year guidance for 2019. To summarize, we are pleased with our first quarter performance and view these results as a validation of our strategies to grow Starbucks at scale with greater focus and discipline. We appreciate the hard work of Starbucks partners around the world in our stores, at our roasting plants, and in our support centers, who deliver these results in a manner that remains true to our company's mission and values which is the core of our business. And with that, Kevin and I are happy to take your questions joined by Roz Brewer and John Culver as Durga outlined at the top of our call. Thank you.

You probably didn't make as big of a deal as I would have expected about gross margin going up in the Americas for the first time in a couple of years. I don't know if you can give any more color around if it's just because of the beverage mix leading the comp? And whether or not you believe that's sustainable for the rest of the year?

We typically don't highlight gross margin but what I will do is speak to the performance of the Americas operating margin, just to give you some flavor for how we saw that play out in the quarter. In the quarter we've realized meaningful operating efficiencies and positive sales leverage which includes some gift card accounting benefits but those were more than offset by an unusually high level of investments including seasonal marketing expense to support holiday, product mix and inflation, primarily higher wages. And to give you a flavor for how we see this playing out over the balance of the year, we do expect stronger margin tailwinds and lighter margin headwinds compared to the first quarter and thus less store-level margin contraction as the year unfolds. I'm specifically looking at product mix and what happened there in the first quarter. We experienced an adverse margin impact as beverage mix shifted from blended to refreshers, and also from higher food sales but that was partially offset by the positive impact of lower merchandise sales.

My question is about China. It's a two-part question. First, despite some indications of a slowing macro economy there, how do you feel you performed on a relative basis when you compare your sales to others? Secondly, you mentioned that the delivery rollout in the initial major markets has contributed to a mid-single digit percentage of your product mix. Is this an all incremental impact, or are you seeing a mid-single digit increase in sales, or is it taking away from in-store sales? How does this compare to your expectations at the start of the rollout? Thank you.

Thanks, David. I'll just comment briefly and I'll hand over to John Culver to go into some more detail. On your first question, I think that the fact that the performance we delivered, up 18% increase in new stores plus stabilizing our comp at 1% comp growth, that's delivering double-digit transaction growth which we think is the most important metric for us to focus on in China. Our new stores are highly profitable and they are working well, so we're going to continue to play the long game and I think we'll let you benchmark us versus others as their data comes out. But I think we're very comfortable and very confident in the strategy that we have in China. I'll let John comment further on that and take your question on delivery.

David, I think that overall from a China perspective we saw strong Q1 performance and continued momentum in the business, and as I shared in New York at Investor Day, really, just looking at the total transaction growth in the market, the new store build-out which represents about 80% of our total revenue growth and the fact that we continue to increase our overall share in the market as we build out our store footprint. Clearly, the environment in China right now; we've demonstrated our ability to navigate what is a changing consumer economic and competitive environment. But as Kevin said in his comments, we are playing the long game and we believe in the strategy that we have in place, and the strategy is focused in a couple of different areas. First, it's continuing to expand our store footprint, and the reason we're doing that is because we continue to see very strong returns, and best-in-class performance in the new stores that we're building. The second thing that we're focused on again is continuing to grow the total revenues in the market. In the quarter we grew 19% when you normalize for foreign exchange, as well as the East China integration, and our store count overall grew 18% as we opened up 10 new cities. So we now operate 3,700 stores across 158 cities. The other area that we're focused on is continuing to expand our digital partnership with Alibaba. And you mentioned Starbucks Delivers, we have rapidly rolled out in less than 90 days to 2,000 stores across 30 cities and we're seeing strong awareness being built, we're seeing strong trial, and we're seeing a growing adoption level from customers. I would say that from some of the metrics, the average delivery time is approximately 19 minutes from the time a customer orders to the time they receive it; we're seeing strong performance in both Beijing, as well as Shanghai, and the average ticket that we're seeing through the delivery orders is a bit higher than what we see in our average core stores and the mix tends to be more beverage led, and in particular, espresso led. So we feel good about the progress that we're making. In terms of incrementality to your question, we are seeing some positive impact but I would just say that it's too early to call exactly what that impact is but we're encouraged by the initial results that we're seeing. And we feel that we've got a competitive edge in the market, we've set new standards for delivery of coffee to our customers, and to customers throughout China we've obviously introduced innovation with splash-proof lids for hot and cold beverages, tamper-proof packaging seals, and individual hot and cold delivery containers. And so we're very encouraged by what we're seeing on the delivery platform through Starbucks Delivers, as well as through our partnership with Alibaba.

On the U.S. business, I have two questions. First, you provided some details about daypart and product mix; how did the comparisons work between My Starbucks Rewards members and non-members? Are your stores experiencing more visits from loyal members? Are you managing to bring back some of the less frequent users, and can you quantify the benefit from the new digital relationship you have? Additionally, can you discuss whether delivery will eventually be available in the U.S. through the Starbucks app, or will it only be through UberEats, and why is that the case? It seems logical to want to capture customers who already use your app for delivery rather than directing them to a third-party app.

So, first of all let me start with the breakdown between Starbucks Rewards and non-Starbucks Rewards; we typically don't give a great detail in that area between Starbucks Rewards and non-Starbucks Rewards but I will tell you that we continue to grow our business at peak in the mornings, and that's when we see our strongest Starbucks Rewards customer in our store, so we are continuing to grow very well there. I will also mention that within the quarter we saw very nice improvement in the number of Starbucks Rewards customers, we added 1 million new Starbucks Rewards members to the business. When we look at those numbers, that is a number that we've not achieved since 2015, so we're pleased with where we're growing the Starbucks Rewards customer. I will also tell you that we continue to see spend per member list on the Starbucks Rewards customer that we are pleased with, and we're also continuing to do work to convert those customers that have joined us from a non-Starbucks Rewards perspective and to get them to join us as a Starbucks Rewards member, so our work continues there. Your second question was about how we are approaching Starbucks Delivers in the app. That work is ongoing. We just migrated from Miami to San Francisco this week, and the software integration is the most crucial aspect of our efforts right now. We are pleased with the progress we've made in this short time. Currently, access is only available through the Uber app, but we are working on enabling access to Starbucks Delivers through the Starbucks Rewards app, which is coming soon.

I would like to follow up on China regarding delivery. How is that delivery contributing to growth based on the adoption trends you've observed in the first few months? Additionally, can you provide insight into the pace of the rollout after reaching the initial 2,000 deliveries? You also mentioned co-marketing opportunities with Alibaba, which involves several hundred million customers; how do you anticipate that will develop? Thank you.

David, on the delivery side, we are currently seeing a mid-single digit contribution through our transaction mix in major markets like Beijing and Shanghai. We're experiencing solid growth in delivery transactions, and our focus will be on building awareness of Starbucks Delivers through Alibaba and their app, as well as our own Starbucks app. We'll concentrate on encouraging trial and fostering repeat usage to increase adoption. These are our main priorities. Regarding our partnership with Alibaba, we have the Starbucks Delivers program, including the Star Kitchen initiative with Hema, which we are committed to investing in and expanding together. The second area I would say is as it relates to Tmall and the opportunity that we see to make Starbucks product accessible through the Tmall site and today through this partnership we now have the number one position in terms of sales in the food and beverage card category across China, and in particular on the Tmall site. The virtual store that I talked about at the Investor Day is something that we have kicked off with Alibaba that gives us access to their 600 million users, and gives them the opportunity to become Starbucks Rewards members at a much easier pace and with very little friction. So what have we seen from a Starbucks Rewards program? From a Starbucks Rewards program our 90-day active membership grew over 14% in the quarter, we now have 7.3 million active members and the total membership across Starbucks Rewards stands at 22 million which showed an overall 8% increase in membership. So we're very, very pleased with the partnership and the opportunity that we're seeing with it and the opportunity to continue to innovate.

You're caught in a strong holiday season in the U.S., definitely a nice rebound from last year. During the holidays, you ran a TV advertising campaign which is something you guys have done in the past but I was curious if you're planning to leverage up for the results to take advantage of the brand scale and lean more into TV advertising in calendar 2019 to take advantage of that scale? And then separately, I remember you once previously called out nitro contributing about 1% to a store's comps once that's introduced. Is that still the case? Thanks.

First of all, regarding the media we used during the holiday season, it was beneficial for us. We have consistently engaged in our digital media and personalized connections, and the out-of-store media we implemented was effective. Whenever the Starbucks brand is prominently advertised, we see a positive impact on our performance. I also want to mention that the commercials were well utilized; some of our partners appeared in them, making them well received. In the future, we plan to create a better balance between out-of-store media and digital media, resulting in a more integrated approach than what you have seen before. As for your second question about nitro, while I’m not sure if I directly relate the 1% improvement in our comparable performance to that number, I can tell you that our cold beverage category performs exceptionally well for us. During the holiday period, our cold espresso offerings did remarkably well, and we are optimistic about nitro, which is why we are expanding it. Overall, our cold platform continues to do extremely well for us.

Well, I want to thank all of you for joining us today. We continue to execute against our growth at scale strategy that we outlined at last month's investor conference. And I think the results that we just posted demonstrate that that strategy is working. Now I also know many of you were able to join us in New York at this opening of the Starbucks Reserve Roastery in December and we're excited to announce that the Tokyo Roastery will open to the public on February 28. So I would invite all of you on your next trip to Tokyo to please stop by and visit this beautiful roaster, and we'd love to host you. Thanks for joining us and we look forward to talking to you again, and we'll see you soon. Thanks.