All right. Good morning, everybody. My name is Danilo Gargiulo. I'm the senior analyst at Bernstein, covering restaurants and food distributors. I would like to thank you, everybody, for being here today. Before we start, quick reminder that you're able to submit questions through Pigeonhole by either scanning the QR code shown on the screen or by going to pigeonhole.at with passcode 2026SDC. We are very thrilled to have Starbucks here on stage today. Even more delighted to share the stage with Brian again, first time back as the Chairman and CEO of Starbucks. Cathy, the CFO of Starbucks. This is your first time as a CEO of Starbucks here at SDC. Before we go deeper, what are the top three takeaways that you would like investors to remember by the end of today? Well, great to be here, and look, I would say you guys heard our most recent earnings call. To me, the thing that I'm most excited about is the foundation operationally is a lot stronger, and we're now building from a position of strength operationally. The labor we put in is now performing against the Green Apron Service model. We've got clear metrics for how we're holding ourselves accountable for performance around the GROW scorecard. Then we're seeing now the repetitions around those key components of Green Apron Service and those key metrics play out in great customer service experiences. That's a critical piece. Obviously, I think our menu and marketing innovation has really struck a chord. Whether it was the protein program, the matcha menu reset, the baked case reset, most recently the energy refresher program, just also all the flavor resets that we've done. I think we've made our menu and our marketing much more consumer relevant and also much more culturally relevant. I think you've seen us show up now more in culture, the way that Starbucks historically has shown up. I think as we go forward, you'll see us continue to lead culture, whether it's at events like Coachella or the World Cup is happening here in a couple weeks. Please don't go that way. Italy's out of the World Cup, so. Well. Yeah. This is the second time in a row, right? Third time. Third time. Brian, please. Please. Any predictions on the World Cup? I think those two things are really important. The other thing that I would mention too is we mentioned we would get our rewards program to address some of the consumer feedback that we were getting, and then launch it with a new kind of tiered system. I'm happy to say that that launch went really well, and we're seeing really great adoption in all the various tiers that we have. Operationally, I think the team is really performing well. Marketing-wise, I think we're performing really well. Menu innovation, I'm excited about the pipeline to come. I've been delighted by what we've executed. Digitally, I think rewards has gone really well as well. Those are probably the top three things that are working. Obviously, there are things that we still are working on around tech, supply chain, and development. All in all, and I think I've said this along the lines of, one, I feel like we're ahead of schedule, and more importantly, I feel like we've seen a turn in our turnaround. Mm-hmm. Maybe Cathy, same question for you, maybe with more financial lenses. What were the top three takeaways that you'd like investors to remember? I think starting where Brian just finished, which is the progress on the turnaround. We're ahead of schedule, and we have seen this last quarter an inflection in the bottom line. That didn't come overnight. We saw it coming several quarters ago. About four quarters ago, we said we were going to lead with the top line. We had to start with those non-rewards customers. We got to the rewards customers. We had to see the growth in the morning daypart and in the afternoon daypart. What this last quarter showed was all of that coming together, in which case we started to see the bottom line inflect. I think that's probably the most important part is that that's all necessary on our path to the turnaround, to continue to grow, not just top line, also the bottom line. We saw that this last quarter, which was great. I think underneath there, though, my maybe second main point would be we see a clear path for the guidance we've given longer term, we gave guidance three years out. It is the conviction of the turnaround we're seeing and the building blocks. First off, top line was very broad based, which gives us confidence for the continued growth in the top line. Bottom line, we should see that continue to inflect as we start to roll over some of the investments. We're going to see some of the Cost of Goods Sold pressure coming down with COGS, I mean, with coffee prices coming down in the back half. Moving forward, our cost savings program, we have very clear line of sight for the $2 billion of cost savings for the next three years or so, which should continue to help with that margin expansion. Lastly, just opportunity. We continue to see not just opportunity on, we've got the morning daypart back at a really good place. Still room to grow there. It's still growing. We're particularly excited about what we can do in the rest of the day. Opportunity to grow our new store footprint around the world and in the U.S. I say that because I feel like we're at the early innings of all of that opportunity as we progress through the turnaround. Excellent. Brian, nearly two years ago, you joined Starbucks, and surely you had ideas on how to turn around a company that was facing some severe traffic losses. What surprised you the most when you joined Starbucks? The reality is the brand is one of these iconic global brands, highly resilient and beloved. I think we just drifted away from why people originally fell in love with Starbucks and why they will continue to be in love with Starbucks. You saw this drift in the marketing, you saw this drift in, I think, tech, you saw the drift in operations. Probably the most visible place where you saw the drift is just the experience when you walked into the stores. I always approach these things from the customer perspective. What really became clear was, Starbucks had become a place you grabbed coffee on your way to do something, as opposed to Starbucks being a place you want to go to and be a part of. We just had to bring that back. What was clear is we were understaffed, and we had hardened the restaurants. In a lot of cases, we were building soulless experiences. I think at the crux of Starbucks is there is this soul in every transaction and every experience that needs to come forward. Hopefully you're seeing this already. When you walk into the stores, it may not be a long conversation, but you should see our partners with their eyes up, a smile, they're engaged, they're leaning towards our customers. When you get to the handoff experience, there should be a note written on your cup. There should be a moment of connection at that point. Then when you decide to either stay in the store or if you're going to leave the store, you should feel like you've come in and out of a coffee house. I think that's really important for every experience. We'd just gotten away from some of those things. I think the trick for us going forward is making sure that every experience, people feel like that was a unique Starbucks experience, and one that they ultimately say is, "Hey, that was worth it. I want to do it again. Which aspect of your Back to Starbucks plan took a little bit longer than you had anticipated before joining? Which one took a little bit less than expected, and why? Look, I would say one of the things that was great is our partners in the stores quickly adopted the idea of getting back to Starbucks because they knew what that meant. A lot of our partners were long-tenured. When they realized we were going to be doing things that would make their job be one about customer connection as well as the craft of the drinks that they were going to pull together, they were energized and engaged. To get 250,000 partners at the store level to basically hear what is the strategy and how we're going to get back on our front foot, that is hugely powerful. That adoption went a lot faster than I had expected. It also helped that we did the all-manager conference, I think a couple of months in as well. Look, some of the things that took a little bit longer, frankly, was getting the innovation and some of the work done just because as an organization, we were too slow. We didn't have clear accountability, and we weren't able to make decisions quickly to get things done. Now I'm happy to say, when I first got to Starbucks, in order for us to do a raspberry syrup, the timelines were 18 months or more. I was like, "That's not okay." What I'm happy to say now is we've shrunk those timelines down to eight months, and we'll get it down to four months. What you're going to see now going forward is we're going to have news on Starbucks every three to four weeks because we've got the operational capability in the store to support that news. Then you'll see us doing every couple of months, hopefully, what are big movers. Like energy refreshers, a protein platform, a matcha menu reset, a bake case reset. We're going to have the ability to be in culture with a healthy drumbeat because this business has unbelievable frequency, and it has unbelievable loyalty. If you want people to stay engaged, you got to stay top of mind, and you got to be culturally relevant. I think we're starting to do a pretty good job on that. So just the speed of decision-making was slower than I had expected. I think we've done a great job of getting the right people into the right jobs with the right accountability, and I couldn't be prouder of the team that we've assembled. I think when you look at my leadership team, I would argue we've got the best in the business when it comes to finance, marketing, operations, supply chain now, tech, HR. I feel really good about the leadership team that we've put together and the culture that we're creating that values the idea of speed and performance. Cathy, when you arrived at Starbucks, what was the state of the P&L, and which actions have you taken to make the business more flexible through the cycles? Yeah, I love your question about flexibility. What I saw, and it showed up in the P&L, is we had taken, as Brian said, kind of our eye off the customer and what mattered most. Starting there. How it showed up in the P&L is we didn't have the same cost discipline we have today, and we will continue to have. We were investing in a bunch of things that frankly just didn't matter as much as some of the things we should've been focused on. We had a little bit of cost discipline that needed to happen. What we saw with, and if you looked at the P&L through time, we had become very fixed and less variable throughout the course of the P&L. All of those sets of decisions, and it was no one decision, but a whole bunch of them, caused our P&L to pretty much tip over as soon as we lost the top line, which is what you saw then as the business started to shrink back in 2024 timeframe. Obviously, we dropped the earnings. The great news is we've made a lot of progress. You've been following our cost savings agenda that we've been working on. First and foremost, you got to get the top line back, which we have. We've been trying to consciously make our choices around focusing on the investments that matter most. Starting with the coffee house and the customer, and then back and being very diligent there. Making thoughtful choices where we can to make the cost more variable than fixed. That the P&L can flex with the business a little bit more than it was able to when I first got there. We've made a ton of progress. We are by no means done. It always has to start with keeping the customer and the coffee house in mind. If we start with our decisions there, and then really critically question everything else that we're doing, I think we're getting to a good place. Like I said, I think we've got a long way to go, but I'm excited about the progress we're seeing. It was nice to see the income inflect this last quarter. It was the first time in two years EPS grew. It was the first time in two years we saw operating income inflect. One data point, but it's the right direction. Which areas of the business were under-investing in? In which other areas of the business you were probably over-investing? You're still early in the journey. Yeah to be unlocked. As you objectively look at the business today, where are some pockets of over-investment that over time you're going to be pruning a little bit, and which are some other areas where you think you might need to be investing a little bit more on? Yeah, the clear obvious under-investment was in the coffee houses and with our team, our partners in the coffee house. We were asking our partners in the coffee house to do a lot with very little. The first thing we did was invested with Green Apron Service back into the coffee houses. We've shared over $500 million of investment there. That obviously has been a significant part of the turnaround and the customer experience, and obviously the traffic we're seeing starts with that investment. We've had to do a little bit of investment in supply chain as well. The frequency and the replenishment cycle of our supply chain doesn't support the business we have today and the business we want. We've done a little bit of investment there this year. We'll finish that up. Largely, those are the two biggest areas of investment. All the rest is choosing to not invest in places we were. A lot at the support center. We had forgotten that we needed to be serving customers and partners every day first and foremost. That just meant we stopped doing a lot of stuff that was just not as important at the support center. We've spent a lot of time there. We restructured a few of our support models, like our licensed business internationally and the U.S. and have become very clear on what's our value proposition for our licensed partners, what should we be doing versus what they should be doing. That's helped us to think through the cost structure there. Going forward, we've shared our $2 billion cost savings agenda, and it's kind of across all parts of the P&L. It's Cost of Goods Sold, it's the Operating Expenses and G&A. G&A was the easiest to get at first, or the fastest to get out, to help us offset some of the investments we were making this year. The others take a little bit longer, like Operating Expenses, for example addressing our repairs and maintenance in our coffeehouses. That takes us a little bit to get the tools, the structure, the programs in place to get the savings coming through there like we'd expect, which we will start to see this next year. The last one is Cost of Goods Sold. That one tends to take a little longer because those are longer-term contracts. We have to go out and multi-source sometimes in many occasions. That just takes us a while at our scale to get vendors online or suppliers online. We're making really good progress across all three buckets of the P&L. And if I- The only other thing I would add is we stopped the remodel program. Siren Craft System, and purpose-driven assets. Yeah. We replaced it with an uplift program that is focused on, kind of to Cathy's point, getting the coffee house back to being a coffee house. It's a front-of-house uplift program. We've done probably about 600 of them. We'll get over 1,000 this year. Hopefully, we'll have 2,000 done next year and get through all 8,000 of the stores that need the coffee house uplift done. The reason why that's a big deal is you went from spending millions of dollars and closing stores for three to four months, to now spending about $150,000 and not closing the store at all and doing it overnight. What we've also done with those uplifts is we've returned seats back to Starbucks. Yeah. Yeah. Yay, applause. Yeah. I like the seats as well. Yeah. That was a big shift as well. Not to mention all the other things that we've been up to as well. Can you talk maybe about the balancing between the different consumer journeys? How are you managing a business for a consumer who's looking for different occasions within the same box, from a drive-through to delivery, to having the seating. Sure. How are you maximizing the four wall for that store? Look, I think one of the things that's great about Starbucks is we have all these access points, right? We've got mobile order pickup, we've got delivery, we've got drive-through, and we have the cafe. One of the things that we invested in as well is a technology that we call the Smart Queue, which basically is against an operating standard of if you're in cafe, you'll get your drink from POS to hand off in less than four minutes. If you're in the drive-through, we'll get you from order board and out the door in less than four minutes. Then if it's a mobile order pickup, we basically want to be on time, meaning less than 10 to 12 minutes, and accurate. Okay? So what happens behind the scenes is we've got a technology that's basically sequencing orders. It's not just first in, first out. What this does also is it hopefully syncs up the mobile order for when the person arrives, so you don't end up with a bunch of people just standing around the mobile order pickup station. Then also it recognizes, look, there's a queue of the drive-through people are here right now, and there's a queue of people in the cafe that are here right now. The next phase of this technology is we'll recognize your mobile order when you're on premise, so that we then can queue you accordingly because now you're on premise. That is what allows us to manage the multiple access points in a very orderly fashion. The reality is, what was happening before is if I went up to the POS and tried to order in store, unbeknownst to me, 20 mobile orders could slot in in front of me, and then I'm just standing there waiting. Oh, by the way, the barista doesn't know what the line is like on the mobile orders. They do know what the line is like in front of them, but they couldn't get to the ticket of the person that was in front of them. That creates a really difficult situation because the person that's in front of you. They're looking for some service, versus the person that's off premise hasn't shown up yet. Meanwhile, we're making their drink, and it's sitting on the counter. We had to put order and sequencing into the multiple channels that we manage. I think what's great is by adding the Smart Queue, our delivery business has really taken off. That is a growing piece of the business. Our cafe business is up, our mobile order pickup business is up, and our drive-through business has hung in there. Actually, I would say drive-through was the one access point that we were probably executing okay. Unfortunately, that was at the expense of cafe because Their backs were kind of to the cafe. Their faces were out the window as opposed to seeing their customers who are coming in. I love the fact that we have all these access points, and I love the fact that we have the ability to use technology to manage it in a smart fashion so that everybody gets the customer service experience that they want. Mm-hmm. What was the unlock? Because you mentioned earlier the speed of innovation moved from 18 months, hopefully to four months going forward. What was the unlock on something like raspberry to go from 18 months to four months? How do you make sure that the quality of innovation doesn't decay with accelerated timelines? Yeah, look, it was a function of, we just had too many people thinking they had shared accountability. When everybody thinks they have a little bit of responsibility, that means nobody has any responsibility, and then decisions don't get made, and things just take a lot longer than is necessary. This has no compromise on the quality of the execution or the syrup or the coffee bean or the food that we're making. This is quality of decision making and speed of decision making. Because at the end of the day, our suppliers and partners, they're capable. They're ready to go. We just got to give them clear direction on what we are looking for, by when, and what the expectation is on the standard of what we want out of this. Simplifying, I think, the organization and clearing the way for accountability, has been a huge unlock for the business. I also think just adding to our culture, this idea of performance and speed matter. It's like we still have the same mission and values, but there's also an element of performance and speed. I think those are two critical pieces that you'll see always be prevalent in our culture going forward. Yeah. We very much stand for a culture of getting things done now. I always say I look at evidence. It's my best way to tell, so people can be telling us a lot of effort and a lot of story, but if we don't actually get the outcomes, it doesn't matter. We really shifted the culture with getting things done. We put a premium on just completing tasks. Yeah, because I also think it's not real until it's actually in the store. Last I checked, you can't eat a PowerPoint presentation. You can't drink a PowerPoint presentation. It's like, how can I quickly get from the idea to actually in store so that we can actually see how customers and partners are able to experience what we're trying to do. The good news is we've got thousands of stores in the United States. We can get these into five stores, learn a lot, iterate, and based on the risk that you're taking with the initiative, you can scale up from 5 to 10,000 really quickly. Speaking about simplification of the organization, from a G&A standpoint, do you see more opportunities to continue to simplify the organization from here on? We've done a lot. I'll start there. The most recent announcements we made was really kind of taking some of our learnings in the United States and taking them around the world as we've simplified our license structure. I think we've done a lot. What we're asking the teams to do from here on is, we're tasking everyone to offset their normal inflation, merits, wages, that kind of stuff, with productivity. That's the ask of all the team in the G&A side of the world is, going forward, we don't expect to grow our dollars. We expect to hold them, which means everyone has to be looking at how do they use technology or AI or robotics or whatever it is to drive efficiency or streamline their processes to eliminate some costs so that they can offset their wages and stuff like that. Excellent. Brian, earlier this year, you shared a new long-term guide to reach at least 5% revenue growth with at least 3% global comparable sales growth, 2%-3% new store revenue contribution, and operating margins of 13.5%-15% by 2028. On which elements of this long-term algorithm do you feel more comfortable about? On which ones was there more internal debate? Look, obviously, you got to have comp if you want to get the margin results or the new store results. That is a very important metric for us. We got to have the operating model, the marketing model, and the innovation model so that we can ensure we deliver on that three or better. If you don't deliver on the comp growth, it's going to be very hard to get the margins we're talking about. Frankly, you won't be building stores because the economics are going to keep going in the wrong direction. Look, we spent a lot of time on the guidance because we wanted to make sure it was a guidance that we believe if we execute, we will deliver. I think that's what we're demonstrating is, we're going to execute, we're going to get the comp performance, and then we're going to have the cost discipline, and the programs in place so that we can deliver on the margin, and then obviously get the new units out into the world. It's all important. I would say it starts most importantly with making sure that we're executing with excellence so that we consistently deliver the growth that we need to deliver, because then everything flows from there. Cathy, you were talking about the $2 billion cost-saving programs that you have announced at the Investor Day, obviously besides offsetting inflation with pricing. When you announced the target, you shared that you had great visibility on at least $800 million out of the $2 billion cost savings. What's your current visibility, and how much of the identified savings have already reached the bottom line? Yeah. The $800 million has gone up. It continues to go up, and the team literally works it every day. We're pleased with that, and Brian and I get to see that update every week. That number continues to go up. Equally though, how much we're pulling through in the P&L, we're seeing too, and at the end of the day, that's what I'm measuring is I'm getting the savings. If it's cost avoidance or something, and that's important, and I don't mean to diminish it, but we actually have to see it show up in our P&L. That's where I make sure the teams pull it through the forecast so that we see it in the actuals, and we are. Obviously, a good piece of the G&A savings that are coming through will be at run rate into this next year. A good portion of that's already done. We're already, though, seeing some of the earlier wins in cost of goods sold and a little bit in OpEx as well. I'm actually quite optimistic. I think you'll see a little bit more. It'll weight more towards COGS and OpEx in the next two years. The G&A will be the gift that keeps giving because we're going to hold dollars now. That one we'll keep seeing the reduction there. for context, the $2 billion- Yeah There was about 50% coming from the margin flow through from comps, sales leverage, half of which was coming from a mix of product and distribution cost savings, Operating Expenses savings, and G&A, so one-third, one-third, one-third. G&A is primarily executed upon with maybe some more. Yeah that you talked about. Can you give us maybe some specific examples on the product and distribution cost optimization opportunities that you see from here on? Yeah. Things like we're optimizing our distribution network right now. That was a little bit of the investment I shared that we've got into the supply chain. The reason why all of that matters is so that we can get to daily delivery so that we can have the customer experience we want. We've got a few distribution centers in the wrong places. Those will be savings. We had to add a few in a couple of other places. That's the work the team's doing right now. That's a logical one on product and distribution. Probably the biggest ones are things like many of our products we were single-sourced in. While that may still be appropriate, I'm not saying that that's not, but we should at least do a price check or a cost-to-build check, which we're doing, and the teams have done. That has helped us with unlocking a fair amount of savings, just because maybe at our volume, we hadn't done that, and we should have. Just good discipline in the procurement function has unlocked a great deal of savings for us. Everything from standardized contracts to dual sourcing or multiple sourcing, or even reformulating in a few places where we just should have reformulated. Okay, thank you. Similarly, can you indulge us also in sharing more ideas regarding the Operating Expenses optimization? Because recently, you've heavily invested in the Green Apron Service and you've improved the quality of Yeah employment proposition for partners. Where do you stand against the opportunities from an operating environment within the four walls? One of the biggest ones, which Brian shared, we've already talked about the investment in our team. We feel good there. The one opportunity that's going to just be slower coming is the cost to build a store. That comes through obviously in occupancy and our depreciation and amortization. That will come through over time. That one, if you think about what we used to build, our stores have gotten bigger because we need a bigger back room, so we were getting to 2,500 square feet. They needed a full acre. If you start diagnosing a little bit of that, you can realize that we should have a great coffeehouse experience with all four access points on a half acre and a smaller footprint. That all comes through the P&L. It's just those all show up as a cost reduction then. If I'm no longer building a 2,500-square-foot store, and if you came to the Investor Day, you saw a 1,350-square-foot store. That's a very different cost to build. We can do an 1,850-square-foot store with 32 seats and still a great cafe experience and a drive-thru, but you can get that now on a smaller footprint. We're seeing them, we're putting them in our forecast now, and we'll execute going forward. Even the uplift program that Brian mentioned, putting those new seats back in the stores and that warm environment, the team is already seeing savings on that one, too. My whole conversation with the team this last week is, okay, maybe the targets we've set should be revisited because we're starting to see the savings already there, too, as we ramp to the 8,000 in the entire fleet. You'll see all of those savings coming through, too. Great. Brian, recently, as you mentioned, Starbucks was showing significant acceleration on traffic. Same-store sales in the U.S. approaching 7%. What gives you the confidence that the sales that you have generated in the last quarter are sustainable and not simply a demand pull forward, and the next year, you'll be going back into maybe below 3%? Well, look, we have a simple belief. We have to protect the growth that we've achieved, then we have to build on it. I believe we've got the operating model that will consistently perform. Then we've got the innovation, and also, I think the plan, as you look at how we're going to touch these stores and how we're going to create these experiences for our customers, that people are going to want to come back. It's not just winning in the morning, but it's also going to be creating the afternoon day part. When you win the ritual, which I think we're demonstrating, we're winning the ritual experience in the morning, and we're starting to make really great progress on the afternoon with the matcha menu reset, this energy refresher, the fact that we have seats again in our stores. That's when people like to dwell the most is in the afternoon, especially younger people. I can see there's still a lot of opportunity for us to grow transactions from where we are today. The reality is, we're not all the way back to where our transactions were just in 2023, and we're definitely not where we were back in 2018 or 2019. We have capacity to service more demand, and I believe there is demand that's out there both in the morning and in the afternoon. When you look at what we can do in the afternoon, we've just really gotten started. The energy Refresher and the matcha program demonstrate we can grow the afternoon. Our refresher program, frankly, we have the opportunity to build that platform dramatically, whether it's additional flavors, like we're getting ready to do a blue coconut, or it's sparkling, it's blended, it's sugar-free. There are a lot of opportunities for us to continue to expand Refreshers. Keep in mind, Refreshers is a multi-billion-dollar business. Usually when you create great innovation on big platforms, big things continue to happen. That is our mantra. We are going to continue to innovate on these iconic platforms that we have. We're also going to be, I think, smart about blunting in areas where, frankly, we've been a little slow to blunt. That's probably a perfect example of a blue refresher. If you look at the refresher business across the industry, I feel like everybody's got a blue drink but me. That's an easy one to blunt. Okay? For those out there that like blue drinks, congratulations, you can go to Starbucks in about two weeks to get one. I know it's an oversimplification, but it is also just practical. The reality is customers have needs and wants, and we're going to fulfill those needs and wants in a superior experience. That I know we can build on, and that I know we have the pipeline that we can grow from where we are right now, and there's no capacity constraint in those stores. It's like, let's go. The way I put it to our team is yes, we'll deliver on three or better. I like the better. The way you ensure you get the better is you have the plans in place so that you can also be prepared for the unexpected. The things that we can control, we're going to be maniacal about, and the things that we can't control, that's where I think speed and the ability to pivot and learn is really valuable in the world in which we operate. How do you respond to investors who are concerned that beverages is seeing a momentum and could be just a fad that could be disappearing over time when the capacity of the industry is saturated? We've seen similar story, for instance, on the chicken category, that now is suffering a little bit with the rise of a lot of players who are interested in capturing some of the demand and the returns that they're getting on their boxes. How do you respond to investors who are thinking that this could be just a moment in time as opposed to durable same-store sales growth for the category? Yeah, look, the reality is what consumers say they want and what I believe consumers will desire in the future is going to continue to be great beverages done in customized ways. More of it is skewing cold. That's not to say that coffee and hot drinks are no longer relevant. Look, you can always have debate on a fad versus a trend. My approach has been, let's see what the consumer actually votes with their wallet with. What I've seen over and over again is great experiences with great products always win. We may find over time, yeah, maybe people don't want a blue drink. That's not what defines Starbucks. What defines Starbucks is going to be a community, it's going to be the barista customer experience, and it's going to be this idea of craft and customization. Those are not fads. Those are what people want. It's even become more prevalent today when you look at how lonely people say they are. Despite this idea that supposedly we're more connected than ever, people say they're more lonely than ever. To have a third place where you can have a great experience with a customized drink the way you want it, with food that I think is built for the way you want to eat, that is not a fad. I think that is durability, and I think that is a path for long-term growth. That's what we're going to focus on. Look, things come and go, but at the end of the day, those things that I just talked about are human truths and are the foundation of what makes Starbucks. We're going to be unrelenting on it. Taking the other side of the spectrum of competition, we are seeing competitors that are expanding their app-driven models. How do you see Starbucks maintaining the premium experiential differentiation of the long run? Look, our app is still considered, I think, number one, if not best in class. Tech is going to continue to give us opportunities to figure out how we can enhance that app experience. The thing I always remind everybody is even though it's an app experience, you still usually get your drink from the store. There are those occasions where the delivery driver drops it off, but 90% of the time, 95% of the time, you're getting your drink from the store. Even when it's a mobile order, you come in and you get a handoff experience. That's why it's so important for the coffee house to be a coffee house. You may not decide to sit and dwell, but I'll tell you what, everybody in this room will agree with me. Do you prefer walking into a great coffee house to grab your drink to go? Do you prefer walking into a soulless place to grab your drink and go? I think we know what the answer is, right? The same thing is true if you're ordering Chinese takeout. Where do you like to get Chinese takeout from? The place that's hopping and busy and looks like this is a great Chinese restaurant, or the place you're like, "Uh-oh, I'm the only person that showed up here." Right? It's the same principle. The physical experience is going to be critical, whether you choose to have that initial order experience through the app, or you actually do it through the drive-thru, or you come into the cafe. Obviously, we're going to continue to experiment with that app experience. I think voice is becoming a really interesting place for how people are going to start doing their kind of internet searches or how they interact even with apps. We did a little experiment with ChatGPT. There'll be evolutions in the app, but at the end of the day, the thing that's great about our app is, boy, it is super fast to get to your reorder. We've made it super simple, and I love the simplicity of how that works for folks. We'll continue to build on that strength. Excellent. Can you walk us through the process around obtaining signal, ideating product, and executing at scale? What's the attrition on signal to full rate in production? I want to add one part over here on this innovation cycle. You mentioned that now finally you can get a blue drink at Starbucks. It's more of a catch-up strategy, fast second follower, potentially having a larger scale deployment of something that is already successful in the industry. Do you plan to play that type of role going forward, i.e., I'm going to be providing high-quality, differentiated products that is already proven in the marketplace to the masses, or are you going to be playing more of a forward-looking innovation cycle, introducing things that don't exist, but with the risk of potentially having higher failure rate? I don't think it's an or, it's an and. This is what I think is great about being the market leader. You have the responsibility, I think, and the right to innovate and lead people in culture, in experiences. At the same token, one of the things I learned early in my career is when you have market leadership, you do blunt things. There are going to be some drinks and some things that we do that are all about just blunting what's happening in the category. That doesn't mean you can't also be highly innovative. We're still going to have great innovation on coffee. We're going to be working, you might have seen internationally, we're doing this Aerocano, which is a, you aerate an Americano, and it gets you like a little head on there, and it becomes a much smoother drink. There's also a long black that we're looking at. We're going to also introduce people to new flavors and experiences, right? We brought forward the ube experience for people. We're going to continue to do those things. Just like we've got these iconic products like Egg Bites that I think you can pivot those Egg Bites into an afternoon bite. Why can't that be a chicken jalapeno bite? Why can't that be a pizza bite? Why can't that be a steak bite? Why can't that have 20g of protein and some fiber where it's highly relevant for the GLP user? There's all kinds of things we can be very innovative on, and at the same token, you'd be foolish not to recognize, look, on some things, I'm just going to be darn competitive. I'm not going to cede an inch. It's like, one of the things that's great is when you have market share leadership, you have a scale advantage, and you have the ability to see it all. Then you can pick and choose what you need to blunt and what are going to be the things where we're going to innovate and lead. You know. We're going to do both. I would lean on a little bit, too, just even the Refresher. Brian kind of said it earlier. I'm not sure if we were the first. I'm sure we weren't. We call it Refreshers. Everyone else is now calling it Refreshers. We've been calling it Refreshers for a long time. It's a $2 billion business for us. It's bigger than some of our competitors entirely, not just their Refresher business. We built on that platform. We innovated there early. We built on that platform we just recently launched customizable energy in that. It's a way cleaner, way better caffeine variety. You can now customize more energy in the morning. We're seeing new occasions there, new people showing up for a caffeine-forward drink in the morning that they didn't want maybe a coffee beverage. Then we're seeing them customize out the energy or the caffeine in the afternoon when they want something maybe for their children or they just don't want the caffeine. That's us just building on that platform that we already had a $2 billion platform, and now we've attracted incremental customers and incremental occasions on top of that platform. You'll see us continue to do that, then obviously Brian talked about the blue Refresher that's coming. We'll do that, too. I think that's what Starbucks has always done uniquely well. I think we may have been one of the first with Egg Bites in any significant way. That is something we're known for. Our Cake Pops are iconic. That is something we're known for. I think the afternoon affords us the same opportunity to be known for some things. Great. Now switching on to net unit growth. Some investors might share a view that the market might be close to saturation from number of units. We see more and more operators that are announcing larger and larger goals in terms of new unit development. At the same time, you recently announced that you're expecting Starbucks to be doubling the footprint in the U.S. What gives you the confidence that Starbucks could build another 17,000 stores in the U.S., and where are these pockets of opportunity? Yeah. When I was referencing the double, I was referencing our company stores, so that's the 10,000. Look, we've got clear line of sight on about 5,000, and I think if we're successful building the afternoon daypart and driving the economics that I think we're going to drive, and then you add in the fact that now we have a build capability to get on a half acre and also get into small in-line executions to the 600, 800 sq ft, you can quickly see how that 5,000 becomes 10,000. I think also what you're seeing is we weren't actually competing for those half-acre sites, which is where you would put a smaller cafe with a drive-through, and now we're going to compete for those sites. We have real opportunities if you look from Michigan down to Texas, and then Texas over to call it Virginia, where with these smaller builds for kind of the suburban execution, tremendous opportunity. Then in these urban environments, to be able to have a small inline execution presents a huge opportunity for us as well. The good news is this isn't something radically new for us. We're already doing it around the world. Our license partners outside the United States are already doing these small formats and being very creative. We just haven't taken that learning and brought it to the States, and now we are. Look, I'm very optimistic for where we can get to. The thing that's always tough about development is when you're stopping a program and kind of cleaning it up, and then restarting a new program, it takes about two to three years to kind of shut it down. Build the pipeline. Build the pipeline, get yourself back out there. The good news is the sites are there. I think our development team was just at this big conference last week for all developers. I can't remember what it's called, IC something. What is it? ICSC, yeah. When our folks were talking about, "Hey, we're ready to get into the game on half acres, and we're ready to get in the game on 600-800 square feet," our booth was pretty darn busy. There is a lot of pool for Starbucks, and there are a lot of deals to be had. Now that we have the right, I think, execution, we can be really competitive for those sites. Great. Then Cathy, how should we think about the target average unit volume of the new builds going forward versus the current AUV for the mature store? It is going to depend. If we go smaller, as Brian said, obviously, the AUVs will come down a little bit on those. We can afford to, because the cost to build will be much smaller. So far, AUVs have continued to hold in at a couple million dollars or so. We will see that grow with a successful afternoon daypart. Back to Brian's point, I think I'm particularly optimistic there because that really drives a whole different set of economics that we're not even talking about yet. Not in our near-term guidance anyways that we've shared. I'm excited. I also see a right for us to win there. I think that'll be interesting. Then I'm equally optimistic, though, on all the work the developments team is doing on just the store format going forward. I think as Brian said, we can see around the world great examples already, and we just need to start bringing them here. We got a couple of questions on your former experiences, Brian, as well. The question here is, what gives you the confidence that you can replicate the success and the same playbook of your past experience here at Starbucks at a much larger and more complex business with a more significant international footprint? Well, look, at the end of the day, it's a customer-driven business with a very important partner experience combined with it. Whether that's one store or in our case 40,000, that's true. If we provide great customer experiences and set our partners up so that they can consistently deliver those experiences for our customers, I'm really confident we'll win. At the end of the day, I know we've got the best beans, I know we'll have the best blue drink. By the way, we care a lot about the ingredients of how we build these crafts, right? The blue drink is going to be driven by blue spirulina, right? I think it's the right way to do drinks. It's the right way to do food. I think as long as you're centered on the customer, then you make sure that your partners are set up for success to provide a great experience. I love the fact that our wages and benefits are the best in the industry. Because we need great people to exercise those experiences. We need the stability in our coffee houses, so the fact that 20 hours of work, you got healthcare benefits, or you can get a free college degree by maintaining being a partner, goes a long way. By the way, our wages are best in class too. Now we also have an incentive program where for our partners, if they deliver on key metrics, they at the hourly level, have the ability on a quarterly basis to earn a bonus. We're rewarding our partners for great performance, and then we're also setting them up to achieve that great performance. We've got a maniacal focus on the customer and the customer experience that we ultimately provide. That I think is a winning formula, and it's worked at other customer-facing businesses, and I'm feeling fairly confident it's going to continue to work at Starbucks. You identified five different pillars for comp growth. You mentioned Green Apron Service, menu innovation, brand digital and Rewards, reimagine afternoon, and the coffeehouse reinvestments. For each one of these, in which inning are you today? If you think about the sequencing of the impact of these five, where are you expecting the comps to be growing from here on? Look, the thing I love is we're not a one-trick pony, right. We've got a bunch of growth opportunities in front of us. All of them we're going to be pushing forward. I think this last quarter was probably the first example we had a lot of them hit together. We're going to continue to do just that. I wouldn't say one is more important than the other. I just think there's so much opportunity in this business because at the end of the day, it is a world-class brand with a differentiated experience and with, I think, craft and connection that nobody else can provide. When you push on all those lanes of growth, I think you get rewarded with transaction growth and ultimately comp growth, and that ultimately flows into earnings. Great. We are running out of time. Two final question in kind of rapid form. How will Starbucks be different five years from now? What is the hardest choice you think you will be facing in the next five years? Oh, geez. The hardest choice might be my daughter's boyfriend. For other parents out there. I have two daughters, by the way. Look, I think Starbucks, the way it's going to look different from here is they're all going to be great coffee houses. One of the things that frustrates me a little bit where we are right now is you're not sure what you're going to get on the other side of the door when you open the door, right? Ultimately, what we're going to get to is every time you open a Starbucks door, you know what you're going to walk into. It's going to be a great coffee house. You're going to have partners that are eyes up, smiles, engaged, and want to commit to being a great community coffee house. I think you're going to experience that around the world. We're already seeing this. I have the opportunity to visit our Starbucks all around the world, and we're seeing the Green Apron Service model show up in all these places. I think that's what you're going to see over time. I also think you're going to see a business that has two peaks. We're going to have a great morning peak, and we're going to have a great afternoon peak, and you're going to see a business that can run multiple access points flawlessly. Right. You're going to have delivery, mobile order pickup, cafe, and drive-thru. You're probably going to see a lot of smaller stores, too, along the way. I'm really excited about what the future looks like for our business. There's so much growth in front of us and so much opportunity. The hardest decision, I'll tell you what, the world is moving at a much faster pace than I think we ever imagined. I think the hardest thing to do is to make sure you don't lose focus of what you need to do. I say this to our team all the time. We got to keep the main thing, the main thing. Do not get distracted by the things that we cannot control. I think it's very easy in this social media environment and an always-on news cycle, and let's be honest, a lot of unexpected events that are occurring, to quickly get distracted and have you drift away from what's really important. I think that's going to be the hardest choices of how do we make sure we protect the core of what makes Starbucks, while making sure that we're still evolving but not losing sight of who we are. Excellent. Yeah. Brian.