Starbucks Corporation (NASDAQ:SBUX) Q3 2023 Earnings Call Transcript

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With the investments we’re making to more vertically integrate our supply chain, it gives a greater flexibility in China and also greater productivity. So I think in addition to that, your other question on productivity, as I look at what I see with regard to the opportunities we have both in the stores and out of our stores, and that, by the way, cuts across all the whole business, we have further productivity options, which just gave us confidence on margin in terms of the progressive margin improvement that we have made. So early days in China, market going to expand and further opportunities for us to get productivity.

Operator: Thank you. Your next question comes from Brian Harbour with Morgan Stanley. Please state your question, please. Thank you.

Brian Harbour: Yeah. Thank you. Good afternoon. I wanted to ask just about the point on kind of supply chain and procurement. I think you guys have been pretty clear on the labor side, what the opportunity is there, what you’re doing. Could you elaborate though just more on the supply chain side and where you see the most opportunity there? How that factors into where you think margins can go?

Laxman Narasimhan: Great. I’ll take that. As I look at what we’ve been working on over the last six months or so, it’s very clear that the investments we’re making in our stores is yielding the kind of productivity that you would see, the efficiency as well as the throughput that we get. But what is interesting is if you look end to end, we have opportunities pretty much everywhere, both in terms of what we buy, how we buy it, how we flow products to stores, the services that we provide to our business, the technology investments that we’re making, we have opportunities everywhere. And I think that’s part of the reason why you see we’ve added Arthur Valdez to the team. And just an example, the availability of record sandwiches went up over the course of the last quarter.

And what you see as a consequence of that is the attach rates went up as a result of it. And so I think that those are just examples of the kind of improvements we’re seeing. Clearly, we’re seeing benefits, as you know, with regard to freight and the cost of it. And the ability for us to rethink how we do what we do is large. And so there is opportunity there for us in terms of bringing automation in, flowing products better, buying better and frankly, developing a supply base that can also keep up with the kind of scale and growth plans that we have.

Operator: Thank you. Your next question comes from David Palmer with Evercore ISI. Please state your question.

David Palmer: Thanks. I had a question on transaction growth and what you’ve seen in your Rewards membership. And I’m wondering if there’s an insight there over time, since 2019, you’ve had over 80% increase in your active Rewards membership. It’s 15% higher than a year ago. And you noted that transactions were up 1% in the quarter and down versus four years ago. So it looks like maybe frequency is down. Maybe the consumer is using you differently, consolidating orders, certainly bolstering the check by having more items per order. But are you seeing any sort of solves from a marketing standpoint? You have very good visibility into what your consumers are doing. You have over half of your orders, you know your consumer and you see what they’re doing and the frequency they’re coming. So I’m wondering about the tools you see from a consumer side versus some of the more operational stuff you’ve been talking about as ways to unlock growth. Thanks.

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