The conference call for Starbucks Fourth Quarter and Full Fiscal Year 2023 Results is being led by CEO Laxman Narasimhan and CFO Rachel Ruggeri. The call will include forward-looking statements and cautionary statements about risks and uncertainties. GAAP results will be discussed, but non-GAAP results will be the focus. The call is being webcast and will be available for replay on the company's website.

The first quarter fiscal year 2024 earnings conference call for Starbucks has been tentatively scheduled for January 30, 2024. Laxman Narasimhan expresses gratitude to Starbucks partners for a successful fiscal year 2023 and discusses the company's momentum and reinvention plan. The call will provide an update on long-term strategies and the launch of a holiday at Starbucks. The company's strong results and confidence in future opportunities will be shared, with a focus on five areas: elevating the brand through stores, digital innovation, customer experience, efficiency, and margin improvement.

In the fourth quarter, Starbucks saw record revenue and earnings per share growth, driven by strong demand and a successful fall launch. The company also grew its global store count and saw record numbers of active Starbucks Rewards members. In addition to strong performance from their classic menu items, new offerings such as Apple-inspired beverages and food items also performed well.

The company's quarterly results have shown strong ticket growth and successful menu innovation. They have been able to successfully introduce complementary and competing products and flavors, and have invested in their partners, equipment, supply chain, and technology. The company has also prioritized the installation of new equipment to meet the high demand for cold beverages. They have also created a more stable work environment for their partners, with an increase in partner hours and barista tenure.

In the fourth quarter, the company experienced record store growth and double-digit revenue growth internationally, with strong customer demand for beverage and food offerings. The international segment's comparable same-store sales in the U.K. and Japan remained high, attributed to higher profitability and productivity store formats. The international license market also saw growth in Starbucks Rewards programs. In China, the company saw revenue growth and a 5% comp, in line with expectations. Overall, the company's strategy is working and they are investing profits back into their partners and stores.

Starbucks' full-year revenue grew by 3% to $3 billion, with a 20% increase in the second half of the year in China. This growth was driven by strong beverage and food offerings, successful market strategies, and strong execution from partners. The company saw success with coffee-forward innovations and increased food sales. They also experienced growth in their omnichannel experiences, with over 21 million active loyalty members in China. In the quarter, they opened a record 326 new stores and plan to reach 9,000 stores by 2025. The opening of the China Coffee Innovation Park demonstrates their commitment to the Chinese market.

The company is optimistic about their position in the Chinese market, citing their competitive advantages such as their leadership team, stores, operations, and innovation. They plan to continue growing in scale and expanding into new cities. Their channel business, including partnerships with Nestlé, PepsiCo, and other international partners, has helped them reach customers outside of their retail stores. They have received recognition for their innovation and have seen growth in their channel market position. Despite a volatile environment, they have met their financial goals and their reinvention is ahead of schedule.

The company has seen positive results from its reinvention, with strong performance in partner and customer experiences. They are optimistic about future growth and have confidence in their ability to adapt to changing consumer needs. The call will provide more details on strategies for growth. The company has achieved double-digit earnings growth in fiscal year 2023 due to double-digit revenue growth and margin expansion. Q4 revenue reached a record high, with a 9% increase from the previous year.

In the fourth quarter, the U.S. business had record-breaking sales and the International business also performed well, resulting in 8% growth in consolidated comparable store sales and 7% growth in net new company-operated stores globally. Operating margin expanded by 310 basis points, with EPS increasing by 31%. For the fiscal year, consolidated revenue reached a record $36 billion, with 8% comparable store growth and 7% net new store growth. Operating margin was 16.1% and EPS was $3.54, exceeding previous guidance.

In the fourth quarter, North America reported record revenue of $6.9 billion, a 12% increase from the previous year. This was driven by an 8% growth in comparable store sales, with 2/3 of the growth coming from transactions, mix, attach, and customization. The U.S. business also had strong performance, with 8% comp sales growth driven by premium beverages and food attachments. The company's success in driving incremental spend shows that they are providing value and a unique experience for customers. Transaction comp sales grew by 2%, contributing to multiple record average weekly sales, including during the fall launch.

In the fourth quarter, Starbucks saw high demand for its products and services, both during and outside of promotional windows. This demand was driven by record-breaking numbers in key aspects of the Starbucks Rewards program, as well as growth among occasional customers. This demand, combined with increased customer connection scores and growth in transactions, mix, customization, and attach, demonstrates the strength and durability of the company's business. In the U.S., licensed store revenue remained strong, with a 18% increase from the previous year. The operating margin in North America also saw significant expansion, driven by increased efficiency and sales leverage. In the international segment, revenue grew by 11% (or 15% excluding currency impact) and comparable store sales increased by 5%, driven by growth in store traffic and digital engagement.

The International segment of the company saw strong growth in net new company-operated stores, with China leading the way. China's revenue and average weekly sales both grew, driven by strong transaction growth and a consistent customer experience. The company sees significant opportunities for growth in China and has made investments in dayparts, digital offerings, and store format. The opening of a new roasting plant demonstrates their commitment to the Chinese market. The International segment's operating margin also improved, allowing for reinvestment in the business. The channel development segment's revenue was flat in Q4.

In Q4, the company saw strong growth in the at-home coffee category, with a 16.1% share and a 55.8% operating margin. Their fiscal year 2024 guidance predicts 5-7% global comp growth, driven by strong new store performance, momentum in the licensed business, and a 5-7% comp growth in the US. China is also expected to see growth, with a higher comp in Q1 due to lapping prior year mobility restrictions.

Starbucks is experiencing strong growth due to their digital capabilities and innovative stores, leading to double-digit revenue growth in China and a projected 7% global new store growth. The company plans to reach 41,000 stores globally by the end of fiscal year 2024, with a focus on expanding in white space areas and leveraging their brand internationally. The combination of global comp growth, store growth, and licensed business growth is expected to result in a 10-12% consolidated revenue growth for fiscal year 2024. However, there may be a decline in revenue in their Channel Development segment due to the sale of Seattle's Best Coffee and optimization efforts.

The company expects flat revenue in their Channel Development segment, but is confident in their double-digit growth potential for the year. They also expect margin expansion through efficiency and investments in wages, new stores, digital innovation, and supply chain modernization. The Channel Development segment is also expected to contribute to overall operating margin. The company plans to continue their disciplined approach to capital allocation, with a focus on improving return on invested capital. The majority of their CapEx will be invested in their store portfolio.

The company plans to continue its stable dividend approach and maintain a 50% dividend payout ratio to show confidence in long-term growth and attract investors. They have a strong capital allocation strategy and expect a higher tax rate in fiscal year 2024. They project double-digit EPS growth through a balanced plan of revenue growth and margin expansion. The company is confident in their long-term growth and is grateful for the contributions of their partners.

The company will now begin a Q&A session focused on their fourth quarter and full fiscal year 2023 results and fiscal year 2024 guidance. Questions on other topics should be saved for a later meeting. The first question asks about the competitive environment in China and its impact on the company's margins and new unit economics. The CEO responds by stating that their brand in China, Shing Baka, is performing well with a 5% comp in Q4 and a 20% growth in the second half of the year compared to the first half. The company has seen an increase in morning daypart sales and strong local innovation. They are comfortable with their food and beverage transactions in China.

The company is pleased with the competitive position of its beverages and food, as well as the cash returns of its stores. Despite challenges, the business is coming together well. The next question is about the U.S. comp and any changes in consumer behavior. The company is confident in sustaining momentum through the fourth quarter and has plans in place to reaccelerate the U.S. comp if needed. The clarification is about the fiscal '24 guidance, with a worldwide comp of 5-7% and EPS growth of 15-20%. The long-term guidance of 7-9% comp may be updated later.

The speaker addresses concerns about the economy and its potential impact on Starbucks. They reassure that customer demand remains strong and attribute it to the strength of the Starbucks brand, customer loyalty, and the company's diversified channels and digital relationships. They also mention having multiple levers to deal with uncertainty and express confidence in their ability to exceed expectations. They then hand the question over to Rachel for further discussion.

The company is confident in its 5% to 7% comp guidance for fiscal year 2024, as it reflects the strong performance and momentum of the business. This is part of a balanced approach to achieving 15% to 20% earnings growth, with a focus on new and licensed stores. In the Americas, operating margin increased by over four points, driven by operational improvements and supply chain efficiency. The company expects progressive margin expansion for fiscal year 2024.

In Q4, the company saw strong margin expansion, with the largest driver being leverage in store operating expenses due to operational efficiencies from their reinvention. Sales leverage and strategic pricing also contributed to the margin expansion, offsetting investments in G&A and partner wages. This momentum is expected to continue in FY '24, with continued margin expansion. Growth and efficiency opportunities are seen as key factors in achieving this leverage.

The company is planning to implement a $3 billion savings program and efficiency measures over the next three years, with a focus on the supply chain. This will allow them to invest in the business and achieve margin expansion. During the current quarter, the company saw strong growth in U.S. comps and traffic, driven by a record number of customers and higher average ticket sales. The growth is coming from both rewards and non-rewards customers, and the company is seeing an increase in transactions per store per day. This growth is attributed to the company's ability to adapt to changing consumer demands.

The company has seen strong growth in drive-through and delivery orders, leading to a strong performance in the quarter. They expect continued improvement in traffic and transactions per store per day in the next fiscal year, driven by innovations in customization and premium beverages. The company has also evolved to meet customers where they are, with purpose-defined stores. The team has focused on improving speed and throughput in stores, with a strong operating foundation in place.

The company has seen improvement in drive-thru times and overall operational efficiency due to a combination of operating practices and new equipment. This is part of their ongoing reinvention and has led to margin expansion and earnings growth. They plan to continue focusing on staffing and scheduling to further improve efficiency and overall partner engagement.

The speaker answers a question about the company's potential for increased throughput during peak hours and 15-minute intervals. They mention progress made in staffing and scheduling, as well as investments in employee wages and benefits that have led to lower attrition rates and longer tenures. They believe there is still more potential for improvement in these areas, which will help during peak times.

The company is looking to simplify operations in stores and meet demand through careful choices about store locations and digital amplification. They plan to increase CapEx to $3 billion, with a majority going towards new store growth and renovations, as well as equipment such as Negedice and Clover Vertica. There will also be investments in supply chain modernization and an innovation and technology center in China.

The company's reinvention plan is progressing ahead of schedule, with notable progress in staffing and scheduling as well as efficiency improvements. The focus is now shifting to purpose-defined stores and improving the operating foundation in stores. The equipment pipeline and portfolio management are also on track. The CEO is pleased with the progress and expects further improvements in the future.

The speaker believes that the trend of growth in the company will continue in the future. They thank the audience for their questions and invite them to join the strategic update and holiday launch later in the day. The call is now concluded.

This summary was generated with AI and may contain some inaccuracies.