Starbucks Corporation
Q1 2022 Earnings Call Transcript

Published: 1 Feb 2022

[Operator:]

Good afternoon. My name is Alex, and I will be your conference operator today. I would like to welcome everyone to Starbucks First Quarter Fiscal Year 2022 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. I would now like to turn the conference over to Tiffany Willis, Vice President of Investor Relations. Ms. Willis, you may now begin your conference.

[Tiffany Willis:]

Good afternoon, everyone, and thank you for joining us today to discuss Starbucks first quarter fiscal year 2022 results. Today's discussion will be led by Kevin Johnson, President and CEO; and Rachel Ruggeri, Executive Vice President and CFO. And for Q&A, we will be joined by John Culver, Group President of North America and Chief Operating Officer; Michael Conway, Group President of International and Channel Development; and Leo Tsoi, Chief Executive Officer of Starbucks China. This conference call will include forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factors discussed in our filings with the SEC, including our last annual report on Form 10-K and quarterly report on Form 10-Q. Starbucks assumes no obligation to update any of these forward-looking statements or information. GAAP results in first quarter fiscal year 2022 include several items related to strategic actions, including restructuring and impairment charges, transaction and integration costs and other items. These items are excluded from our non-GAAP results. All number references on today's call are on a non-GAAP basis, unless otherwise noted. For non-GAAP financial measures mentioned in today's call, please refer to the earnings release and our website at investor.starbucks.com to find a reconciliation of those non-GAAP measures to their corresponding GAAP measures. This conference call is being webcast, and an archive of the webcast will be available on our website through Friday, March 4, 2022. For calendar planning purposes, please note that our second quarter fiscal year 2022 earnings conference call has been tentatively scheduled for Tuesday, May 3, 2022. And with that, allow me to turn the call over to Kevin.

[Kevin Johnson:]

Thank you, Tiffany, and welcome, everyone, to today's call. Before we dive into the quarter's results, I want to take a moment to reflect on the fact the world is now entering the third year of this pandemic and recognize that over this period, Starbucks has made significant progress driving our business recovery. The last two years have been anything but linear. Many parts of the world continue to experience significant COVID-related disruptions, including Starbucks' two lead markets, United States and China. However, through a dynamic and challenging environment, three things have remained true for Starbucks. First, global consumer demand for Starbucks is strengthening across our offerings and throughout all dayparts. This is a result of our work over the past year to expand digital customer relationships, introduce new beverage offerings and provide a safe, familiar and convenient experience for our customers. Second, we remain unwavering in the prioritizing the health and safety of our store partners and customers, even when the associated costs may create short-term earnings pressure. We have consistently provided best-in-class COVID benefits to our partners since this pandemic began. And third, the flexible operating protocols we established from the beginning of the pandemic continued to serve us well. The combination of these things has enabled us to adapt to near-term challenges while continuing to invest in what we know is a long-term opportunity for all stakeholders. Starbucks delivered record first quarter revenue of $8.1 billion, representing 19% growth. Global same-store sales grew 13%, demonstrating strong customer affinity for Starbucks. Demand for Starbucks continues to build, and we are fully committed to capitalizing on this momentum for the long-term. That said, while we have seen extraordinary top line growth, we've also experienced extraordinary cost pressure, which impacted our margin performance. As the Omicron variant began to quickly spread, it resulted in higher-than-anticipated costs in three key areas across our U.S. business, each of which impacted our results similarly. A highly transmissible Omicron variant amplified staffing shortages in our supply chain, resulting in higher-than-planned distribution and transportation costs. We also experienced a significant increase in our industry-leading COVID isolation pay for our partners, and we saw higher-than-anticipated costs from training and onboarding of new Starbucks partners. As we navigate the near-term challenges of this latest COVID variant, we remain confident in our ability to rapidly adapt while continuing to drive our long-term agenda of share gains, growth and value creation. In our other lead market, China, the zero-COVID policy there contributed to significant disruption to store hours and transaction volume. Net new store growth and performance remained strong, yet overall revenue and profitability came in below expectations. While we believe that these dynamics are contemporary, we are focused on appropriately navigating the evolving macro dynamics and balancing long-term investments in the business. I'll now provide more insight into our Q1 results and the actions we are taking to address the current state of our business, industry and overall economy. While continuing to prioritize our partners and ensuring Starbucks delivers long-term profitable growth. In the U.S., we experienced very strong customer demand over the holiday season. Our ability to deliver the Starbucks Experience to our customers how, when and where they want, resulted in first quarter revenue of $5.3 billion. Year-over-year revenue growth of 23% was driven by a double-digit increase in customer traffic, highlighting our compelling holiday lineup and strong in-store and digital customer connection throughout the holiday season. Customer demand increased through all dayparts and resulted in record Starbucks Card activations and reloads in excess of $3 billion. Starbucks Rewards grew 21% to a record 26.4 million 90-day active members. Average ticket grew mid single-digits, demonstrating our continued differentiation through customized premium beverages and compelling food options. Prior to the emergence of the Omicron variant, we were experiencing some inflationary pressures and staffing issues resulting from the broader pandemic. When the Omicron surge began, inflationary costs and staffing shortages were amplified, well in excess of our expectations. As I mentioned, three primary factors

[Rachel Ruggeri:]

Thank you, Kevin, and good afternoon, everyone. Our Q1 performance showcased the strength of the Starbucks brand underscored by strong customer demand despite intermittent COVID headwinds, which accelerated this quarter given the highly transmissible Omicron variant. At the same time, it also highlighted continued industry pressures and operational challenges, which we are actively addressing as Kevin highlighted moments ago. Starbucks delivered global revenue of $8.1 billion in the first quarter, up 19% from the prior year, setting a Q1 record, primarily driven by the exceptional holiday performance in the U.S., coupled with strong results from our global portfolio with remarkable breadth and depth despite continued mobility disruptions to our China operations impacted by the country's zero-COVID policy. Q1 consolidated operating margin contracted 30 basis points from the prior year to 15.1% due primarily to significant investments in store partner wages and benefits as well as inflation, partially offset by sales leverage and pricing in North America. Q1 EPS was $0.72, up 18% from the prior year reflecting strong revenue growth. However, it was lower than our expectations due primarily to our U.S. business, driven by the three key factors Kevin outlined

[Operator:]

Your first question comes from Jeffrey Bernstein with Barclays. Please proceed with your question.

[Jeffrey Bernstein:]

Great. Thank you very much. A question on the operating margin guidance for both this year and the out years. It sounds like this year, you’re now saying approaching 17% on a non-GAAP basis. But now not getting back to the 18% to 19% until fiscal 2024, albeit I guess, still growing in fiscal 2023 off of the 17%. I just want to make sure I understood that correctly. And if you could then prioritize the initiatives to return to that 18% to 19%? I know you had previously mentioned labor investment should drive sales, which would be critical. And then you had a variety of cost saving initiatives and ultimately, pricing would be there to backstop. I just want to make sure we have that prioritization right in terms of the biggest buckets that give you the confidence getting back to that 18% to 19%. Thank you.

[Rachel Ruggeri:]

This is Rachel. Thank you for the question. How I’d start would say, as we look at FY2022, based on what we saw in Q1 and what we’re guiding for the balance of the year, we think approaching 17%, the better gauge of our margin is allows us to – as we’re seeing, we saw cost pressures accelerate in December and we’re seeing those intensify as we noted in January and into Q2. Now we’ll take action against those costs but it will take us a little bit of time. And so for that reason, we believe it’s prudent for us to guide approaching 17%. With that, as we exit FY2022 and as we enter FY2023, we’ll now see a lower margin – a slightly lower margin than what we had originally guided. And as a result of that, we’re continuing to look at ways to drive sales, as you outlined. That is our biggest opportunity for us to be able to drive margin and to grow earnings in the future. So we’ll continue to invest in our business in the areas that are going to drive sales both in this year as in FY2023. We’ll also continue to focus on the areas this year and into next year that will help us continue the momentum that we’re seeing. So sales is, by and large, our biggest opportunity. In addition to that, as we’ve outlined, we’ll continue to take pricing while we balance pricing decisions and actions with our demand. And so that will be another big opportunity for us as we continue to grow. And then we’ll continue to find efficiencies in our business. As we’ve outlined, we’ve been working on efficiencies related to productivity that will help support this year and it will also expand into FY2023. We certainly have opportunity as we think about, from a tailwind perspective, as we see recovery, both in China as well as in our U.S. business and as we continue to further the efficiencies focusing on. But broadly, I would say sales, by and large, is going to be our continued opportunity for our growth not only this year but into FY2023. So hopefully, that gives you a perspective.

[Operator:]

Thank you. Your next question comes from Jared Garber with Goldman Sachs. Please proceed with your question.

[Jared Garber:]

Hi, thanks for the question. Wanted to follow up on the previous question a little bit as it relates to margins. Rachel or Kevin, could you help frame maybe some of the pricing actions that you’ve taken? And what maybe you still have left in the chamber, so to speak, to help offset some of these pricing – or some of these inflationary pressures? And what are you seeing on the demand side as it relates to sort of elasticity of demand with these pricing actions going through in the last couple of months and then what you’re looking at going forward? Thanks.

[Kevin Johnson:]

Yes, Jared, this is Kevin. Thanks for the question. I’ve commented before, we have a very sophisticated approach to pricing that leverages analytics, artificial intelligence, and it’s overseen by a very talented team who do the modeling and look at the elasticity of demand along with the pricing actions on an ongoing basis. I think we mentioned some of the pricing actions we took both in October and January. I’ll hand to John here in a second to talk through those in the U.S. But with those pricing actions, we still saw incredibly strong demand through the holiday season. But John, let me hand to you to go through the specifics.

[John Culver:]

Yes, Jared, thanks for your question. Our pricing strategy, as Kevin has shared and Rachel as well, is driven by several factors such as inflation rates, partner investments, the infrastructure investments that we want to make, and then obviously, the investments we want to make on continuing the innovation pipeline. We do all those things while balancing the premium value for our customers and the experience we want to provide them. As we saw inflation begin to increase in the middle of this past year, we made the decision to take pricing and we implemented pricing effective October 1. As inflation continued to grow, we saw that. We needed to take additional action and we did so effective January 1. So we’ve taken two moves around pricing to help mitigate the challenges that we’re seeing. Now we also have additional pricing action that we have planned for the balance of the year that will additionally help offset the trends and some of the cost pressures that we’re seeing. And as Kevin highlighted, that’s being informed by the analytics and insight team. In terms of elasticity, we have not seen any meaningful impact to customer demand. To the contrary, our customer demand continues to grow. We’re coming off of a very strong quarter in terms of transaction growth at 12% for the quarter in the U.S., the highest since pre-pandemic levels, and our ticket is also very strong as well. So we watch that very closely and we will adjust accordingly.

[Operator:]

Thank you. Your next question comes from Andrew Charles with Cowen. Please proceed with your question.

[Andrew Charles:]

Great. Thanks. A question for John or Leo. Obviously, the China sales environment has been challenging, and you guys are not immune to it despite some pretty impressive gains in the digital and loyalty strategies. China development remains robust and on track for the year. But just curious, what would it take for you to reconsider China development plans to slow down openings and focus more intensely on improving the same-store sales? Thanks.

[Kevin Johnson:]

Leo, why don’t you take that one?

[Leo Tsoi:]

Certainly. Hi, Andrew. First of all, I want to say Happy New Year to everyone. This is the second year – second day of our Chinese New Year here in China. Now your question on the store opening and the development, what I’d like to say is that we have actually opened more than 1,200 stores in the past two years, and most of them we actually opened during the pandemic. This is equivalent to more than one-fifth of our portfolio, which is larger than many of the other retailers in the market for years. And what is more, as Kevin just mentioned, we have been able, all these new stores to achieve the best-in-class profitability and returns. And this goes to show the huge market potential that we are here to unlock. And so when you see this entire development, it is important to note that 70% of our growth actually in China is driven by our new store openings, and I’ll say, will continue to drive and leverage the opportunity here as we see in this market development. And simply put, the three strategies that we’ve been working on is proven. Number one is to go wide to add them into more cities. Second is to go deeper by bringing a rich and diversified stock portfolios that curate new coffee experience to our customers. And third, as the pandemic is coming back and with a resurgence, we continue to be go smarter to leverage the power of our data analytics and also to drive our store economics, including our store footprint so that we can operate in these markets. And I have – I must say that I’ve been in this market for more than 10 years. What I’m seeing is we are really in the early stages of these markets. And as we go wide, go deep and go smarter, actually, our opening is actually helping us to build our success for the long-term. Thank you, Andrew.

[Kevin Johnson:]

And I’ll just reinforce the key point that Leo made is as we continue to build these net new stores, they’re performing at best-in-class store profitability and return on investment. And as long as we keep delivering best-in-class profitability, return on investment, we’re going to continue to lean in on building new stores and play the long game. In your question, Andrew, is what would cause us to rethink that, the answer would be if we saw revenue and return on investment not meeting that hurdle rate that we feel comfortable with, we would reevaluate. But right now, it's amazing. Through this pandemic, as Leo mentioned, as we go wider and deeper in our new store development, they are performing extremely well. And so we're going to continue to lean in.

[Operator:]

Thank you. Your next question comes from Sara Senatore with Bank of America. Please proceed with your question.

[Sara Senatore:]

I wanted to ask about the U.S. same-store sales number. And first of all, did you see any impact on the top line with the advent of Omicron? I know you mentioned cost, of course, but a lot of the industry did see a dampening effect on comps in the back half of December. And then on a related note, you're seeing transaction growth when most restaurants still are not. So maybe could you talk a bit about what's happening? Is it coming in your urban markets? Does it have different regional footprint? Just trying to understand how your traffic might be recovering in a way that the rest of the industry doesn't seem to be? Thanks.

[John Culver:]

Yes. Sara, thanks for the question. Yes, we did see an Omicron impact especially amplify in the last two to three weeks of the quarter. And it played out in a couple of ways, obviously, in terms of as the cases surged, number one, customer mobility was impacted. But then also, we saw our partners also have a similar surge in the number of cases as well as call-outs, which Kevin spoke to and Rachel spoke to in terms of the Omicron COVID pay or the COVID pay that we provide our partners. Now with that, we also were in the midst of having a record holiday quarter and couldn't be more proud of the work that the team did in terms of delivering very strong top line growth of 23% in a very, very complex environment. In terms of what we're seeing in terms of the transactions and the growth of transactions, there is a pent-up demand for Starbucks and for people wanting and longing to return to their normalized routine. So a couple of things that I would just call out. First, the beverage attach that we're seeing in the stores continues to normalize. We've seen strong beverage mix growth across, in particular, cold beverages, which now account for 70% – over 70% of our beverage transactions. We've also seen strength in alt-dairy and the growth of alt-dairy and then also an increase in the modifier performance, whether it was the holiday beverage or the overall promotion that we saw, very strong growth. Food continues to grow and break all-time records in the quarter, and really, that's being driven by breakfast and by bakery. The other thing I would just add is that our peak transactions improved versus the prior quarter and a year-over-year basis. And then we had strong growth on the digital side. We now surpassed 26 million 90-day active members. And as part of that, our non-SR customer transactions continued to grow and reached its highest level since the pre-pandemic. In terms of the stores and where we saw traction in that, the suburban and the rural stores, where drive-thrus are the most prevalent, continue to outpace the rest of the portfolio. Our drive-thrus had its fourth straight quarter of double-digit comp growth. The central business district, the urban core and the urban edge recovery also continues, and it was the third quarter in a row of positive comps for all three of those urbanities. And then the convenience channels continue to play a big role. Between MOP, drive-thru and delivery, that accounted for over 70% of our sales in the quarter. So very encouraged with the strong customer demand and the way in which our partners really were able to meet the needs of our customers and step up under very, very challenging circumstances.

[Kevin Johnson:]

And Sara, I would just add to everything John just said, what we've seen too is following each COVID wave, we've seen customer demand strengthen. And we anticipate that's going to happen following Omicron as well. But John and his team have done a fantastic job navigating this place, and I think he did a great job outlining the actions that we've taken that have driven that result.

[Operator:]

Thank you. Your next question comes from John Glass with Morgan Stanley. Please proceed with your question.

[John Glass:]

Hi, thank you very much. Going back to productivity, what have you learned from this experience in terms of the ability to start to reduce store hours, to reduce menu items and complexity? And does that play a role in your productivity, that is to say, reducing some of those things? Or is that antithetical to your goal of driving sales?

[Kevin Johnson:]

Yes. Thanks for the question, John. I'll just comment briefly and then I'll hand it over to John to take into some more detail. But certainly, we have learned to be very, very adaptable throughout this pandemic. And so certainly, when these COVID waves hit, we know how to adapt store protocols, store hours, if we need to consolidate partners in one store and temporarily close a store, we do that. If we need to amplify certain channels like drive-thru or mobile for pickup, we do that. So we've become very adaptable. And I think one of the things that's helped us is also see the opportunities for us to drive productivity gains certainly as we look to the future. And both are very important, how we adapt to COVID but also how we simplify the work in our stores and bring solutions that give us productivity while, at the same time, it improves the partner and the customer experience. And John, I'll let you just talk a little bit about the details of some things you guys are working on.

[John Culver:]

Yes. This is an area, John, that the team is laser focused on. And clearly, it starts with taking action to reduce the complexity of the work in our stores for our partners to meet the demand of our customers. And we've shared previous calls the work that we've got going on around automated ordering. That continues to be put in place to reduce those manual routines of our partners. We continue to make investments in improved functionality for our equipment and better flow-through of that equipment in terms of what it's able to produce, whether that's the measuring of two machines, whether that's the warming ovens or whether that's our cold brew system, and then also at the same time, always assessing our beverage routines, ways in which we can build beverages, become more effective and more productive in building those beverages and drive better productivity. And then lastly, in terms of eliminating low-volume SKUs, we have taken action to eliminate and reduce low-volume SKUs. We did that during the first surge of COVID where we ran into some of the supply chain challenges. We took action to pull some of the low-volume food items out of the stores, and we have not had a meaningful impact to overall sales revenue. So productivity plays a key role for us going forward, and it's an area that we're laser focused on.

[Operator:]

Thank you. Your next question comes from Lauren Silberman with Credit Suisse. Please proceed with your question.

[Lauren Silberman:]

Thanks for the question. So on membership, so rewards membership up 21% in the quarter, U.S. traffic, 12%, so active rewards member growth has been faster than traffic, which I think is something we've seen over the past couple of quarters. Can you talk about the dynamics of that difference? And then you previously talked about members spending 2x to 3x more once they join the program. Does that still hold with the newer cohorts that are coming into the program? And if so, how long does it take for those new members to move along that maturity curve?

[John Culver:]

Okay. Thank you very much, Lauren. As I shared, we added and grew our active memberships 21% in the quarter and we now exceed 26 million active members. We added five million active 90-day members on a year-over-year basis. So Starbucks Rewards now represents 53% of the spend in our stores, which is at an all-time high and which is a three-point increase versus fiscal – Q1 fiscal 2021. As part of that, their growth in terms of spend has grown commensurately. We're seeing significant increase in the spend in the first year of membership versus the prior 12 months of the preceding membership. We're seeing a strong lift in spend when they join, regardless of whether the customer is high or low frequency. And Rewards members, as you shared, are spending at an elevated rate and visit our stores at a 3x frequency rate versus our nonmembers. So we're going to continue, as a company, to double down in this area, and we see it as significant upside and presenting tremendous value to meet the need states of our customers.

[Operator:]

Thank you. Your next question comes from David Tarantino with Baird. Please proceed with your question.

[David Tarantino:]

Hi, good afternoon. My questions on the turnover in the U.S, it seems like that might have surprised you in the most recent quarter, given your commentary about training costs and onboarding new partners. So I guess that’s a trend maybe we haven’t heard from others. So I wanted to understand kind of what you think drove that spike in turnover if you had one, and why you think that might ease as the year goes on here.

[John Culver:]

Yes, David, I’ll take that question. And clearly, it’s no secret that we’re in a constrained labor environment broadly across the country. In particular, foodservice is one of the most heavily impacted in terms of finding available labor and staffing the needs of a business. Our turnover rates, I would say, as we track them, they were and have been elevated versus our pre-COVID levels. But what we’ve done with the actions that we’ve taken as we emerged out of the quarter, we’re beginning to see that turnover rate stabilize. And basically, our hourly turnover rate has basically flattened over the course of the last several weeks. In addition to that, we’ve also seen a significant uptick in terms of partner sentiment, which is improving as well. So for us, we are an employer of choice. We’re going to continue to make the right investments in our partners, whether that has to do with wage, whether that has to do with benefits or just really giving them the opportunity to grow with the company. And we feel very confident that we’re going to come out of this in a much stronger place, given the actions that we’ve taken. But clearly, it is a challenging environment. We’ve had to adjust our labor models and adjust store hours to address it. And we’ve been able to navigate it thus far, and we have confidence that we’ll continue to be able to navigate that.

[Operator:]

Thank you. Your next question comes from Andrew Barish with Jefferies. Please proceed with your questions.

[Andrew Barish:]

Yes, good afternoon. Rachel, I was just trying to understand a little bit more on the kind of 200 basis points of other inflation and how that’s changed or different from what you were talking about kind of going into this year on the prior guide.

[Rachel Ruggeri:]

Sure, and I believe you’re referring to the 200 basis points that maybe Kevin addressed in his prepared remarks. There’s a couple of ways I’d look at the 200 that we had is in Kevin’s prepared remarks, we talked about nearly 200 basis points, the majority of that was inflationary pressures as we began FY2022. So as you recall, we had expected to have elevated cost pressures going into FY2022 related to the decisions we made around wage but also the inflationary pressures, both in freight and labor across our supply chain and across and through our commodities. What we’ve seen, those costs have actually, as we’ve outlined, accelerated in December and have intensified, really largely related to Omicron into January. So when we talk about the back half of the year having another 200 basis points of headwinds, the lion’s share of that is really inflationary pressures related to Omicron that we saw in December and that we’re seeing further in Q2. That also includes the COVID-related pay as well as training. As we get through Q2 and when Omicron subsides, I don’t know exactly when that will happen, but as it does, we would expect that our inflationary pressures related to Omicron would lessen in terms of the impact on margin. But overall, our inflationary pressures in FY2022 will remain elevated relative to FY2021.

[Operator:]

Thank you. Your next question comes from John Ivankoe with JPMorgan. Please proceed with your questions.

[John Ivankoe:]

Hi, thank you very much. I wanted to get back to the discussion on U.S. traffic because it looks to us that U.S. same-store traffic is still down double digits from the first quarter of 2022 to the first quarter of 2021, and despite at least what you said last quarter, a record number of discrete customers, obviously, a record number of MSR members. So I wonder like what the big kind of addressable buckets in your opinion there is to kind of re-attract the frequency of your previous customer base is kind of the first point. And secondly, is there anything that you can do with the direct communication functions around MSR, the personalization, what have you to really step on the gas for that program to get back your overall store visitation levels back to the levels it was in 2019 or fiscal first quarter of 2020, whatever you want to call it?

[John Culver:]

Yes, John, just as it relates to the transactions that you mentioned, we are focused on getting back to those levels. A couple of things that are impacting it is obviously, the way in which our stores are set up and how customers are being mobile or not going to work and not having their normal routines. Now we did see on the good side, a positive side, return of the breakfast daypart and peak transactions, which gives us optimism for hope in terms of growing those transactions during that period. In addition, I would say that we’re going to continue to leverage the convenience channels of Mobile Order & Pay as well as drive-through and delivery to meet the changing customer needs to drive transaction growth going forward as well. And then lastly, I would say that we will continue to assess the store footprint to make sure that we are building new stores and relocating additional stores – existing stores into the areas where customers are, given the pandemic and the changes that have occurred in the pandemic. And Starbucks Rewards is going to play a significant role in that as part of that growth.

[Operator:]

Thank you. Our last question comes from David Palmer with Evercore ISI. Please proceed with your questions.

[David Palmer:]

Thanks. Just a follow-up on John’s with regard to on-premise traffic, it’s obviously been weak across all U.S. restaurants. Could you talk about your on-premise traffic per store and how that compares to pre-COVID? And looking at that gap, how much of that do you think is going to be an easy sales win as soon as consumers become more comfortable with regard to COVID? And how much do you think might be a lingering change just due to behaviors shifting longer-term? Thanks.

[John Culver:]

Yes. I think that what we see – well, I know what we’ve seen is that as we’ve had to adjust store operating protocols, in some cases, we’ve gone to pickup-only, we’ve gone to drive-thru-only and we’ve readjusted the format. So the ability for customers to come into the stores and to sit in the store is not at the level of capacity than it was back prior to COVID. This is an area that we’re continuing to focus on in adjusting and reopening the stores fully, number one, as we’re able to, given COVID, and number two, as we’re able to, given some of the staffing challenges that we’ve seen. So we continue to adjust and monitor this very closely and make decisions on a daily basis. Now in terms of customers and their changing routines and how much is going to go back to where it was before and how much has changed, we feel confident that given the Starbucks Experience, our customers come to us because they love a great premium experience in a high quality cup of coffee. And whether it is coming in our stores or coming through the convenience channels, we’re going to continue to grow in all those areas and meet the change whatever it is for our customers going forward in terms of their routines.

[Operator:]

Thank you. I will now turn the call over to Kevin Johnson for closing remarks.

[Kevin Johnson:]

Well, thank you all for joining us today. I hope you get a sense of three things

[Operator:]

This concludes Starbucks first quarter fiscal year 2022 conference call. You may now disconnect.