Loading summary
Transcript31 lines
- [00:01]
IBM Representative
The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM,
- [00:33]
Bloomberg Host
Bloomberg Audio Studios, podcasts, Radio News,
- [00:38]
Chipotle and Starbucks, both of them raised their guidance after stronger than expected quarters thanks to trendy new menu items and revamped loyalty programs. All those stocks up across the board. But let's dive deeper into Starbucks. Romaine Bostick, co host of the Close, is joining us this morning alongside the CEO of Starbucks, Brian Nicholl. Remain.
- [00:57]
That's right, Brian Nicholl joining us right now fresh off of last night's earnings reports. That 7.9% comp growth. Brian, obviously the street likes what they hear, but I do need to get a little bit more color as to exactly where that is coming from. Transactions 4.2%. That's foot traffic. Brian, is that just favorable comps? Are you truly getting more people into the store?
- [01:17]
Brian Nicholl
Yeah, no. Great to be here. And look, the reality is what's terrific to see is the growth is coming from more customers coming into Starbucks more often. And you know, that's just a foundational strength. And the good news is we're seeing it across all income groups and, and really all age groups. So just really terrific strength moving through
- [01:38]
Bloomberg Host
our stores with regards to the tickets as well, that was also up about three and a half percent in the most recent quarter. So it's a function of both foot traffic coming into the store, but also people spending more, are they buying more? Are these add ons what gets that ticket price up to that three and a half percent jump?
- [01:55]
Brian Nicholl
Yeah, so what you're referring there is we're seeing people add more food, so a higher attach rate. And then what we're also seeing is people modifying more of their drinks with things like our cold foam, adding an espresso shot. So it really is terrific to see people using our menu to get them the customized experience that they want out of their drink and then also attaching what is really some terrific food to go along with their beverage.
- [02:19]
Bloomberg Host
Do you have any concerns about maintaining this momentum? And I don't necessarily mean that from an operational perspective. We just got a GDP report for the second quarter backwards looking much lighter than what folks had been looking for. Consumer Spending holding up right now. But you've referenced in the past that you had seen some strain, at least among the lower income and lower income consumers. Are you concerned that some of that weakness might be spreading beyond just the lower income folks?
- [02:46]
Brian Nicholl
You know, actually we're seeing strength across all income groups at Starbucks. And you know, what we continue to see is when we give people a great experience, they come back more often. And when we do it consistently, they really reward us with their business. And so, you know, we've not seen the customer move back as it relates to Starbucks. They've been really resilient. We're very optimistic about we're headed, you know, we exited the quarter with really strong performance and we're excited about how we're heading into our fourth quarter and we're really optimistic about the plans we have for 2027. So you know, look, we're just getting started. It's great to see the strength across all of these customer, you know, demographics and we're confident we're going to continue to have success with them.
- [03:30]
Bloomberg Host
Well, let's talk about 2027. Obviously we've seen the revenue numbers at least I say the sales numbers start to come up a little bit. There's still some concern about whether we could see more meaningful profitability. How much of the lag between those two is tied to the revamp of the stores? I mean, you've done a thousand so far for this fiscal year. I think you're still guiding towards 1500 for the next fiscal year. There's a huge cost attached to that, right?
- [03:56]
Brian Nicholl
Well, you know, look, I think the thing that we've done here is we were really smart about what we spent on these uplifts and the implications on the store. So you know, we can do these things for roughly $150,000. We do not close the store at all. So operations continue to perform and then experience that our partners have because now they've got a new really great looking coffeehouse and that what our customers have results in, you know, frankly, more transactions. So it's been a great program. We'll continue to push the program forward. We're going to accelerate into 2027 because we know when we create a great coffeehouse and we have that great partner slash barista to customer experience, we're rewarded with more business. And you know, it's not a big investment, but it's a meaningful investment and then it gets us great, great results.
- [04:41]
Bloomberg Host
Is there any way you can share with me what the difference in comp sales is for a Revamped store relative to the stores that haven't been uplifted.
- [04:48]
Brian Nicholl
You know, we haven't shared that publicly, but what I can tell you is we see a move in a positive direction as it relates to transactions and because of what we're seeing, we are accelerating the program.
- [04:58]
Bloomberg Host
I think the last time we talked with regards to transactions, you talked a lot about improving the in store experience by also improving the speed of which those orders get out the door, whether it's in the cafe or in the drive thru. I know there was some color on the conference call about some of the time that you shaved off of that. We're talking seconds here, but it seems like those seconds matter to you. How much progress have you made?
- [05:19]
Brian Nicholl
Yeah, look, this is one where I'm really excited because we set out right from the go that we wanted to improve the speed that our customers experience and then do it consistently. And kind of behind that is really this drive towards more throughput. And we've seen just that. So we've got better throughput in the mornings. We also have better throughput in the afternoons and frankly, as a result all day long our transactions are up throughout the day. And when you kind of pull that back, yes, customers are loving the experience, but our partners are doing a great job of being staffed as a team, deployed correctly and then consistently executing the green apron service model which then results in better speed at the drive thru, better speed in the cafe, more on time and mobile order pickup and frankly pretty good speed in the delivery channel as well. So it is having the effect that we, we would want where in totality the Starbucks business now I think is providing people the great experience that they want at the speed that people need based on the occasion where they're visiting us.
- [06:16]
Bloomberg Host
Is there any conflict though with getting that number down in terms of the time down and this idea of these add ons and other things that I would assume would complicate the process for the baristas just a bit.
- [06:27]
Brian Nicholl
Yeah, look, we're very intentional, you know, so everything that we do, we have an eye towards. What is the implication on our ability for our, for our customers to get the product, the food that they want in the speed terms that they desire. And we also have a really close eye to make sure that our partners are set up to be able to provide the customization, the drink, you know, the craft, the way that they would want to do it themselves. And so, you know, that is part of our developed development process and that's part of the rigor that we go through to make sure before it gets to the store. It's been vetted such that we know we can still deliver on the great experience at the speed that our customers expect.
- [07:05]
Bloomberg Host
You've introduced a lot of new products. I know you even talked on the conference call about a s' mores drink. Not necessarily my bag, but I can understand why some folks might like it here.
- [07:13]
Brian Nicholl
Have you tried it?
- [07:15]
Bloomberg Host
Yeah, not yet. I have tried the orange cream and it is good here. But. And look, I mean probably the s' mores drink isn't targeted towards my demographic. I mean you've clearly gone after the younger demographic with the Gen Z, the pink drinks, the S' mores, etc. Here. But with these types of drinks, you know, the complexity that, that maybe adds to the process. But also this ide if these aren't going to be permanent menu items, just sort of limited time offers. Do you run into sort of some issue in terms of sort of how you forecast out comp sales growth if you know, s' mores might be gone and you know, whenever, a few weeks or whatever?
- [07:48]
Brian Nicholl
Yeah, look, I think the menu innovation that comes out as like limited time offers versus the menu innovation that ends up being permanent on our menu. They serve two different purposes. And yes, we're able to forecast this with accuracy. I mean, as a result, I think you saw in the release, our supply chain, we're 99% of the time in stock with the items that people want. And I think if you look at our beverages, it's almost close to 100%. So we are able to forecast correctly, supply it correctly and then most importantly, we build it in such a way that our partners are able to do it consistently and give people the experience that they want. You know, as you mentioned, like the orange cream, cold foam. Yeah, that's going on the cold brew. I mean, look, the good news is, yes, it's orange cream, but it's exactly the same way that we always do cold brew, exactly the same way that we always do cold foam. So the consistency, the standardization of the build so that people can get to the quality experience that they want at the speed that we know they desire is really important to the, to this, to the work that we do on this.
- [08:48]
Bloomberg Host
What's, what's the best selling product out there right now?
- [08:52]
Brian Nicholl
I mean, look, we still are selling, you know, right now our ice shaken espresso is a huge popular drink. Our Americano is a big, very popular drink. Obviously the iced caramel macchiato is one of our top drinks. Matcha lattes is a top drink. So the good news is it's not just one item. We actually have the breath that I think really resonates with people's palates.
- [09:15]
Bloomberg Host
I do have to ask you, Brian, about a report that Bloomberg had about three weeks ago citing internal documents that you were actually looking to replace some of your in house software tools, particularly those made by Microsoft and IBM. Your chief Technology officer has talked a lot about how he can maybe get some of those software costs down. Any credence to that report?
- [09:38]
Brian Nicholl
Yeah, look, I think you would expect us to be looking with a critical eye towards any product that we use and whether or not we're getting the best cost proposition and also are we getting the best outcomes from that proposition. And that's basically what we're doing here, is we've got some great partners, but at the same token, we need to make sure that we are getting the best output for the best pricing. And I think, you know, as probably everybody's doing with the advent of AI, it gives you an opportunity to rethink what we're doing and how we're doing it. And you know, that's literally the exercise that we're going through. And I think you would expect that from all organizations to have the cost discipline tied to making sure that you're getting the right outcomes that you want.
- [10:19]
Bloomberg Host
Well, that cost discipline is obviously also increase the amount of cash you have on hand at the same time your debt obligations are down. Where is that cash going to go? Is that next dollar going to go to buybacks? Is it going to go to acquisitions? Is it just going to go back into the stores?
- [10:33]
Brian Nicholl
You know, so the good news is for us, as the business continues to recover, you know, the balance sheet gets stronger and stronger. It gives us terrific opportunities to invest in growth. Obviously some of that growth is going to be the store remodels and then obviously building new stores. And then we'll look around to figure out what is the right next growth vehicle for us. You know, buybacks may be part of it. Obviously we've got to dividend. That has always been there. So we're always thinking through what is the best way to deploy that cash so that we get growth in the business and get a great return for our shareholders and all of our partners.
- [11:08]
Bloomberg Host
Hey Brian, appreciate it. But I need you to do one last thing for me and settle a debate that my niece wanted me to ask you. When officially does pumpkin spice season start?
- [11:18]
Brian Nicholl
It's coming. Get ready. We're not too far away. So I'm anxious for it as well.
- [11:24]
Bloomberg Host
All right, Brian. Really appreciate you taking time for us, Brian. Nicole there, CEO over at Starbucks.
- [11:29]
4imprint Advertiser
Whatever your goal, trade show giveaways, client gifts, or team gear, 4imprint has the promo products to match. With thousands of options from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget. With standout choices at every price point and with their 360 degree guarantee, you can be four imprint certain your order will show up just right, right on time. Explore more at 4imprint.com 4imprint for certain.