Starbucks(US:SBUX)2024-07-31 01:24Financial Data and Key Metrics Changes - The total company revenue for Q3 2024 was $9.1 billion, representing a 1% increase year-over-year and a 6% increase over Q2 [6][31] - Global comparable store sales declined by 3% year-over-year, with a negative 2% comp growth in North America and a negative 14% comp growth in China [6][31] - The global operating margin contracted by 70 basis points to 16.7%, and earnings per share for the quarter was $0.93, down 6% from the prior year [6][38] Business Line Data and Key Metrics Changes - The US business saw a 4% increase in average ticket driven by pricing and multi-beverage orders, while transactions in the US posted a comparable decline of 6% [31][32] - Mobile Order & Pay revenue grew by 10% year-over-year, with a 7% increase in transactions [22][32] - Starbucks Rewards membership in the US grew to 33.8 million, with increased frequency of visits across all deciles [20][33] Market Data and Key Metrics Changes - The company faced challenges in international markets, particularly in China, where consumer spending was cautious and competition intensified [24][25] - In China, average daily transactions, weekly sales, and operating margin improved sequentially quarter-over-quarter, with Starbucks Rewards members growing to a record 22 million [26][29] - Strong performance was noted in Japan and parts of Latin America, contrasting with headwinds in the Middle East and Southeast Asia [24][25] Company Strategy and Development Direction - The company is focused on a three-part action plan to improve US store operations, attract new customers, and enhance the customer experience [7][8] - There is an emphasis on operational excellence and efficiency improvements across nearly 10,000 US stores, with significant changes expected to drive growth [9][10] - The company is exploring strategic partnerships in China to enhance competitive positioning and accelerate growth [29][61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the trajectory of the US business and the operational improvements being made, despite current challenges [24][30] - The company acknowledged the cautious consumer environment impacting sales and emphasized the importance of targeted offers and promotions to drive traffic [19][66] - Future product offerings, including seasonal items, are expected to drive customer interest and engagement [18][42] Other Important Information - The company plans to accelerate new store builds and renovations, with 580 net new builds and over 800 renovations planned in North America for FY 2024 [13][39] - The company is committed to maintaining a disciplined approach to capital allocation, targeting an earnings payout ratio of approximately 50% [41][42] - The fourth quarter and full fiscal year 2024 earnings conference call is tentatively scheduled for October 30, 2024 [5] Q&A Session Summary Question: Margin and Cost Actions - Management discussed a 5% year-over-year decline in G&A, driven by lower performance-based compensation and cost efficiencies [46] - Future reinvestments will focus on supporting promotional activities and partner wages [47] Question: Composition of Average Check - The average ticket increase included 25% from multi-beverage orders, indicating a response to promotional offers rather than premiumization [49][50] - The promotional intensity was lower than competitors, with 14% of transactions driven by offers [51] Question: Challenges in China - Management acknowledged significant headwinds in China but emphasized the long-term potential and distinctive advantages of their business [25][60] Question: Decline in Non-Rewards Customers - The decline in non-rewards customers was attributed to a challenging consumer environment, with efforts to improve value communication [66] Question: Siren Systems and Returns - The company is on track with Siren system deployments, focusing on targeted improvements in stores with the highest customer service outages [71][74] Question: Sales Performance and Future Expectations - Management expects Q4 comp growth to be flat to low-single digits, with actions in place to strengthen growth for FY 2025 [79][80]