Starbucks Corp (SBUX) — Q4 2022 Earnings Call Transcript

Thank you, Diego, and good afternoon, everyone. And thank you for joining us today to discuss Starbucks' fourth quarter and fiscal year 2022 results. Today's discussion will be led by Howard Schultz, Interim Chief Executive Officer; Frank Britt, Executive Vice President, Chief Strategy and Transformation Officer; Sara Trilling, Executive Vice President and President of Starbucks North America; and Rachel Ruggeri, Executive Vice President and CFO. And for Q&A, we will be joined by Laxman Narasimhan, Incoming Chief Executive Officer; Michael Conway, Group President of International and Channel Development; and Belinda Wong, Chairwoman of Starbucks China. 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 factors discussed in our filings with the SEC, including our latest annual report on Form 10-K and quarterly report on Form 10-Q. Starbucks assumes no obligation to update any of these forward-looking statements or information. GAAP results in the fourth quarter fiscal year 2022 include several items related to strategic actions, including restructuring and impairment charges, transaction and integration costs, and other items. These items are excluded from our non-GAAP results. All numbers referenced in today's call are on a non-GAAP basis, unless otherwise noted, or when there is no non-GAAP adjustment related to the metrics. Further, year-on-year comparative metrics on today's call are based on a 13-week or 52-week basis, to exclude the impact of an extra fiscal week in fiscal 2021. For non-GAAP financial measures and year-on-year metrics mentioned in today's call, please refer to the earnings release and our website at investor.starbucks.com to find reconciliations of those non-GAAP measures to their corresponding GAAP measures and 53-week and 52-week metrics. This conference call is being webcast, and an archive of the webcast will be available on our website through Friday, December 2, 2022. And for your calendar planning purposes, please note that our first quarter fiscal year 2023 earnings conference call has been tentatively scheduled for Thursday, February 2, 2023. And with that, allow me to turn the call over to Howard.

Thank you, Tiffany. Hello from Milan. Today has been an especially significant day for me, serving as a powerful emotional reminder of my journey with Starbucks. Forty years ago, walking through the beautiful streets of Milan, I was first inspired by the potential of what Starbucks could become globally. Now, I'm back in Milan, celebrating the early days of our successful business in Italy—a country where many doubted Starbucks would thrive—on the same day we globally launch our holiday season, an event that has become a renowned phenomenon. Much of Starbucks' inspiration has stemmed from Italy. Here, our partners' commitment to crafting coffee with elegance and passion, along with their dedication to providing a premium coffee experience, has reached exceptional levels. Italians have embraced Starbucks, evidenced by our best-selling beverage being a solo espresso, which affirms the quality of our coffee and the relevance of the customer experience we've maintained since our founding in 1971. We recently opened our 20th store in Verona to enthusiastic crowds, with Rome and Naples following closely in 2023. Milan and Italy embody the premium coffee experience Starbucks is delivering in various cities worldwide, as shown by our strong financial and operational results for Q4 and fiscal 2022. In Q4, Starbucks saw global revenues rise by 11% over the previous year to a record $8.4 billion, driven by 7% comparable store sales growth globally and 11% in North America. For fiscal year 2022, we increased global revenues by 13% to a record $32.3 billion, aided by 8% comparable store sales growth globally and 12% in North America. We also expanded our global store count by 6% in fiscal '22, concluding the year with approximately 36,000 stores in 83 countries. Today, Starbucks facilitates over 100 million customer visits from our retail outlets globally, and across all channels, we provide over 400 million coffee experiences each week. We are navigating the current challenging operating environment while remaining acutely aware of the global economic uncertainties confronting our customers. Our strong performance in the past quarter and the year highlights the relevance of the Starbucks brand and our strong relationships with customers amid these challenges. We observed robust demand for Starbucks coffee in Q4 and consistently throughout the year across all markets. We're encouraged by signs of recovery in China during Q4, where innovation and increased customer engagement with the brand, along with eased COVID restrictions, fueled strong positive sales momentum and quarterly improvements. The rapid acceleration of our business in China in Q4, coupled with the clear connection between sales growth and the relaxing of COVID restrictions, reinforces our belief in Starbucks' long-term growth potential in the region. However, recent weeks have seen a significant resurgence of COVID in China, leading to renewed lockdowns and restrictions that have substantially reduced foot traffic in our stores. We expect the current uncertainty due to COVID to persist and reiterate our previous outlook shared in our Q3 call and Investor Day: while our long-term ambitions for China are unchanged, we foresee a non-linear recovery for our business in the country. I'll elaborate more on China shortly. In fiscal 2022, we made significant strides in expanding our global customer base. In the U.S., we grew our unique customers by 9% year-over-year, and our local customers are engaging more deeply with the Starbucks brand, shown by a 16% annual increase in U.S. Starbucks Rewards membership, reaching nearly 29 million members—up 5% from Q3. Starbucks is now connecting with more customers more meaningfully, both domestically and globally than ever before, positioning us well for further revenue and comparable store sales acceleration in the upcoming months and years. Our performance reinforces our confidence in the ambitious growth plan we announced in September, which aims to add roughly eight new stores daily, ensuring best-in-class returns worldwide over the next three years, targeting nearly 45,000 global stores by fiscal year 2025. Our Q4 results also reflect the early, encouraging benefits from our reinvention plan investments outlined at Investor Day in September. Following me, Frank Britt, our Chief Strategy and Transformation Officer, will provide insights into our reinvention benefits expected in the coming quarters and years. Next, Sara Trilling, a 20-year Starbucks partner who recently took the lead in our North American business, will share insights into our operations in that region and what to look forward to in the coming months. Then, Rachel will discuss our financial and operational performance in Q4 and for the year and provide guidance for the upcoming year. Finally, we'll conclude with a Q&A session. Starbucks' reinvention, co-created with our partners nationwide, will enhance every aspect of our partner, customer, and store experiences. Last week, 2,000 Starbucks leaders from across the U.S. and Canada gathered in Seattle to unify around our reinvention initiative and bring those insights back to their local markets. I’ve never witnessed such tremendous engagement and positive responses at any Starbucks gathering in my over 40 years with the company. Our reinvention investments will simplify our partners' tasks, better position them to meet growing demand in our stores, and enhance their interactions with customers. Initial results from our reinvention investments have already been positively measurable, particularly in partner retention, service speed, and overall customer experience. I'm especially pleased to see these investments revive coffee excellence, craft, and joy for our Starbucks Baristas. Core to our long-term growth strategy and Starbucks' success is our global leadership in coffee and espresso across both hot and cold beverages. In Q4, we continued to build on our core, innovate, and introduce new customization options and premium offerings, solidifying our stance in hot and cold coffee categories—especially cold coffee, which we pioneered and continue to expand worldwide. The demand for customized, handcrafted cold beverages is impressive, as they now represent 76% of our total beverage sales in U.S. company-operated stores. Customers are increasingly personalizing their cold drinks by adding high-margin flavor modifiers for unique beverages tailored to their preferences. We’re also continually introducing innovative core hot coffee and espresso offerings, including enhancements to popular seasonal offerings like pumpkin spice, which is up 17% from last year due to increased customization with cold foam. As part of our reinvention effort, we're implementing a proprietary handheld cold foamer that improves beverage quality and service speed while reducing partner complexity; the response from our partners has been overwhelmingly positive. The surge in new U.S. customers and Starbucks Rewards members, combined with strong customer reception of our innovative beverage offerings, led to the highest net sales week in our history this past September. Let me emphasize that statement: we experienced the largest sales week in September in our entire history. The strength of our business as we exited September, paired with an exciting holiday lineup launching today, marked by festive store decor, holiday favorites being added to our menu, and the return of our iconic red cups, gives us great confidence for holiday 2023. In North America, the convergence of customer trends towards premium beverages, increased customization, strategic pricing decisions, and an 18% food sales increase drove net revenues up 15% year-over-year to a record $6.1 billion. Once again, our convenience channels, including drive-through, Mobile Order & Pay, and delivery, accounted for 72% of our total sales volume. Starbucks Rewards members contributed to a record 55% of sales in our U.S. company-operated stores during Q4. The Rewards program continues to enhance customer value, foster connections, and propel our business forward. Despite our global scale and growth, we have remarkable untapped potential to expand our Rewards program in a unique way. We recently initiated the Reward Together program, allowing a select group of leading brands to partner with us by integrating their loyalty programs with Starbucks Rewards. Through Reward Together, we will engage and reward members of both brands with new benefits and experiences that enhance the value of our Rewards program, drive membership, and increase customer lifetime value. Our first partnership in the U.S. with Delta Airlines launched last month and received an extraordinary customer response, catching both Delta and Starbucks by surprise. Additionally, we unveiled Starbucks Odyssey, a next-generation loyalty model that incorporates NFTs into our Rewards program, allowing us to connect with customers on a deeper level and giving them the chance to earn and purchase digital collectible assets that unlock new benefits and immersive coffee experiences. Customer feedback on Starbucks Odyssey has been incredibly positive, and more details will be shared soon, when our first customers have the chance to explore this new exciting way to engage with Starbucks. The results will likely surprise many. Our rapidly expanding base of 6,600 North American licensed stores reported strong results in Q4, with revenues rising 25% in the quarter and 29% for the year. We are continuing the rollout of Starbucks Connect across our U.S. licensed store network, which enables these stores to offer the full range of Starbucks Mobile Order & Pay and Rewards benefits for the first time. As you will hear from Sara, the 1,600 licensed stores that have adopted Starbucks Connect are experiencing significant business growth since implementing it. Starbucks Connect allows us to capture demand across our broader portfolio and will contribute positively to our business. The momentum in our International segment that began in Q3 continued into Q4, with revenues for the quarter increasing by 12% to $1.8 billion on a constant currency basis, and for the year, revenues grew 9% year-over-year to $6.9 billion, also on a constant currency basis. We added 518 stores during the year, bringing our global total to nearly 18,500 stores. We're aware of the challenges posed by the rapid appreciation of the U.S. dollar for our international licensees, and we are maintaining close communication as we collectively navigate this dynamic environment. Regarding our Channels business, Starbucks retains the largest market share in U.S. at-home coffee and ranks first in global ready-to-drink coffee. Continuous growth in our Global Coffee Alliance with Nestle contributed to strong Q4 performance, with revenues increasing 18% on a constant currency basis to $484 million. For the year, revenues in this segment also grew 18% to $1.8 billion on a constant currency basis. Now, let me shift to discussing China. Starbucks has a 20-year history in China, and our aspirations for this market have never been higher. We currently operate over 6,000 stores in China, and as Belinda mentioned at Investor Day, we plan to reach close to 9,000 stores by 2025. We're set to open the Starbucks China Coffee Innovation Park, which will house our largest coffee roasting and packaging facility outside the U.S., in the summer of 2023. We employ over 60,000 passionate partners in China, and they are highly engaged with customers, as demonstrated by today's record high customer connection scores. We continue to be a top employer and lead in partner investments, recently introducing a 14th month bonus for all full-time employees. We remain committed to investing in career paths and opportunities for our partners while supporting the communities we serve. Our customer base in China is expanding, and our digital connection with them is strengthening. Active Starbucks Rewards membership jumped 29% sequentially in Q4 from Q3 to over 17 million members, approaching historic levels as restrictions were lifted, showcasing the strength and relevance of the Starbucks brand in China. Mobile ordering, which was negligible in 2019, made up 44% of sales in Q4. Delivery, which has increased 35% year-over-year, now accounts for over 24% of total sales. We foresee continued growth in mobile, digital, loyalty, and delivery channels as driving forces for our business. However, we are acutely aware of the evolving macro challenges in China, especially related to the impacts of the zero-COVID policy. Our strong belief in the future of our business in China is built on our previous successes and our commitment to the long journey ahead. We're optimistic that once COVID-related disruptions fade, Starbucks will solidify its position as the clear leader in our category and likely emerge as the preeminent Western consumer brand in the country, thanks to our ongoing investments in partners and our business throughout the pandemic. Laxman’s onboarding is progressing remarkably well. He has connected with our partners in stores across the U.S. and U.K., quickly winning their trust and respect. Just this week, he achieved Barista certification in record time and received his store Green Apron. Laxman's dedication to understanding store operations and the experiences of our partners and customers reflects our shared recognition of what is essential in these initial days of his tenure at Starbucks. We engage daily as he continues to learn about the company and our operations. The Board and the leadership team, along with myself, are deeply invested in his success. I am confident that Laxman is the ideal CEO for Starbucks at this pivotal moment. Today, he is witnessing the launch of our critical holiday season. Soon, he will be leading the company in bringing our reinvention plans to life and guiding Starbucks into the future. In conclusion, Starbucks has never been in a stronger financial position, nor better positioned or more confident about our prospects as we enter Q1, the holiday season, and embark on the exciting new growth era ahead. With that, I'll hand the call over to Frank.

Thank you, Howard, and good afternoon, everyone. It was just 50 days ago that we laid out our reinvention agenda that involves five major strategic shifts. First, creating a truly unified global company; second, radically improving our in-store partner experience; third, reimagining our store operating model; fourth, reinvention around what customer connection means; and perhaps, most importantly, redesigning the construct of what it means to be a partner at Starbucks. While still early days, we are seeing progress with several key proxy measures. For example, retention has increased with turnover scores at the hourly Barista level, lower by 1 point versus the prior year and 4 points versus the prior quarter. Additionally, customer connection scores show a 5-point improvement to pre-pandemic levels. All of these are early but encouraging signs. We fully embrace that our partners are the most critical component to our longer-term performance, and we need to be even better at addressing their needs. Partners who proudly wear the Green Apron have bravely shared their stories and their ideas in our co-creation sessions, and we have concentrated our efforts to jointly create solutions with our partners and for our partners. In the fourth quarter, we continue to improve our already industry-leading benefits to a deeper position of strength with several new programs for partners. Representative examples of improvements include: a new incentivized savings program in partnership with Fidelity, designed to help partners in case of unplanned financial challenges; a new student loan debt program to empower partners looking to find the best ways to address their college debt management obligations; an increase in sick time accrual ratios for our partners; an updated family expansion reimbursement program, aimed at assisting partners with the cost of growing their families through adoption and similar means. We have remained committed to the critical development opportunities of our people. And as a complement to doubling our partner training hours, as Howard noted, we've reintroduced our iconic Black Apron credentialing program, and nearly 5,000 partners have already earned their apron and continue in the program. We've also launched the pilot of a new partner app designed to create one digital community for our 270,000 U.S. and Canada company-owned store partners. Over time, this new digital platform will allow partners to stay connected on what matters to them most, including their schedules, their benefits, and continuing to use their voice to drive the co-creation of Starbucks. More than 1,000 partners have participated in our testing and are providing feedback for our launch planned for Q2. Obtaining the right mix and number of hours is essential to a thriving partner experience at Starbucks, and we aim to provide desired hours with flexibility and predictability. We are highly focused on honing our staffing models and operating processes to ensure we can allocate the right amount of talent to each store every daypart, advancing our capabilities to fine-tune our hours of operations by store to reflect unique demand patterns. As part of the reinvention agenda, all these efforts share a primary focus to grow the lifetime value per partner and are connected to the ongoing reinvention initiatives, including in-store waste reduction and further acceleration of equipment rollout to enable an improved partner experience and higher productivity. We will also continue to focus on accelerating our trade area transformation, modernizing the way technology elevates the store experience, and continuing supply chain innovation. Longer-term, powered by our partners' insights, we have a very robust agenda and improvement plan powered by a new architecture and vision of the partner experience. Over time, this will translate into an even more partner-centric system in the stores, affirm our reputation as a frontline talent career launchpad, and improve retention rates. Finally, as part of this new phase of reinvention, we continue to lean into our centralized project management office to drive better integration among our initiatives and fully capture the synergies across our store and customer innovations. Together, these initiatives are designed to strengthen our business through top-line growth and margin expansion and improve the partner experience. I look forward to sharing more of the progress in the quarters ahead. Let me now turn it over to my partner, Sara.

Thank you, Frank, and good afternoon, everyone. I'm Sara Trilling. I'm pleased to join you today for my first earnings call in my new role, leading the North America business. While I'm relatively new to this particular role, I'm a 20-year partner and most recently served as Senior Vice President of Asia Pacific. Over my Starbucks career, I've touched nearly every aspect of the business and have served in many leadership positions across a variety of functions, including store development, retail operations, product, and marketing. I'm looking forward to applying the relevant breadth and depth of my experiences to this next phase of growth in North America. To build on some of the comments from Frank and Howard, we continue to see very healthy growth in our North America business. As we highlighted at Investor Day, we saw the highest net sales week of all time with the launch of our fall promo. I'm pleased to share that this subsequently led to an incredibly strong September, with three of the highest sales weeks in our history. Our strong quarter, comparable sales of 11% and revenue growth of 15%, were largely driven by a record-breaking fall launch, coupled with continued strategic pricing actions, increased food attach, as well as the shift to more premium beverages and a growing demand for personalization in both company-operated and licensed businesses. Elevated from pre-pandemic levels, we maintained ticket comp strength in our U.S. company-operated business at 10%, representing our fifth consecutive quarter of increased ticket comp. These results reflect the continued strength in demand for Starbucks as our customers fell into their new normal routine and behaviors. We fully expect the momentum from our record fall launch to continue as our highly anticipated holiday at Starbucks launched just today and includes some great seasonal offerings. What gives us further confidence in the holiday season is the strength of the Starbucks brand with younger, more diverse customer groups. More than half of our U.S. customer base is Gen Z and Millennials, reflecting relevancy and brand love across generational cohorts, trends we see with diverse customer cohorts as well. We are incredibly pleased with our business momentum and the reinforcement of our strategy in the following key areas. First, we've established sustained relevancy of the Starbucks brand in customer loyalty. In fact, Starbucks is consistently, quarter-over-quarter, the leader in market share, first choice, and past 30-day visitation when it comes to an away-from-home coffee occasion as measured by our brand equity tracker. We're also pleased to share that customer connection scores have increased 5 points versus pre-pandemic levels. The strength of the brand is further illustrated by the success of our iconic pumpkin spice platform, which grew 17% year-over-year and continues to resonate with customers who love the classic Pumpkin Spice Latte, as well as newer additions, such as the Pumpkin Cream Cold Foam modifier. Second, our cold customized beverage strategy is working. We're seeing growth in both hot and cold, and increasing customization. In Q4, more than 60% of beverage units sold in the U.S. company-operated business were customized, contributing to the $1 billion and growing annual net sales for modifiers, representing growth of 2x since the first fiscal 2019. Finally, we reinforced our unique position in providing experiential convenience as evidenced by all-time highs in Starbucks Rewards engagement amid Mobile Order & Pay orders. The Starbucks Rewards program in the U.S. grew 90-day active members, ending FY '22 with nearly 29 million members. This represents growth of 16% year-over-year and 55% of our U.S. company-operated revenue in the quarter, up nearly 4% from the prior year, representing the highest-ever percent of tender. Mobile Order & Pay surpassed 26% in Q4 for the first time in a quarter, finishing fiscal year '22 at 25% of total transactions. We're incredibly optimistic about our continued momentum in digital following the unprecedented interest in Starbucks Odyssey, the integration of NFTs with our industry-leading loyalty program to create an accessible Web3 community that brings unique aspects of our brand to life in a new way. We also experienced a wildly successful launch of Reward Together with Delta. With this partnership, our Rewards members can earn miles faster through their everyday purchases at Starbucks and earn even more Stars on days when they travel with Delta. The initial response from customers has been extraordinary and beyond our expectation, and this is just the start. Importantly, we finished the year with nearly 25% of our U.S. license portfolio live with Starbucks Connect, allowing us to create a seamless digital experience across our stores, giving customers more ways to connect with our brands and furthering the value of the rewards experience. As part of our reinvention and as we shared at our September Investor Day, we're investing in equipment to innovate for an improved partner and customer experience. We have completed the deployment of Starbucks Cold Brewer and have rolled out the Mastrena 2 espresso machine and new warming ovens to nearly 95% and 72%, respectively, of our stores across the U.S. This equipment collectively supports improvement in our throughput during both peak and full day while providing the foundation to support elevated partner and customer experiences as we further reinvention plan investments and productivity. The rollouts for these three items will be completed by fiscal year '23 for our company-operated stores. Additionally, we rolled out nearly 60% of our handheld point-of-sale investments to nearly 75% of our cold beverage labelers. Handheld POS is already helping us capture new and latent demand in support of our ambitious revenue expectations. We expect to see further benefit as we extend the rollout for handheld POS into fiscal year '24. While still in the early days of development, partner and customer reception of the new Siren System innovation we shared at Investor Day is overwhelmingly positive, including the Clover Vertica brewer and the new proprietary on-demand cold-pressed Cold Brew technology. We expect to begin rolling out Clover Vertica brewer later in this fiscal year, with our broader Siren System innovations fast following in fiscal year 2024. Through our investments, we're giving our partners more time to focus on coffee craft and connect with customers, enabling them to continue delivering experiential convenience in a way that only Starbucks can. The powerful unlock is our reinvention positions us for sustainable, profitable growth over the long term. In fact, just this last week, we welcomed nearly 2,000 retail leaders from the U.S. and Canada to Seattle for our District Manager Leadership Experience. This powerful three-day event is designed with great intention to provide a renewed understanding of the critical role each leader plays in our business and with our people, and equip them fully to lead their stores and store partners through our reinvention and into our future as we all breathe life into this reinvention plan. To close, this is an incredibly exciting time to lead our North America business. While the macro environment may be uncertain, our performance is once again demonstrating the strength and resilience of our brand and our business. We are well positioned in this environment, which will only further strengthen as our reinvention comes to life. I'll now turn it over to Rachel.

Thank you, Sara, and welcome to your first Starbucks earnings call. Good afternoon, everyone. As you heard throughout this call, starting with Howard, we had record-breaking performance this quarter, and I'm incredibly proud of what we achieved together. We finished fiscal year 2022 with consistently strong demand in the U.S. and in nearly all major markets globally, with that demand sustaining as we exited the year. Our Q4 consolidated revenue reached another historical high of $8.4 billion, up 11% from the prior year or 14% when excluding a 3% impact from foreign currency translation. The revenue growth was primarily driven by a 7% comparable store sales growth and 6% net-new store growth over the past 12 months, further strengthened by the remarkable momentum in our global licensed store businesses. In addition, this outstanding performance reflects double-digit revenue growth in all three of our reporting segments in constant currencies, showcasing the resiliency of our brand, the power of customer loyalty, and the depth of our diverse portfolio. Q4 consolidated operating margin contracted 380 basis points from the prior year to 15.1%, primarily driven by investments in growth in labor, including enhanced store partner wages and new partner training, part of which were investments under our reinvention plan. Furthermore, operating margin was impacted by inflationary headwinds and deleverage related to COVID restrictions in China. The overall contraction was partially offset by pricing in North America and sales leverage across markets outside of China. Q4 EPS was $0.81, declining 9% from the prior year but better than expectations, including $0.05 of nonrecurring benefits primarily related to discrete tax benefits. For the full fiscal year, our consolidated revenue reached a record $32.3 billion, up 13% from the prior year or 15% when excluding a 2% impact from foreign currency translation driven by 8% comparable store growth, 6% net-new store growth, and strength in our global licensed store businesses. Full-year consolidated operating margin and EPS were 15.1% and $2.96, respectively. I will now provide segment highlights for Q4. North America delivered revenue of $6.1 billion in Q4, up 15% from the prior year and another all-time record, primarily driven by an 11% increase in comparable store sales, inclusive of a 10% increase in average ticket as well as net-new store growth of 3% over the past 12 months. Impressive momentum in our U.S. licensed store business also contributed to the segment's record revenue performance. My colleagues spoke in detail about our incredible U.S. performance in Q4, posting an 11% comparable store sales growth. Average ticket once again broke a record, primarily driven by pricing and food attach. Despite elevated pricing actions throughout the year, daily store traffic in the U.S. reached approximately 95% of pre-pandemic levels in September, fueled by the wildly successful fall promotion. Importantly, the volume of beverage and food items sold per store has well exceeded pre-pandemic levels, and the number of unique customers again reached an all-time high in Q4, up 9% over the prior year and up more than 1% versus the prior quarter, underscoring our brand's expanding reach and relevance in customer loyalty. North America's operating margin was 19% in Q4, contracting 270 basis points from the prior year, primarily due to investments in growth in labor, including enhanced store partner wages and new partner training as well as inflationary headwinds, partially offset by pricing and sales leverage. Our disciplined actions to closely manage labor hours, reduce waste, and prioritize discretionary spending also contributed to the segment's margin performance as we build a strong foundation for progressive margin expansion in years to come. Moving on to International. The segment delivered Q4 revenue of $1.8 billion, down 1% from the prior year or up nearly 12% when excluding a 12% unfavorable impact from foreign currency translation. This double-digit revenue growth in constant currencies was driven by sustained strength in all major markets outside of China, as well as an 8% increase in total store count over the past 12 months. The growth was partially offset by a 5% decline in comparable store sales as the impacts of COVID continued in China. As Howard discussed, our China market continued its recovery in Q4, navigating through recurring COVID outbreaks and turbulent consumer mobility. The market posted a comp decline of 16% in Q4, a meaningful sequential improvement from a 44% decline in Q3. Despite this depressed traffic, the China team's outstanding leadership and strength of our brand were markedly evident in the quarter as reflected in record levels of store development, growth in delivery, and the highest-ever customer connection scores. Outside of China and excluding the impact of foreign currency translation, our diverse international markets across the globe sustained incredible momentum in Q4. Collectively, the market's revenue growth exceeded 30% in the quarter when excluding a 19% unfavorable impact of foreign currency translation. The international segment's net-new stores reached a quarterly record at 518, climbing to more than 18,000 stores in total, setting the stage for a new era of growth, with a rapidly expanding footprint around the world. Operating margin for the international segment was 14.5% in Q4, down 750 basis points from the prior year, mainly driven by deleverage related to COVID restrictions in China, lower government subsidies, and partner investments. The contraction was partially offset by pricing and strong sales leverage across markets outside of China. Shifting to channel development, the segment's revenue grew 16% to $484 million in Q4 or up 18% when excluding a 2% impact from foreign currency translation driven by growth in both the Global Coffee Alliance and our global ready-to-drink businesses. Channel development continued to play a vital role in differentiating, diversifying, and amplifying our brand by creating customer occasions outside our stores. As a result, Starbucks remains the market leader in both the total U.S. at-home coffee and ready-to-drink categories. Building on the success of our newer platforms, the segment's robust innovations continued in the quarter, including the introductions of ready-to-drink Starbucks Pumpkin Cream Nitro Cold Brew in the U.S. and bottled Frappuccino Smoothie in China, to name a few. The segment's operating margin was 50.6% in Q4, down 170 basis points from the prior year, mainly driven by business mix shift. Let's now move on to our fiscal 2023 outlook, which reflects the beginning of a new era of growth. Our guidance remains consistent with what we shared at our Investor Day in September. So today, I will reaffirm and refine the guidance specific to fiscal year 2023. We'll also introduce an outlook on a few below-the-line metrics that were not part of our Investor Day guidance. Starting with the first building block of our growth, comparable store sales growth. We expect fiscal 2023 U.S. comparable sales growth to grow in the range of 7% to 9%. For China, we're expecting outsized comps in fiscal year 2023 as we lap the severity of the lockdowns in the market. 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. Our fiscal 2023 global comp growth is expected to be near the high end of our long-term target range of 7% to 9%, consistent with what I shared at Investor Day. Global comp in Q1, reflecting the negative comp in China, is expected to be at the low end of the annual guidance range, then expand in subsequent quarters. Moving on to the second building block, new store growth. We expect our U.S. store count to grow by approximately 3% in fiscal year 2023. In China, we will continue to rapidly expand our store footprint, with approximately 13% growth expected in fiscal year 2023. We expect our global store growth to reach approximately 7%, with over 75% of the growth coming from outside of the U.S. as we continue to diversify our portfolio globally. With this powerful combination of global comp and store growth, coupled with our Channel Development performance, we expect our consolidated revenue growth to reach the range of 10% to 12% in fiscal year 2023 despite an approximately three percentage point unfavorable impact expected from foreign currency translation. 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. 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. We have a solid path to capture strong demand, maximize opportunities unlocked from our reinvention plan, and deliver attractive revenue results. Our third building block is operating margin. Globally, we expect solid margin expansion in fiscal year 2023. 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. In addition to the quarterly shape of operating margin, here are a few points to consider. We expect over $1 billion in incremental investments in fiscal year 2023, half of which will reflect the annualization of the fiscal 2022 investments. 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. Headwinds will be managed through sales leverage, pricing, and productivity from the reinvention, resulting in positive margin expansion as the year progresses, as I previously mentioned. The fourth building block is capital allocation. We expect our CapEx in fiscal 2023 to be approximately $2.5 billion. 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 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. 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. Regarding interest expense, we expect between $540 million and $560 million of interest expense in fiscal 2023, up from $483 million in fiscal 2022. This increase is driven by incremental debt issuances in fiscal 2022 and fiscal 2023 as outlined in our capital allocation strategy. Importantly, we remain committed to our BBB+ credit rating and leverage cap of 3x rent-adjusted EBITDA. As for tax rates in fiscal 2023, we expect our effective GAAP and non-GAAP tax rates to be in the mid-20% range. This is up from our fiscal 2022 GAAP and non-GAAP tax rates of 22.4% and 23.1%, respectively, which benefited from certain discrete tax items that are not expected to repeat to the same degree in fiscal 2023. Finally, based on the current environment, we expect foreign currency translation to have an approximate four percentage point unfavorable impact on fiscal 2023 earnings growth. Despite that, we continue to expect fiscal 2023 GAAP EPS growth to be at the high end of the 15% to 20% range. Fiscal 2023 non-GAAP EPS growth is expected to be at the low end of the long-term range of 15% to 20%, as the benefits of the reinvention investments will take time to amplify. It's important to note that Q4 fiscal 2022 included approximately $0.05 of nonrecurring items, largely from discrete tax benefits. 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. In closing, here are key takeaways from my discussion today. We are incredibly proud of our Q4 performance, underpinned by the experience our partners create for our customers each and every day. Our 2023 guidance sets the stage for another year of record performance. Importantly, we recognize that our future growth is dependent on our investments in our partners, stores, and customers. As we lean in and solve the challenges of our business together with our partners, we are confident in our path to unlock a new era of growth, creating value for all stakeholders, partners, customers, and shareholders. Once again, our success is earned through our more than 450,000 Green Apron partners working across the globe to elevate the Starbucks experience each day. Their commitment and their unwavering focus will continue to be the cornerstone of our new era of growth. With that, we will open the call to Q&A.

Great, thanks. I had two questions on the Rewards Together program. First, can you talk about what differs about this program versus the Stars Everywhere program that Starbucks ran about six or seven years ago, when you partnered with New York Times, Lyft and Spotify, that was ultimately discontinued? And then my other question is just on the data sharing. Can you talk about the new capabilities this program is going to afford you and how the data sharing will work between you, Delta, and any other new partners that you guys bring on? Thanks.

Thank you for the question. This is Howard. I'm sitting with Brady Brewer, Chief Marketing Officer of Starbucks, and he'll take your question. Brady?

Yes. Thanks for the question. Really, the Reward Together program is about taking like-minded leading loyalty programs and linking them directly to Starbucks Rewards. And the intent is that whether or not you are with an airline like Delta, you can earn miles faster at Starbucks, and you can get additional Starbucks benefits when you fly with Delta. We're looking at a number of leading brands, and so this is creating direct tech-to-tech connection to link our loyalty programs and make the experiences better for both brands and both sets of customers. In terms of the data, we're really sticking with our continued focus on using data to make the experience better but being very thoughtful and disciplined about the data that we capture, but using it to make the experience better and inform our business. We're excited about the early stages of Reward Together. What we've seen, as you heard on the call, is extraordinary demand to link accounts in a way that was overwhelming relative to our expectations. So we're excited to see this build in the future.

Thank you very much. Howard, since the Analyst Day, the top question we've heard on Starbucks is related to the new long-term comp guidance of 7% to 9%. It seems like you're quite confident on that in fiscal '23. It seems like you have a pretty good line of sight, and these quarterly results support that. I get the feeling fiscal '23 is driven by menu pricing and the China bounce-back. But with that said, the focus, I guess, we're hearing is more looking six to 12 months out, with an even larger system. And in the face of a slowing macro and potential recession, it seems like your product will be more discretionary. So just wondering your confidence or maybe if you could prioritize the drivers to support that 7% to 9% comp, just because yourselves and even your peers, it's just been very difficult to sustain that level without it being driven by price. So especially going into a potential recession, you're confident six to 12 months out that we could still be talking about 7% to 9% for the next couple of years. Any color or prioritization would be great. Thank you.

Thank you, Jeff. Let's address the question by reflecting on our history, recent observations, and the reasons for our confidence. Despite the unprecedented current environment, we have consistently shown that Starbucks offers an affordable luxury that our customers appreciate, and their loyalty remains strong. In the past, we didn't have the benefits of the Rewards program, which is now generating significant and predictable revenue for us, fostering a loyal customer relationship. Additionally, we’ve monitored the demographics of our customer base, and we have seen it getting younger, which was our goal. This younger demographic, particularly Gen Z, has more discretionary income and has shown strong loyalty to Starbucks. We also have significant pricing power; although we’re not looking to raise prices currently, we’ve implemented nearly 6% in price increases over the past year without a decline in customer loyalty or transactions. Our focus on customization, particularly with cold beverages, is also helping increase the average transaction value. We have a solid promotional plan for the remainder of the year, and we’ve had to narrow down our beverage innovations because there were so many promising options. Furthermore, during the pandemic and the past year, Starbucks has gained consistent market share in our category and benefited from strategic real estate formats. While we acknowledge the challenges in the current environment, the decisions we make are influenced by the ongoing global situation. Nevertheless, we are confident that our resources, expertise, history, and innovation will enable us to achieve strong results moving forward. Thank you.

Hi, thank you so much. I have a question and then a follow-up, please. The question is really about, you just mentioned the premiumization and customization and how that seems to be more common with cold beverages. I guess that feels like it's been a tailwind for a little while now. How much further can you push this, if you will? Cold accounts for 76% in total. How much higher can that be? And as you think about customization, could you share what percentage of orders are customized or something that could give us a sense of how far along you might be in that penetration throughout?

Sure, I'll start.

I'm sorry. And just a question about China. I just wanted to clarify, as you talk about the restrictions, it's really about mobility, not about challenges in opening new stores. Thanks.

Yes. In terms of China, that is 100% correct. There's no issue with regard to opening stores. In fact, we're opening stores at record numbers. And Belinda is on the phone, and if you have a follow-up question about China, she certainly can answer it. In terms of your question about our ability to extend cold and modifiers, a few things. One, cold has certainly surprised us all at Starbucks. But our ability to customize beverages is a significant competitive advantage. There is no other coffee company anywhere in the world that has our ability to respond instantaneously to a customer's request about customization, nor is there a coffee company that has our ability behind the counter in terms of flavors, syrups, and modifiers to provide the customer with what they want. I think cold is in its early stages in terms of what's coming. And the innovation we have around cold throughout the year will continue to drive awareness and I think attachment. However, no one should think about the fact that our hot coffee business is not growing. In fact, it's growing nicely, but cold has kind of taken over. We have significant innovation plans for hot. So I think the percentage of revenue cold versus hot will see hot go up as a result of the innovation we have around the hot platform. And I'll give it to Brady, just to follow up on your question as well.

Yes. As Howard mentioned, hot coffee is growing, but cold beverages have accelerated significantly over the last few years, contributing substantial sales volume in our stores. What we're observing, as Sara pointed out, is that the cold-customized plant-based beverage platform is particularly appealing. The younger demographic prefers colder drinks. We've seen considerable year-over-year growth in Iced Espresso, which is our largest product category. We are also witnessing growth in hot espresso. Refreshers, Nitro, and Cold Brew are all experiencing significant growth. Moreover, as Howard stated, modifiers have increased in double digits year-over-year. Now, over 60% of our beverages are customized. This is important because our customers have realized that their favorite beverages can't be found elsewhere. This ties back to the earlier question about navigating tough times; these are beverages that can only be found at Starbucks and cannot be made at home. Customization has increasingly enabled this in our stores. We are just getting started, and there are plenty of growth opportunities ahead.

Thank you for the question. I wanted to ask about China. Can you talk about your composition of locations in China across Tier 1, Tier 2, and lower-tier cities, and just in terms of unit growth, where you're growing across those tiers? Any color you can provide on trends you're seeing in Tier 1 versus other cities would be helpful. Thank you.

Sure. Belinda Wong, who runs Starbucks China, is on the phone from China, and I think she is obviously the best person to answer the question. So Belinda, please.

Thank you, Howard, for the question. Starbucks remains a leader in brand share and preference, leveraging our premium positioning and competitive edge derived from the exceptional coffee experience provided by our partners and the strong connections we have with our customers. We are pleased to see the strong growth of the coffee market in China in recent years alongside the introduction of new brands and competitors. Each brand presents different value propositions aimed at various segments and locations, but collectively, we will advance coffee culture and boost overall category adoption. Regarding our new store development approach, as I mentioned during Investor Day, we will adhere to our purpose-built store strategy. We will focus on optimizing our store portfolio, enhancing density in key trade areas within our top 20 cities, and expanding into new cities where we have not yet established a presence. There are numerous opportunities for growth in these areas. Additionally, we will adopt a smarter approach. Our robust store development system, created by our excellent local team, relies on data that provides insights into where we should open stores in terms of format and size, not only for the third-place experience but also to meet omnichannel customer needs in all cities, both new and existing. Finally, we will prioritize sustainability. As I mentioned previously during Investor Day, we aim to launch 2,500 greener stores by 2025 as part of our portfolio. We are very confident in our strategy to expand our new stores while also understanding the growth potential in the China market. Thank you.

Thank you. For several calls now, we've been talking about the record number of discrete customers that Starbucks has. Obviously, that's very admirable to be able to talk about that, just having the breadth of the customer base. I would like to put that in context: 55% of MSR. This is presumably a customer that you could get to come to your brand more often, in other words, to actually have increased frequency relative to the brand of the past. So can you talk about the frequency opportunity you have? I mean, I guess, in two parts. One, you're bringing back that 2019 customer to come back as often today as they used to three years ago, kind of the first part of the question. And then secondly, what are the frequency-driving opportunities you have for some of the new customers? I mean, talk about that as both part of the MSR program as well as other initiatives that you may have.

Brady?

Sure. Thank you, John. While transactions are still lower than FY '19 or pre-COVID levels, what we are seeing is transactions continuing to grow. A part of this is that products sold, as measured by units per store per day, have been consistently higher than FY '19. What we're seeing is more group orders. Starbucks Rewards frequency is a function of both our SR members visiting frequently, but we're also adding so many new members. What we're doing is acquiring customers who are lower frequency and bringing them into the program, which helps increase their frequency. The SR program tends to see a very significant increase in frequency in the first year of membership. So SR is a strong driver of that for us.

I would like to follow up on the recovery in China. I’m interested in understanding your expectations for the year regarding the outlook for China. It seems that your guidance is based on the assumption that there will be a reopening in the second half of the year. What are the risks to your projections, especially regarding the comparisons and earnings recovery in the latter part of this year if the zero-COVID policy continues?

Rachel, do you want to start that? And if Belinda wants to add anything. Rachel?

Yes. Thank you for the question. The way we've considered the recovery in China is really, as we said in the beginning, based on mobility. When we talk about an outsized performance in the back half of the year, it's as we lap the severity of the lockdowns. Even though there may still be challenges, if you recall, we have, towards the end of Q2, started to see the severity of the lockdowns with a negative 23% comp in that quarter, followed by a negative 44% comp in the following quarter. So we're basing our expectations of recovery based on the laps and the increased mobility. Certainly, as we've indicated today, it's nonlinear, but that's how our actual assumptions for recovery are based, which is part of our guidance.

Belinda, do you have anything to add? Please go ahead, Belinda.

Yes. Yes. Let me just add to the fact that we're pleased to see a solid sequential improvement in Q4 in terms of our revenue and comp sales growth. It's encouraging to see the strong positive correlation we're seeing between easing restrictions and our business recovery. The incredible sequential improvement on our 90-day active members enthusiastically returning to our stores as soon as mobility restrictions ease, really gives us confidence in our ability to rebound as soon as the mobility restrictions are lifted. So I just wanted to add that. Thank you.

Belinda, can you just add one more thing, if you don't mind? What you've been able to do, given the restrictions on digital and delivery, please?

Yes. Despite the short-term COVID disruptions, as we shared at Investor Day, we remain laser-focused on executing our China growth agenda with great discipline and confidence, right? As you heard, we achieved record high-quality new store growth. Now we have 6,021 new stores across 230 cities, and those new stores continue to achieve best-in-class returns and profitability. We're also focused on our fast-growing omnichannel business, and that continued to gain great momentum. As Howard shared, Starbucks Delivers, sales grew 35% year-on-year to a record 24% of our sales mix. That's pretty incredible. Total mobile ordering sales mix now reached 44%. That's something we're very pleased to see, and it's going to be here to stay as we unfold more occasions from our customers. Customer engagement, as I said before, rewards active members coming back; we're also pleased to see that that’s very close to our historic high as well. We're achieving the highest customer connection scores. Our partners are really on the ground serving our customers. We're learning every day as to how to operate our stores better. We're increasing our muscle and our operational capability. We're getting smarter in our supply chain and our store development. I'm very pleased to see that. Last, one more thing. In terms of our partner engagement, we achieved record-low full-time retail partner turnover in FY '22. That really demonstrates the partner investments we've made over the past years are truly paying off. We're very humbled and well-positioned and excited to capture future growth opportunities. Thank you.

Thanks very much. On the reinvention plan, inside of '23, can you help us prioritize what you think drives sales the most? You talked about retention improving. You've talked about some equipment upgrades. If there's a way to rank order what you think sort of benefits the business, or if there's a cadence, should we think about certain of these initiatives benefiting one part of the year versus the other? Inside of that, can you just talk about speed of service and where you are, where you want to be? It would seem to me, just based on personal experience, that’s still an issue and maybe a gating factor to unlocking greater traffic growth over the next couple of quarters. Thanks.

Frank, can you take the reinvention question, please, and then Sara could talk about speed of service?

Sure. The partner experience as the core of the operating model of Starbucks is designed to drive retention, improve connection scores for both partners and customers. The secondary effect, to answer your question about top-line growth, is it creates more capacity that allows us to capture that incremental demand that sometimes is challenged in the current operating environment. The core of the reinvention agenda, of course, is the combining of innovation around store, customer, and partner. But at the end of the day, it’s designed to give us the capacity to engage the customers how they want to be engaged, in service of supporting their needs and ultimately, the performance.

Thank you, Frank. Thank you, John. I just want to start out with an acknowledgment. We certainly don't have a demand issue in our stores. As we've talked about, we have total weekly active customers that continue to grow. We're benefiting from incredibly high average weekly sales. Your call-out about the opportunities regarding speed with service is top of mind with all of us. Notably, over the last quarter, we did see some improvement during peak in our drive-through business in those window times, which is a metric that we continually keep an eye on and really orient our focus in our retail stores, with leaders observing and coaching during that daypart specifically. All I can say is that I acknowledge the opportunity ahead. What we hope to see with the reduction in turnover, the increase with more tenured partners, and overall stability in our stores, you will continue to see improvement with speed, with service, whether that’s in those peak hours in cafe and drive-through or across all dayparts.

Hi, good afternoon. Howard, I think you mentioned that you're willing to support some of the licensed partners outside the U.S., if I heard that correctly. I wanted to see if you could elaborate on what you mean by that statement and whether you're seeing pockets of issues outside the U.S. with all the pressures in the macro environment. Any elaboration on that would be helpful. Thanks.

Sure. I'll start and respond, and then I'll give it to Michael Conway, who runs International. I think Starbucks has some very unique long-term relationships that go back, in some cases, with the Middle East, Mexico, Latin South America, and Korea. Some of these relationships go back 25, 30 years, and others have been established recently. There's a tremendous level of loyalty and friendship that we have well beyond the business relationship. So we're in constant contact side-by-side with our partners to ensure they know that if something did come up, we would be a backstop and be there for them. That has not, in any way, been the case, and they have not indicated anything. But we certainly want to be the kind of partner that we can look back on with great pride for having been there for them. I'll give it to Michael Conway, who is working side-by-side with them every day.

Thank you, Howard. We’re keeping a close eye on the headwinds that we know are here, both from a foreign exchange perspective and inflation perspective. But so far, we're not seeing any negative impacts. Our business outside of China internationally grew over 30%. We’re having double-digit comps in all of our company-operated markets and across all the regions. We’re staying very close to them. But at the same time, we feel confident that between the strength of our brand, the convenience that we’re bringing, and the fact that certainly over this last quarter, we saw travel start to pick up. It was a strong summer, and mobility is continuing to open up, we see a lot of tailwind in our business. We’ll stay close to our business partners should they see challenges.

Good afternoon, and thank you for taking my question. I wanted to ask about the commentary you provided earlier regarding the employees. It seems they were surveyed about working conditions and benefits, similar to what you've done for consumers. My two-part question is: first, has the process for surveying employees and customers changed in any way? Second, where do their perspectives overlap? What common ideas do employees and customers share in their relationship? Thank you very much.

Why don't Frank and Sara take a shot at that? Thank you for the question, Nicole.

Yes. We have a very advanced, what we call, listening capability, where we are constantly sensing how our partners are doing, those who proudly wear the Green Aprons in the store. There is a process that happens on a sort of short-term basis just to monitor, and then we have a more comprehensive process which we do quarterly. We deconstruct that every quarter, we do a tremendous amount of correlation analysis using some very advanced capabilities we have in the analytics and data science arena. We try to be precise about the things we’re responding to based on the first principle that we’ve espoused now for quite a while, which is this idea that we should create the new Starbucks with partners and for partners. I think we have come a long way in that arena. Yet, as we often say, we are pleased but not satisfied. As for the connection to the customer side, which I’ll let Sara further elaborate on, we know that there is a direct correlation between partner engagement, which is the sum total of the surveying you’ve mentioned, and customer engagement. We know that correlation is real, and it’s amplified; you can see it every day in action. We try to spend a lot of time understanding the connection between the two. In the context of the brand, which Brady speaks to, we know that care is the number one factor in the brand equity equation of Starbucks. We know the partner is the epicenter of that care. That is the fabric that binds the lens of the brand experience as measured by the customer and the realized experience as measured by the partner in the store.

Thanks, Frank. And Sara?

Thank you, Howard. I would just pull up and offer a broad range perspective going back to the reinvention overall. The investments that we're making are directly designed to make it easier for our partners to do their job and to enable them to meet the growing demand in our stores and create new ways with that additional capacity to engage with our customers. We track partner engagement on a regular basis. We also map that engagement to the activity that we're launching in our stores in order to understand the connections, address any pain points, or seize opportunities, and we continue to check and adjust and design around those learnings looking forward. The other thing I think we're excited about is launching some new listening mechanisms related to partner engagement. Our partner app is one example of that, which we're piloting and testing. As we look to the future, we acknowledge that it is an era of co-creation. Those who are closest to the frontline, serving our customers, have a deep and rich understanding of what's needed, and we need to enable them to be able to serve.

Thank you. First of all, Howard, thank you very much for the kind words on Italy and its coffee culture. I wanted to ask a question on the differences you're seeing in terms of customer behavior or demographic about incremental unique customers that you're seeing across your stores. In particular, what is attracting them to the brand compared to your existing base?

Brady?

Oh, great. Yes. I think the relevance of the brand, as Howard outlined, is not only are we seeing in the U.S., for example, a larger population of 7-day active customers than we've seen ever before. When we get deeper into that, what we see is that our customer base is becoming younger. In the U.S., 51% of our customer base is now Gen Z and Millennial. In fact, now our customer base is quite diverse. The brand position we have right now is the strongest brand affinity of any away-from-home coffee brand around the world, and it's seen as the first choice for coffee away from home. The younger you go, the stronger the brand affinity gets, and the more diverse you go, the stronger the brand affinity gets. For all of those reasons, we continue to cater to a very diverse and increasingly young customer base with those cold-customized plant-based beverages, and the strategy is working, and we’ll continue to do so. Thank you.

On behalf of all of us at Starbucks, I wish you and your families a wonderful Thanksgiving vacation, and we look forward to speaking with you at the end of Q1. Have a great holiday season. Thank you very much.