Starbucks FY 3Q17 Earnings Call Notes

posted in: Notes | 0

Kevin R. Johnson – Starbucks Corp.

physical + digital

‘The evidence is clear that the pace of retail transformation is accelerating with a common theme: extending the in-store experiences to include relevant digital scenarios. It is the driving force behind combinations including Walmart’s acquisition of Jet.com, the combination of PetSmart and Chewy.com, and last month’s announcement of Amazon’s intent to acquire Whole Foods. Each of these combinations demonstrate that pursuit of enhancing the physical retail experience with a relevant and complementary digital experience.”

Matthew Ryan

Deceleration in restaurant spend but we’re outpacing the industry

“in the U.S. and just about any other market we’ve studied, there’s been a decades-long trend for growth away from home, food and beverage consumption, driven by demographics and people just want more convenience. And we’re strongly bullish on the long-term continuation of that trend.

However, in the past year, we’ve seen some pullback from that trendline, as we have from time to time, with consumers in the U.S. shifting some discretionary spend to other categories. We look at all sorts of sources of data here, including corroborating credit and debit card spend data. But we think the best source of industry comp intelligence comes from the APT index, which is a metric developed by Applied Predictive Technologies, that’s the name of the company, that aggregates and tracks actual comp data from a broad set of more than 100,000 retail restaurant and QSR competitor locations on a weekly basis, allowing us to understand just how well we’re doing versus important benchmarks.

And for Q3 overall, the APT index showed decelerating and negative comp for QSR and restaurant industries, while Starbucks’ own metrics accelerated comp to 5%. In fact, the differential between Starbucks and the industry increased significantly in Q3 compared to the past several quarters, and that’s just on the comp stores. It excludes the effect of any further market share gains we have as a result of our strong pace of new store openings.

Within the quarter, we did see some deceleration in month-to-month comp performance for both industry benchmarks and Starbucks, but Starbucks steadily outpaced the competition.”

Howard Schultz

New relationships will elevate brick and mortar

“I would just add, as Kevin had in his prepared remarks, what we’ve seen over the last few months with Walmart and Jet.com and PetSmart and Chewy and most recently Amazon and Whole Foods, I think this is just, we’re in the nascent stage of these kinds of commercial relationships that are going to elevate the experience of a brick-and-mortar retail company. And having said that, Starbucks is probably best positioned, given our national footprint, the demography of our customers, and where we’re located to have those kinds of conversations. I think it would be premature to kind of get into who they are, but clearly, we are a very viable partner, given the change in the industry.”