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Starbucks Corp.(SBUX)Q3 2021 Earnings CallCorrected Transcript27-Jul-2021customer experience, further differentiating Starbucks and offering customers ever-increasing choice as to howthey engage with the brand.We again added over 1 million new active Starbucks Rewards members in the quarter. With over 24 million activemembers now representing 51% of all spend in our US stores and up 8 percentage points over pre-pandemiclevels, our ability to engage has never been higher. More and more of these customers are embracingexperiences that effortlessly fit their lifestyle. With drive-thru representing 47% of transactions and mobile orderingfor in-store pick-up, delivery, or curbside at 26% of transactions, we are leveraging all channels to better serve ourcustomers.While it is very clear that our Rewards program has accelerated our recovery in a meaningful way, where Q3really stands out and what adds to our confidence is the acceleration we saw in our non-Rewards customers.While Rewards spend grew at a rapid mid-teens rate quarter-over-quarter, for the first time in 11 quarters nonRewards spend growth outpaced SR spend. This is further evidence of the great human reconnection. The rapidreengagement of non-Rewards customers not only propelled our record results, but also underscores the strengthof the brand and the growth potential ahead.And finally, we continue to make meaningful progress to reposition our US store portfolio through trade areatransformation, which is now nearly 80% complete. In the past 12 months, we have opened 554 new storescombined with in-store seating and drive-thru service. This portfolio repositioning and new-store formats haveincreased drive-thru store performance to 75% of our total US sales, a number that continues to rise as weincrease efficiency.The improvements and additions we are making to our portfolio today will provide benefits for years to come.With our focus on the customer experience, new beverage innovation, and digital customer relationships, wecontinue to increase share of customer occasions, while also contributing to a rapidly growing market for all thingscoffee.Moving on to China, where we posted a very positive result with year-on-year revenue growth of 45%.Remarkably, total revenue in China has grown 23% in just two years as we continue to play the long game. Andwe are on track to open more than 600 net new stores this fiscal year. In Q3 alone, we opened 162 net newstores that continue to deliver best-in-class new store profitability and returns.We ended the quarter with 5,135 stores, and we are well on track to operate over 6,000 stores by the end of fiscalyear 2022. In addition, we posted 19% same-store comp growth in Q3 and saw sequential acceleration of ourtwo-year comp when excluding the impact of value-added tax.Furthermore, we gained strong momentum with sequential improvement on every key metric on a two-year basis,including total revenue growth, store-traffic recovery, and margin expansion. The health of our business in Chinais strong, and we've never been more confident in the long-term growth opportunity.In addition to significant new store growth and sequential acceleration of two-year comps in China, we areexpanding digital customer relationships and engagement by creating new occasions and experiences that makemobile ordering even more convenient and personalized. This has resonated strongly with our customers inChina, propelling mobile ordering to 34% of sales, significantly higher than the 23% in the prior year and morethan double pre-COVID levels.51-877-FACTSET www.callstreet.comCopyright 2001-2021 FactSet CallStreet, LLC

Starbucks Corp.(SBUX)Q3 2021 Earnings CallCorrected Transcript27-Jul-2021Starbucks Rewards continues to aggressively expand our digital ecosystem across major platforms, driving 90day active members to an all-time high of 17 million, a 4% increase over previous quarter and a 71% increaseversus prior year. Gold members, a very important cohort, are engaging Starbucks at pre-pandemic levels.Our performance in China is a testimony to the unparalleled strength of the Starbucks brand and our enduringrelationship with our Chinese customers. Our rapidly growing store footprint, market-leading digital ecosystemand customer engagement, robust innovation pipeline, and the enduring love and loyalty for the Starbucks brandin China are all unmatched.I have full confidence in the strength of the Starbucks brand in China and across all our international markets.There should be no misunderstanding of how big and robust our business in China is and will be. These are stillearly days, and our strategies are clearly working. Starbucks is uniquely positioned for success in China well intothe future.With phenomenal strength and growing momentum in our retail business, let me now move on to our channeldevelopment segment that also continues to exceed expectations. Over the past three years, we have madesignificant progress expanding our reach and amplifying the Starbucks brand through CPG, single-serve coffee,ready-to-drink, and food service. I attribute our success to the power of the Starbucks brand, the bold innovationthat attracts new coffee lovers into our categories, and the caliber of our strategic business partners globally.In Q3, Starbucks retained our number one brand position in total US at-home coffee and further expanded ourleadership position versus other brands. The Starbucks brand continued to increase share in the total UScategory, impressively adding 1 percentage point over the prior year despite lapping a strong comp.The Global Coffee Alliance with Nestlé is a powerhouse, and we continue to see strong performance across allaspects of the key strategic relationship. Earlier this year, building on the success of the Starbucks by Nespressoplatform, we expanded and introduced Starbucks by Nespresso on the Vertuo line, which is already exceedingsix-month distribution and velocity targets. In addition, the combination of strong CPG performance combined witha steady recovery in food service gives us added confidence.In ready-to-drink, Starbucks is the number one premium brand globally, with our North American CoffeePartnership with PepsiCo growing 19% in consumption and our international ready-to-drink business growingdouble digits in EMEA and China Asia-Pacific. These channels amplify our brand in more than 80 markets aroundthe world, offering millions of customers at home and at work options that complement their Starbucks in-storeexperience. And just yesterday, we announced plans to reach new markets and grow our Starbucks ready-todrink portfolio with Nestlé, who will now serve markets across Southeast Asia and Latin America.Our channel development strategy to amplify the brand while growing share of at-home occasions continues toattract new customers to Starbucks with unparalleled choice, while driving best-in-class returns.The key takeaway from today's call is this. We look to the future with as much conviction as ever in our strategy,as this quarter represents the beginning of a multi-year tailwind for Starbucks that is powered by three factors.First, the total coffee addressable market is large and growing rapidly. The market is expected to grow to wellover 400 billion in size globally over the next three years. That represents a compound annual growth rate of 8%to 9% as the market rapidly recovers from the global pandemic. Second, within this large and growing market,consumer preferences continue to shift from mainstream robusta coffee to premium arabica coffee whereStarbucks is the leader. Third, and perhaps most important, Starbucks has rapidly adapted to new consumer61-877-FACTSET www.callstreet.comCopyright 2001-2021 FactSet CallStreet, LLC

Starbucks Corp.(SBUX)Q3 2021 Earnings CallCorrected Transcript27-Jul-2021behaviors and strengthened key points of differentiation. Our focus on the customer experience, relevant newbeverage platforms, and expanded digital customer relationships are translating to increased consumerpreference and deeper customer engagement.The combination of a highly differentiated brand experience, a continued consumer shift to premium arabicacoffee, and a large and growing addressable market is a powerful trifecta that provides our business with a multiyear tailwind. These factors, reinforced by the results of this past quarter, give us confidence that this is just thebeginning of what is about to unfold.And with that, I will turn the call over to Rachel, who will walk you through details of our Q3 results. Rachel?.Rachel Marie RuggeriChief Financial Officer & Executive Vice President, Starbucks Corp.Thank you, Kevin, and good afternoon, everyone.I'm thrilled to share with you the results of this milestone quarter, delivering record revenue and record non-GAAPEPS only four quarters after the depth of the pandemic. Over the past year, we have proven our ability todifferentiate ourselves with the unique and personalized experiences we create for Starbucks customers whetherin our stores, through our app, or down the grocery aisle leading to this quarter's impressive results.Starbucks global revenue reached 7.5 billion in Q3, up 78% from the prior year, far surpassing the pre-pandemicquarterly record set in Q1 fiscal 2020 driven largely by the incredible performance in the US, our largest market.Q3 non-GAAP EPS was 1.01, up from the loss of 0.46 in the prior year driven by faster than expected marginrecovery in the Americas due to sales leverage from lapping prior-year COVID-19 impacts and the benefit fromcontinued strength in average ticket. Our Q3 EPS includes 0.09 of benefit related to discrete tax items, most ofwhich was originally anticipated in Q4 as referenced on our previous earnings call.The investments we have made in our business have made Starbucks stronger, more resilient, and positioned forlong term growth. This powerful momentum gives us the confidence to meaningfully raise our EPS outlook for thefull year, as I will explain later.I will now take you through our Q3 fiscal 2021 operating performance by segment, followed by an analysis of ourconsolidated margin performance.Our Americas segment which fueled our record quarter delivered revenue of 5.4 billion in Q3, 92% higher thanthe prior year primarily driven by an 84% increase in comparable store sales including 82% comp transactiongrowth. As Kevin mentioned, US comparable store sales growth reached 83% in Q3 driven by a materialimprovement in transaction comp of 80%.Average store transactions continued to grow and ended the quarter at nearly 90% of pre-pandemic levels,presenting further opportunity to return to and grow beyond FY 2019 levels. As transactions have grown, we'vemaintained the strength in average ticket, up 1% over the prior year, remaining significantly elevated as many keypost-pandemic consumer trends have continued. Growth of cold beverages and customization coupled withsustained strong beverage attach and record food attach in Q3 all contributed to the strong ticket and give usconfidence in our ability to maintain a meaningful portion of the ticket gains over the coming quarters.Americas Q3 non-GAAP operating margin expanded to 24.7%, up more than 200 basis points from Q3 of fiscal2019 largely driven by sales leverage on our product and distribution costs, including waste favorability, the71-877-FACTSET www.callstreet.comCopyright 2001-2021 FactSet CallStreet, LLC

Starbucks Corp.(SBUX)Q3 2021 Earnings CallCorrected Transcript27-Jul-2021benefits of SKU rationalization over the prior two years, and favorable sales mix shift. Pricing and the benefits oftrade area transformation also helped offset the sizeable investments in wages and benefits, as well as highersupply chain costs due to inflationary pressures. While we're thrilled with our margin performance in Q3, weexpect it to moderate slightly in Q4 primarily due to the growing impact of inflation coupled with incrementalinvestments critical to our continued growth, which I'll discuss in a moment.Moving on to International, the International segment delivered revenue of 1.7 billion in Q3. Excluding a 10%favorable impact of foreign currency translation, the segment's revenue grew 65% over the prior year, reflecting a41% increase in comparable store sales inclusive of a 5% adverse impact from lapping the prior-year VAT benefit.Strong sales growth from our international licensees as well as 8% net new store growth over the prior – over thepast 12 months also contributed to this growth.Kevin spoke to our performance in China. In addition, the International segment performance was adverselyimpacted by virus resurgences in Japan with a state of emergency severely limiting consumer traffic during mostof the quarter. It's important to remember that the vast majority of international markets in which we operate arebehind the US in terms of both vaccination and mobility, so revenue recovery is predictably lagging in thosemarkets. Still, our partners in every market remain focused on what they can control and what they do best. Themoments of connection they are providing our customers during these challenging times will support growth asvaccination rates improve.International non-GAAP operating margin rose to 22.5% from minus 2.7% in the prior year mainly driven by salesleverage from lapping the impacts of COVID-19 as well as store labor efficiencies across our company-operatedmarkets and larger government subsidies. On a two-year basis, these temporary subsidies provide anapproximately 200 basis point benefit in the quarter, boosting the segment's non-GAAP operating margin close toits pre-pandemic level of 22.7% in Q3 fiscal 2019.On to Channel Development, revenue was 414 million in Q3, a decline of 7% from the prior year primarily drivenby Global Coffee Alliance transition-related activities including a structural change in our single-serve business.When excluding the approximately 20% adverse impact of these transition-related activities, ChannelDevelopment's revenue increased by 13% in Q3 mainly driven by growth in the Global Coffee Alliance productsales and our ready-to-drink business.The segment's non-GAAP operating margin expanded to 46.7% in Q3 from 35.6% in the prior year. Normalizingfor the 700 basis point impact of Global Coffee Alliance transition-related activities I just mentioned, ChannelDevelopment's operating margin expanded 410 basis points in Q3 driven primarily by the strength of our ready-todrink business. We expect the impacts from the transition to be substantially completed by the end of fiscal 2021.Finally, at the consolidated level, our non-GAAP operating margin was 20.5% in Q3, up from minus 12.6% in theprior year. The year-over-year increase in our operating margin for Q3 was primarily driven by sales leverageacross the P&L as we lapped COVID-19 impacts and related costs as well as pricing in the Americas. These werepartially offset by additional investments in retail store partner wages and benefits, which remain a strategicpriority for us to support our world-class partners.Given the strength of our performance in Q3 and the optimism we have for the fourth quarter, we're pleased toupdate our guidance across a number of key areas. We expect the momentum we have seen in the USunderpinned by the ongoing great human reconnection to continue, and as a result, we expect both Americas andUS comparable store sales growth in Q4 in the range of 22% to 25%. This corresponds to a two-year comp rangefor Q4 of 11% to 13%, reflecting further sequential improvement from an already strong level of 9% in the81-877-FACTSET www.callstreet.comCopyright 2001-2021 FactSet CallStreet, LLC

Starbucks Corp.(SBUX)Q3 2021 Earnings CallCorrected Transcript27-Jul-2021Americas in Q3. As a reminder, the two-year comps we are monitoring are calculated on a multiplicative basisinstead of an additive basis as described in today's earnings release.For the International segment where sporadic virus resurgences continue to impair consumer mobility in somemarkets, we now expect comparable store sales to grow mid to high-single digits in Q4. For China, we expectcomparable store sales to be roughly flat in Q4. Similar to the Americas, these ranges for both International andChina translate to a meaningful sequential improvement in two-year comp from Q3 to Q4 despite the challengingmarket dynamics expected to linger in Q4.Based on the outlook for the segments, we now expect Q4 consolidated comp growth in the range of 18% to21%. On a two-year basis, this equates to a range of 7% to 10%, a considerable sequential increase from the Q3two-year comp of 4%.Moving on to retail store development, although we expect approximately 1,100 net new stores globally in fiscal2021, we now anticipate a slight shift between our segments. For the Americas, we now expect the total storecount in fiscal 2021 to remain roughly flat to prior year as the new store openings are virtually offset by higherthan normal closures reflecting the continued progress of our accelerated trade area transformation initiative. ForInternational, net new stores for fiscal 2021 are expected to increase to approximately 1,100 from 1,050 in theoriginal guidance.With the updated comp sales and the store growth outlook, we are also tightening our guidance for full year fiscal2021 consolidated revenue to a new range of 29.1 billion to 29.3 billion from 28.5 billion to 29.3 billion. Thisincludes Channel Development's revenue which is now expected in the range of 1.5 billion to 1.6 billion for fullyear fiscal 2021 compared to the previous guidance of 1.4 billion to 1.6 billion, reflecting the segment's strongperformance to-date. As a reminder, our fiscal 2021 consolidated revenue guidance range is inclusive ofapproximately 500 million for the 53rd week.Additionally, given the faster than expected margin recovery to-date, we are raising our consolidate GAAPoperating margin outlook for the full year to approximately 17%, up from the previous range of 15% to 16%. Ourconsolidated non-GAAP operating margin is now expected to reach approximately 18% in fiscal 2021, up from theprevious guidance of 16.5% to 17.5%, reflecting the momentum we saw in Q3 and expect in Q4.Our operating margin is tempered a bit by two factors that we see growing in relevance in Q4 and into fiscal 2022.The first is our latest view on rising global inflation requiring continued incremental investments to support ourgrowth. The second is our strong commitment to increasing wages of our store partn

Starbucks Corp. (SBUX) Q3 2021 Earnings Call Corrected Transcript 27-Jul-2021 1-877-FACTSET www.callstreet.com 2 . with digital customer relationships continues to extend our reach, deepen engagement, and enhance the . Starbucks Corp. (SBUX) Q3 2021 Earnings Call Corrected Transcript