星巴克 (SBUX) 2010 Q4 法說會逐字稿

Good afternoon.

My name is Amanda and I will be your conference operator today.

At this time I would like to welcome everyone to the Starbucks Coffee Company's fourth-quarter fiscal year 2010 earnings 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.

(Operator Instructions).

Thank you.

Ms.

DeGrande, you may begin your conference.

Thank you, Amanda.

Good afternoon, ladies and gentlemen.

This is JoAnn DeGrande, Director of Investor Relations at Starbucks Coffee Company.

On the call with me today are Howard Schultz, Chairman, President and CEO and Troy Alstead, CFO.

Also here joining us today for Q&A are Cliff Burrows, President of our US business; John Culver, President of our International business; Jeff Hansberry, President of our Consumer Products Group; and Annie Young-Scrivner, Global Chief Marketing Officer.

Before we get started, I'd like to remind you that this conference call will contain forward-looking statements.

Forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements, and should be considered in conjunction with cautionary statements in our earnings release and risk factors discussions in our filings with the SEC, which are included in our last annual report on Form 10-K.

Starbucks assumes no obligation to update any of these forward-looking statements or information.

Please refer to the investor relations section of Starbucks' website at Starbucks.com, and the financial statements accompanying the earnings release, to find disclosures and reconciliations of non-GAAP financial measures mentioned on the call today, along with our corresponding GAAP measures.

Before I turn the call over to Howard, I'd like to remind you of our fiscal 2011 biennial investor conference, which will be held in New York on December 1.

So with that, Howard, I'd like to turn the call over to you.

Thank you, JoAnn, and welcome to everyone on the call.

I am delighted to report the record fourth quarter and fiscal 2010 results we announced today.

Before taking you through the highlights of the quarter and the year, I want to pause to thank our Starbucks partners around the world that have enabled us to deliver these great results to our shareholders.

You did it by delivering a great experience to our customers one cup at a time, every day of the week.

The success we describe today belongs to you.

I am grateful for and humbled by your dedication, your passion and your determination, all of which have powered our transformation into the dynamic and growing company we are today.

And to each of you I say thank you.

I believe that fiscal 2010 will prove to be a defining year in Starbucks' history, topped off by record fourth-quarter and full-year financial and operating results, and the results we reported today are that much more significant when considering against the backdrop of the extraordinarily challenging economic and consumer environments in which they were accomplished.

The hard work our Starbucks partners undertook around our transformational agenda over the last two years has enabled us to be where we are today.

More importantly, I am convinced that the work has provided us with solid and secure foundation we need to profitably grow both new and existing lines of business well into the future.

Today I will share highlights of our Q4 and full-year 2010 financial and operating results, discuss a number of important accomplishments that may not be evident from the figures alone, and introduce some themes that we will discuss in greater detail at our December investor conference.

Then I'll turn things over to Troy, who will take you through the financials in greater detail.

As we reported today, our comparable store sales in Q4 were outstanding in both US and International markets, resulting in an 8% increase overall that was driven by a 5% increase in traffic and a 2% increase in average ticket.

Strong top-line results combined with a continued focus on operational excellence and cost management initiatives drove our consolidated operating margin to 14.1% of sales, significantly ahead of the 8.2% we reported in Q4 of the prior year.

Our EPS followed suit, increasing to a record $0.37 a share in the quarter, and up from $0.20 a share in Q4 of 2009.

The positive trends we saw in Q4 capped a year of continuous, quantifiable improvement and progress in our business.

Q4 represented our fourth consecutive quarter of positive comp growth, and our fourth consecutive quarter of positive traffic growth.

For the year, our revenues increased to $10.7 billion, and our operating income increased by $857 million, to $1.4 billion from $562 million in fiscal 2009.

Our full-year operating margin of 13.3% represented the highest consolidated operating margin in our almost 40-year history, surpassing the previous high of 12.3% we achieved in fiscal 2005.

Our records results are a function of solid performance both in the US and in our international business.

Let me share a little about each of our business units performed in fiscal 2010, starting with our US retail business.

Starbucks' ability to innovate and create excitement around new beverages and beverage combinations, continues to drive traffic and generate incremental sales.

And we are just beginning to benefit from the strategy of leveraging our brand, our retail footprint and our power to innovate, to expand our range of coffee offerings and create new rituals, categories, occasions and formats both in our stores and other complementary channels of distribution.

Sales of Starbucks VIA continued to accelerate with our retail stores continuing to drive trial and acceptance and create positive momentum in all channels.

VIA represents a broad and innovative coffee platform that generated about $135 million in global sales for Starbucks in retail and CPG channels in its first year, making it a runaway product success by any objective measure.

Sales of iced VIA, introduced only this summer, have been more than 80% incremental to the original product line, and the early results from flavored VIA, introduced in our North American retail stores in September, are even more encouraging.

VIA is playing a key role in the rapid expansion of the premium single-cup category, which includes pods and sticks with a retail price point of $0.50 per serving or more.

And with our ongoing commitment to innovation, we will continue to build the VIA platform and bring more new customers into our world of premium coffees.

But the retail introduction of VIA and our innovation pipeline is only part of the story.

We will discuss the unique cross-channel distribution and marketing model that we have developed for VIA in much greater depth and detail at the December investor conference.

We are also equally excited about Starbucks Reserve, our new brand of super-premium, whole-bean, specialty small-batch coffees introduced in Q4 through about 700 of our stores, online at Starbucks.com and through an exclusive loyalty promotion on Gilt.com.

Customer response to the debut of Galapagos coffee, a superb, exotic coffee, was nothing short of overwhelming.

Galapagos sold completely out in our stores at a full price point of $25 a pound, and the guilt.com site, the coffee was sold out in less than 12 hours.

Starbucks coffee authority and the breadth of our reach today is demonstrated by our growing range of product offerings, from VIA instant to complete lines of packaged and flavored coffees, and now to Starbucks Reserve.

In the future, you will continue to see us drive trial and acceptance of new products and formats in our stores, and then migrate these new products and formats into CPG channels in a way that no other coffee company can hope to do.

We are very excited about the upcoming holiday season, including the introduction of a new VIA offering, and that will be VIA Christmas Blend.

We will be offering our popular traditional holiday beverages -- creme brulee latte, peppermint mocha, and gingerbread and eggnog lattes -- and we will reprise our successful 12 days of sharing promotion and offer many exciting new products for the gift-giving season.

Our continued laser focus on improving our customer experience is resonating with our customers, and I am pleased to report that despite increased store traffic, every single performance metric from accuracy, speed of service, beverage taste and overall satisfaction improved in fiscal 2010 from the already industry high levels.

In addition, lean initiatives are playing an instrumental role in our ability to achieve success by improving our capacity at peak times and providing our partners with improved beverage preparation routines, which in turn has led to improved order accuracy and beverage quality and taste.

As our business and our financial and operating performance have strengthened, so too has the overall health and vitality of the Starbucks brand.

We continue to enjoy top of class status as a consumer brand on social and digital networks such as Facebook, where we continue as the number one brand with over 22 million connections globally; Twitter, where we have 1.1 million followers; and Foursquare, where we have more than 2.5 million check-ins.

Media campaigns around Starbucks VIA, customizable Frappuccino, our recognition as the number one best coffee according to the Zagat Survey, and most recently Starbucks Reserve, provide us with a consistent advertising voice throughout the year.

We will continue to utilize traditional and nontraditional marketing approaches to drive traffic, trial and acceptance, as we continue to make our marketing efforts and programs even more proactive, cost efficient and effective in the future.

I am particularly excited about the future opportunity presented by the new Starbucks Digital Network.

I am convinced that the Starbucks Digital Network, in conjunction with free Wi-Fi in our stores, will become an increasingly more compelling brand and in-store differentiator over time, one that will enhance the Starbucks customer experience and reinforce Starbucks' position as a unique and critically important local community gathering place.

In 2010 we refreshed or remodeled about 1000 stores in our US portfolio.

In 2011 we plan to do about the same, while maintaining cost discipline and introducing new store designs that are locally relevant, emphasize coffee and create a sense of innovation and excitement for our customers.

Our newest store in Seattle, Olive Way, is our most recent introduction.

This Seattle flagship store will also better inform our understanding of the afternoon and evening daypart opportunities for a segment of our store base around the world.

Growth in our Starbucks Card business continues to accelerate at record rates.

During fiscal 2010 we loaded more than $1.5 billion on the Starbucks Cards, a 20% increase over 2009, and the Starbucks Card is now used to pay for nearly one in five consumer transactions.

And My Starbucks Rewards continues its fantastic momentum as our loyalty platform.

Nearly 2 million customers have joined the program since its launch 10 months ago, and more than 1.25 million have reached the top gold level tier by making at least 30 purchases.

Let me turn to international.

As we've said on previous calls, one of our top priorities for 2010 was to apply the learning and operational rigor gleaned from the hard work we did in the US over the last few years, to our international markets.

The results we reported today, including positive traffic and ticket trends, double-digit operating margins and vastly improved profitability, demonstrate the unequivocal success of those efforts.

And while we know there is much more to do to streamline operational structure and increase operating efficiencies throughout our international organization, to provide a solid foundation, we know we need to more fully exploit opportunities in Asia and to grow our business and improve our performance across Western Europe over both the short and long terms.

I will briefly touch on noteworthy developments in some of the key markets.

Canada, currently our largest market outside the US, contributed solid transaction, ticket performance and profitability, compared to both Q4 and full-year 2009.

Japan comps turned positive earlier in the year and have remained strong with VIA continuing to drive trial and traffic, adding to incremental sales and powerful results in the market.

We continue to make solid progress in the UK, with traffic reflecting strong growth year-over-year.

Particularly encouraging was UK customer response to My Starbucks Rewards program, where the cards' percentage of tender, a key measure of customer loyalty, doubled in 2010 compared to a year ago.

Our business in France, a market we took full control of at the beginning of fiscal 2010, is improving on plan as well.

Traffic is up and receptivity to the Starbucks brand overall continues to grow as younger French customers increasingly discover us in both mall and neighborhood stores.

Germany delivered 10% comparable store sales growth in Q4, as improved beverage quality, speed of service and store upgrades combined to attract more consumers to our stores.

Noteworthy as well is that in 2010 Starbucks was honored with the distinction of being the best coffee house in Germany by the Deutschland Institute of Service Quality.

Moving to China, we are seeing fantastic comparable sales growth and increased profitability in China, as locally relevant offerings, such as Green Tea Frappuccino, Coffee Jelly Frappuccino, Mocha Valencia, iced tea, juice beverages and Moon Cakes, as well as the Chinese consumer using our stores as their third place, continue to resonate well and attract new and repeat customers in our over 700 stores in greater China.

We continue to open new stores in China with great response.

In September we opened in Xiang Zi and Fuzhou to enormous crowds and exciting brand buzz.

Average daily sales for these new stores are far exceeding even our most optimistic projections.

Two markets that present great strategic opportunity for us are Brazil and India.

We recently took full ownership of our business in Brazil, and are now developing plans to expand that market.

Similarly, we view India as a huge, significant market opportunity that is now ready for Starbucks, and we are now developing plans and engaged in discussions with potential partners on how best to enter that market.

Turning to the CPG, as you know we launched Starbucks VIA through Starbucks retail stores in the US and Canada one year ago, and started our nationwide expansion into multiple North American CPG channels just six months ago.

In this short time we achieved over 40,000 points of distribution.

More recently we began accelerating our global distribution of VIA and are now reaching close to 55,000 points of distribution, including multiple CPG channels in Japan, Canada and the UK.

And we will be entering additional international CPG channels where instant coffee is the norm in the months and quarters ahead.

We are extremely encouraged by recent consumer research indicating that 22% of VIA's volume and 18% of VIA users are actually incremental to the coffee category, providing VIA with one of the highest incremental volume scores that Nielsen has reported on new items in years.

And VIA consumers report that 70% of their usage occasions are incremental to existing coffee occasions.

Spurred by these findings, we are moving our efforts to drive trial and awareness of VIA into high gear, in order to fully leverage the value and opportunity of the brand and the portfolio of products.

As I mentioned earlier, we will go into greater detail about all things VIA at the December investor conference.

Consumption of Starbucks packaged coffee within CPG channels has shown consistent growth over recent months and has outpaced growth in the premium coffee category overall.

We continue to build awareness, volume and distribution behind innovation and product line extensions.

Now as you know, green coffee prices have increased almost 50% over the last nine months.

In our view, this increase is the result of extreme speculation and not the result of normal market forces.

We do not believe this is sustainable, and while many coffee roasters quickly sought the cover of the recent price volatility to substantially raise prices, we have largely resisted doing so.

As customers are assured, however, that Starbucks will continue to use our reach and close relationships with coffee farmers and co-ops around the world to continue to ethically source, roast and make available the highest quality coffees in the world despite the recent price movements.

Seattle's Best Coffee -- SBC continues to gain momentum, and we are particularly excited about the new relationships that SBC established in 2010 with leading national QSRs, including Subway and Burger King and with AMC Theaters.

SBC played a prominent role in Burger King's September breakfast launch, and Burger King will be committing major advertising dollars to support behind its coffee program with its Free Coffee Fridays promotion in which a free cup of Seattle's Best Coffee will be available to consumers every Friday morning in November at participating Burger King locations.

Over the next several months, you will see the new Seattle's Best brand, its architecture fully come to life across all retail CPG and foodservice channels.

Before concluding my remarks and turning the call over to Troy, I would like to share a recent development with you.

For the last 10 years or so, Starbucks packaged coffee has been distributed to grocery stores and other outlets by Kraft Foods.

A month ago, we informed Kraft of our intention to discontinue the distribution arrangement.

The details and timing around any transition will be subject to further private dialogue.

We intend to work closely with Kraft to ensure an orderly transition, putting an emphasis on ensuring that our mutual customers are well served.

We intend to keep our discussions with Kraft private and we are not in a position to provide further commentary at this time.

In conclusion, today's results reflect the great strides we have made over the last few years, but the lessons and the insights from the hard work done in connection with our transnational agenda have not been forgotten.

I am proud to report that Starbucks today is firing on all cylinders, throughout the Company and around the world.

It is indeed a very exciting time for all of us.

But I am most proud of our relationship with our partners.

Our decisions to preserve key elements of the partner experience, from healthcare to our 401(k) plan, to equity in the form of stock options, have enabled us to preserve and enhance our culture and values as the guiding principles of our Company.

I have long believed that success is best when shared with others.

That's what it gives me great personal pleasure to announce that our results in 2010 enabled us to share a special bonus with nearly 100,000 of our store and roasting plant partners.

In this way, as I said at the outset, today's success truly does belong to our partners.

I will now turn it over to Troy.

Thanks, Howard and good afternoon, everyone.

Building on Howard's comments, the fourth quarter was an outstanding one for us, continuing the momentum from prior periods and capping a truly landmark year for the Company.

We recorded the highest earnings per share and consolidated operating margin in Starbucks' history for both the fourth quarter and the full fiscal year.

Strong comparable store sales growth, including the acceleration of the two-year trend in the fourth quarter, and increased leverage as a result of our work to become a more efficient operator, contributed to the record results.

Considering the still challenging macro environment and the investments we're making today that will benefit future periods, these results are particularly rewarding, and substantiate our efforts to increase the value of our business model through both customer-facing and back-of-house initiatives.

Today I will provide additional details on our fiscal fourth-quarter results as well as a recap of our full-year fiscal 2010 performance.

Then I will provide an update to our outlook for fiscal 2011, based on recent trends throughout the business.

Fourth-quarter revenues were $2.8 billion, up 17% from $2.4 billion a year ago.

The revenue increase was due to an extra fiscal week in 2010, and an 8% increase in comparable store sales attributable to a 5% increase in traffic and a 2% increase in the average value per transaction.

Excluding the 53rd week, revenue growth for the quarter was 9%, primarily driven by the increase in comparable store sales.

Both one-year and two-year comp growth were strong again this quarter.

In particular, two-year comp growth continued to accelerate, and two-year traffic growth reached the highest level in three years and is indicative of the continued improvement in the health of our global business.

We reported consolidated operating income of $399 million in the fourth quarter, including $6 million of restructuring charges related to previously announced store closures in our International segment.

Excluding those charges, non-GAAP operating income was $406 million.

This compares to fourth-quarter fiscal 2009 operating income of $199 million, and non-GAAP operating income of $253 million.

This quarter brings to a close the restructuring charges related to previously announced store-closure programs in the US and International segments.

Consolidated operating margin was 14.1% on a GAAP basis, and 14.3% on a non-GAAP basis, reflecting a 390-basis-point improvement compared to last year's non-GAAP operating margin.

Similar to recent quarters, comparable store sales growth combined with operational improvements are creating significant flow-through to operating income.

Earnings per share was $0.37 per share for the fourth quarter, compared to $0.20 per share in last year's fiscal fourth quarter.

Non-GAAP EPS was also $0.37, compared to non-GAAP EPS of $0.24 a year ago.

The 53rd week contributed approximately $0.05 to EPS this quarter.

Excluding the extra week, non-GAAP EPS grew 33% in the fourth quarter.

Before moving to the non-GAAP results of our operating segments, I would like to point out a slight change in our reporting structure this quarter as we've pulled the results of our Seattle's Best Coffee and digital ventures businesses into Other, along with our unallocated corporate expenses.

While Seattle's Best Coffee had portions of its results previously embedded in all three of our operating segments, the largest impact is to our Consumer Products Group, since foodservice and packaged coffee make up the largest share of SBC business.

We made this change to align with our internal management reporting structure, and because of our belief in the long-term growth prospects of SBC.

With that, I will now move on to the results from our US segment.

Total US net revenues for the quarter were $2 billion, a 15% increase from a year ago.

Company-operated US retail revenues increased 15% to $1.8 billion for the quarter, due to the extra week and an 8% increase in comp sales.

The comp increase was driven by a 6% increase in traffic and a 2% increase in the average value per transaction.

Excluding the extra week, US segment revenue growth was 7%.

The 6% increase in transactions was the third straight quarter with positive year-over-year traffic, and matches last year's strong performance.

Traffic growth measured over a two-year period continued to accelerate, and reached its highest point in over three years.

Customers are responding well to the enhancements we've made to the in-store experience, and satisfaction scores continue at near record levels.

Additionally, as Howard mentioned earlier, our loyalty program continues to gain traction with customers, and similar to last quarter we estimate that it contributed roughly a point to the overall comp growth this quarter.

The relaunch of our Frappuccino platform last quarter to a customizable offering continued to perform well, also contributing roughly a point to the overall comp growth.

With respect to the increase in average value per transaction, the pricing architecture work we started in the fiscal fourth quarter of last year was the largest contributor, followed by VIA sales which were enhanced by the introduction of Iced VIA, and the continued expansion of our food warming program.

US cost of sales including occupancy was 38.0% of total revenues in the fourth quarter, an improvement of 200 basis points compared to the year-ago period.

Most of the improvement was the result of sales leverage and supply chain efficiencies, partially offset by higher dairy costs.

US store operating expenses were 38.2% of total revenues, a 220-basis-point improvement over last year.

Sales leverage was the primary reason for the improvement as we continued to drive efficiency at the store level.

While efficiency is a key focus, the quality of the customer experience is paramount, and we understand the importance of striking the right balance for the long-term health of the business.

We continue to make progress on the refinement of our work routines within the store, including a recent change related to beverage production intended to create a better and more consistent experience for our customers in terms of beverage quality and speed of service.

Additionally, we are providing new tools to our store partners that will enable them to focus more on providing world class customer service.

Our new point-of-sale system is now deployed to roughly half of our US stores, and we anticipate that we will have it in all US company-operated stores by the end of this current quarter.

This tool is much more intuitive to the user and provides several benefits, including faster training of new baristas, better speed of service, and more accurate orders.

Another tool, our new inventory management system, is now deployed to all Company-operated US stores.

This system allows our store partners to add improved visibility into their stores' particular inventory needs, increasing their ability to have the right products on hand while managing waste more effectively.

US operating income was $343 million for the quarter, a 66% increase compared to last year.

The operating margin improved 530 basis points to 17.4% of related revenues from 12.1% a year ago.

The primary driver behind the margin improvement was sales leverage as strong comps along with the more efficient operating model contributed to create powerful flow-through.

The US segment continues to be the engine behind our outstanding performance as a Company.

We are reaching new highs in profitability and we see new opportunities for disciplined growth ahead in this segment.

Our stores provide the foundational experience to our customers, and we continue to bring that experience to more consumers around the world, which brings me to one of our future growth engines -- International.

International total net revenues increased 21% to $619 million in the fourth quarter driven by the extra week, comparable store sales growth of 7%, and the acquisition of the France market at the beginning of the fiscal year.

The comp growth was driven by a 4% increase in traffic and a 3% increase in the average value per transaction.

Excluding the extra week, revenue growth for International was 12%.

In line with recent trends, we again saw broad-based strength across all markets, with the UK, Canada and China contributing the most to comp growth.

Transaction growth remained strong across all key markets as we continued to improve the customer experience using many of the strategies that were successful in the US.

Also, we have recently started to realize some increase in the average value per transaction in the UK and Canada, as we refined our pricing architecture in those markets, similar to what we began in the US just over a year ago.

China comps continued to be exceptional, accelerating this quarter from the already strong double-digit trends in recent quarters, as we've been successful with local product offerings in addition to the core beverage lineup.

The strong comp growth is contributing to significant operating income and margin improvement in the region.

We will share more insight into this region and others at our upcoming investor conference.

International operating income was $91 million in the fourth quarter of fiscal 2010, more than double last year's $45 million.

In fact, operating income for the last two fiscal quarters alone surpassed the previous full-year record for operating income in this segment, tangible proof that we've reached a critical turning point in this business.

Operating margin improved by 600 basis points to 14.7%, building from last quarter's 10.9% and reaching an all-time quarterly record.

Key drivers of the margin improvement compared to last year include sales leverage and supply chain efficiency.

Acknowledging the benefit from the extra week this quarter, the recent performance trends of the International segment are still impresses.

We are now starting to hit our stride internationally, and we are more confident than ever in the potential that resides outside the US.

Key growth markets such as China are performing exceptionally well, and we're starting to reach the scale at which we can begin to leverage the infrastructure we've been building over several years.

There are still opportunities to go deeper with disciplined store growth in our largest, most mature markets, while we expect to accelerate store growth in those that are still emerging or underpenetrated.

This growth will enable us to improve on existing operating margin, while bringing the Starbucks store experience to more customers around the globe, and ultimately increasing our share of coffee consumption in our markets.

As the foundation to Starbucks, our store experience allows us to build trust with our customers and opens the door to growth opportunities in other channels that tend to offer higher returns with less capital -- which now brings me to the results of our Global Consumer Products Group.

CPG total net revenues increased 19%, to $201 million in the fourth quarter of fiscal 2010.

Slightly less than half of the increase was due to the extra week in the quarter.

The remainder of the increase was spread across the portfolio, including VIA, and packaged coffee sales.

Operating income for the segment decreased 10%, to $79 million for the quarter, and operating margin decreased to 39.4% from 52.0% last year.

The margin decrease was primarily due to the launch expenses for VIA, and lower income from our ready-to-drink partnership.

The decline in income from the ready-to-drink business is primarily related to increased dairy costs, combined with a price rollback in the grocery aisle, slightly offset by an increase in volume.

We continue to drive distribution, placement, awareness and trial for VIA in this channel that is critical for future growth, and we are extremely encouraged by the results to date.

Over time we expect CPG, both domestic international, to eventually hold the lion's share of sales for this product, similar to our packaged coffee business (inaudible - background noise) .

I mentioned the segment reporting change earlier that moved Seattle's Best Coffee and Digital Ventures in with our unallocated corporate expenses.

Almost all of the revenue in this grouping is related to the Seattle's Best Coffee business.

Revenue for this group increased 46% this quarter, to $44 million, the majority of which was driven by SBC foodservice sales.

We will share more on our strategy for SBC and how it fits into our enterprise portfolio at the upcoming investor conference in December.

Corporate general and administrative expenses increased 25% compared to the same quarter last year, primarily due to the extra week in the quarter and performance-based compensation.

I will now recap our full-year fiscal 2010 performance and a few key metrics.

Earnings per share was a $1.24 compared to $0.52 last year.

Excluding restructuring and transformation-related costs, non-GAAP EPS was $1.28 compared to $0.80 per share in fiscal 2009.

We recognized $53 million in restructuring charges in fiscal 2010, the majority of which related to the previously announced store closures.

Consolidated revenues for fiscal 2010 increased 10% to $10.7 billion.

The increase was mostly due to a 7% increase in comparable store sales comprised of a 4% increase in transactions and a 3% increase in the average value per transaction.

The addition of a 53rd week and the foreign currency translation, primarily related to the Canadian dollar, also contributed to the increase.

With respect to comparable store sales, the US segment had the largest impact, where comps increased by 7% with a 3% increase in traffic and a 4% increase in the average value per transaction.

Internationally, comps were also strong for the year with 6% growth overall comprised of a 5% increase in transactions and a 1% increase in the average value per transaction.

As we have discussed today and in prior quarters, momentum built throughout the year as we worked to improve the customer experience, to add new innovations such as VIA and our customizable Frappuccino platform, and to build frequency through our revamped Starbucks Rewards Loyalty program.

I'd like to share a few details on the performance of VIA this year.

We launched VIA in the five countries during fiscal 2010, first into our retail stores, followed by other channels such as grocery and food service.

We estimate overall system sales to be roughly $180 million for the year, of which nearly 80% is attributed to the United States channels.

To put this in perspective, according to external estimates less than 1% of all new US product launches in the consumer products space reached the $100 million threshold in their first year after introduction.

We will share much more information on VIA at our upcoming analyst conference, including some statistics that show how VIA is being used in ways that are incremental to other coffee occasions and substantiate our belief that VIA is a platform that is poised for significant future growth.

The conclusion of fiscal 2010 represents a milestone for the Company in many regards.

We exited the year in a much stronger financial position than we entered it.

We returned to top-line growth during the year.

We achieved record levels of profitability due to the combination of that top-line growth and the operational leverage of our improved business model.

Financial results from this year provided confirmation in our belief that we have successfully transformed the US business from where it was only two years ago.

With the US business healthy, our focus is now on capitalizing on the significant opportunities that exist through international store expansion and outside the store in our CPG segment.

Starbucks continues to generate significant free cash flow as a result of the health of our business model, enabling us to both fund the profitable growth opportunities and to return significant amounts of cash back to shareholders.

We generated $1.7 billion of operating cash flow and over $1.2 billion of free cash flow in fiscal 2010.

We initiated our first-ever dividend this year, and we repurchased over 11 million shares during the year.

In total we returned approximately $460 million to shareholders in fiscal 2010 through dividends and share repurchases.

With a less capital-intensive stage of growth on the horizon, we are in a strong position to enhance shareholder returns in the future using these levers as appropriate.

I will now give you an update to the fiscal 2011 outlook that was provided on last quarter's call.

Given Howard's comments related to our partnership with Kraft and the evolving nature of those developments, this outlook does not reflect any potential changes to revenue nor expenses related to those developments.

We will share more details as and when appropriate.

We expect mid-to high-single digit revenue growth for the year on a 52-week basis, driven by low- to mid-single-digit comp growth.

We closed fiscal 2010 with strong top-line momentum, and we expect that strength to continue as our business is healthy and an improved store experience is resonating with customers.

Despite the strength and momentum in our business, we remain somewhat cautious as we recognize that the economy is still pressuring consumers with indicators such as unemployment, housing and consumer confidence slow to recover from the recession.

Our outlook for store growth is unchanged.

We plan to add approximately 500 net new stores globally with roughly 100 in the US and roughly 400 in the International.

The majority of the new additions in both segments are expected to be licensed stores.

We now expect capital expenditures to be approximately $550 million to $600 million for fiscal 2011.

This is a slight increase from the outlook provided on last quarter's call, driven in part by more capital for renovations.

Full-year non-GAAP operating margin improvement is now expected to be 100 to 200 basis points in both the US and international segments.

We still expect CPG operating margins to be in the range of 30% to 35%, slightly lower than fiscal 2010, primarily driven by increased investment to support the ongoing VIA rollout.

Consolidated operating margin is expected to improved by 50 to 100 basis points over 2010.

We now expect fiscal 2011 earnings per share to be $1.41 to $1.47 or 15% to 20% growth on fiscal 2010 non-GAAP earnings per share, excluding the benefit in 2010 from the 53rd week.

Similar to last quarter, I will now provide an update to a few items of interest that are embedded in our targets.

First, we continue to expect VIA will contribute modestly to fiscal 2011 earnings.

Similar to fiscal 2010, we expect this year will be a year of investment in the VIA platform, as we build this business and capitalize on the incredible opportunity to take great coffee to people in more parts of their lives around the globe.

Next, we now expect to absorb roughly $0.08 to $0.10 in additional commodity costs for fiscal 2011, mostly related to higher coffee prices, although other commodities that we use, such as cocoa and sugar, are also on the rise.

As many of you are aware, the C-market prices for Arabica coffees are at levels not seen for more than a decade.

While we along with external experts continue to believe that the fundamentals of the coffee market indicate a pending oversupply situation which would put downward pressure on prices in a normal market, speculative investors have continued to drive up prices in the short term.

As a result we now believe we will be forced to lock in portions of our fiscal 2011 supply at higher prices than previously forecasted.

This expected impact from higher commodities is reflected in the EPS outlook I just provided.

Lastly, there is no change to my commentary from last quarter regarding marketing expenditures.

We still expect to spend roughly 2.5% of revenue on marketing, including our share of spending accounted for indirectly through shared profit models such as our ready-to-drink business.

In closing, I along with the leadership team firmly believe that the best days for Starbucks are ahead and that we are in the early stages of a new era of growth for the Company.

With our significant retail footprint, the direct engagement with and trust we have from our customers and our ever-expanding CPG presence, we possess a unique business model that no other retail, consumer product or restaurant company can match.

We are a leader with unequaled brand equity in the global coffee market, a market that is still highly fragmented and holds enormous opportunities to not only capture additional share of the existing market, but to grow the number of occasions where we can bring great coffee to people in more parts of their lives.

As mentioned previously, we will host our biennial investor conference on December 1, at which time we will provide more details on our strategy and the opportunities that are in front of us.

With that, now let me turn the call back over to the operator to begin Q&A.

(Operator Instructions) Jeffrey Bernstein, Barclays Capital.

Great, thank you very much.

Just a broad question on comp trends.

Obviously they have been extremely strong to date.

I'm just wondering if you can kind of size up -- one, I guess the value of an incremental comp to annual EPS looking to '11, fiscal '11, whether you think you have the ability to sustain the current comp momentum on I guess a one- and a two-year basis, with the two-year becoming a lot more difficult now.

Perhaps any color on the actual comp needed to protect the existing margin and whether you can give any color specific to October relative to the quarter just recorded, that would be great.

Thank you.

Troy, do you want to start?

Yes, I will start; I will take part of that, and then I think Howard and Cliff may speak to parts of it as well.

First, as we've said historically, a comp point to us over the course of a year is roughly worth $0.04 to $0.05 per share.

So that's math we've discussed with you previously, and that continues to hold true.

Now, in terms of what comp is necessary to protect our margins, like I said, I will just refer you back to our targets where we have said that we expect low- to mid-single-digit comp growth in this coming year, and with that kind of comp growth we can expand total Company margins 50 to 100 basis points.

Clearly we can survive and thrive in our business, given what we've done -- all the great work we've done around the business model this past year, on something lower than that, at least in this coming year.

So we feel very confident in the comp trends we came through the current year with, and a very good about our margin targets in the coming year, given what we've seen.

I would say before handing it off to Howard to also respond to your question, that we won't make any comments at all about October.

I think, considering your question, I think it's hard to answer that without putting consumer confidence and unemployment in the mix.

And so, we want to be very thoughtful and disciplined about how we are looking at the year.

I think the pipeline of innovation and the excitement we have about holiday and the year, but coupled with the environment, we are comfortable with mid-single-digit comps as a way in which you could look at the year.

I think the extraordinary numbers that we've put up over the last couple of quarters of high-single-digit comps is not a good starting point.

Mid-single digits is where you should go.

Joe Buckley, Banc of America/Merrill Lynch.

Thank you.

Two questions -- one on CPG.

Can you talk about the contribution on CPG -- the VIA contribution to CPG revenues in the quarter or the year?

And if you were to annualize the fourth quarter, what would those numbers look like?

And then a question on US pricing.

Just what kind of price increase you might be running right now year-over-year?

This is Troy; I will speak, first, to the CPG, and the answer is, we won't speak to specifically the impact of VIA in any one operating segment.

I would just remind you that it was during the year and progressively throughout the year that we launched VIA into the CPG channels, and built distribution as we went through the year.

So it would be premature at this point in time to talk about the impact of VIA in any one channel, other than to say we have been extremely encouraged by what we've seen.

We, as you know, have invested heavily against VIA this year, as I mentioned in my prepared comments, and in fact the impact you see in the CPG operating margins this year reflect that investment and reflect the recognition that we expect VIA to be a growing and significant business for us over time, and it's worth investing in now.

What I have said throughout the year, and I will reaffirm now, is that for the total Company, VIA was essentially a net neutral impact to our P&L during the year.

Again, and that's made up of good contribution from the product, offset almost entirely this past year by the launch costs and the spend against it to build it in our stores and then in the CPG channel.

Cliff, do you want to hit the pricing question?

Hi, Joe, it's Cliff.

We are continuing to follow the approach to pricing architecture that we started 14, 15 months ago.

And in that we are looking at obviously all the commodity pressures on us, notwithstanding the comment Troy made about the impact of extraordinary coffee pricing.

And we will continue to follow that approach, reviewing region by region.

We did take some increases in one region at the beginning of October, and that has had a positive impact to offset commodity prices, and we will continue that work in the coming months.

We don't see any reason to break away from that, and it has given us new discipline and it really is looking at the local market and it is looking at the consumer behavior in that market and the complexity of beverage.

So we are very pleased with the progress we made and the customer reaction to any increases we have taken, frankly over the last 15 months.

Could you say where pricing assumption is in your same-store sales guidance for fiscal '11?

No, we haven't specifically said what that is.

It varies by market.

Some prices go up, some go down, as we've said before and as we've executed over this past year.

To further Cliff's comments, we remain committed to an overall pricing architecture work -- meaning, I wouldn't characterize it as a straight out increase by any means.

We hold prices where we can to provide value to consumers.

In the past year, we've taken prices down where necessary and where appropriate.

Consumers have responded well to it and we would fully expect to execute that kind of much more architected, intelligent approach to prices in the coming year.

And Joe, it's also worth adding that the way we have employed our Starbucks Rewards Card, ensuring that we add value to our most loyal and frequent customers.

So it has been a much more holistic approach using pricing architecture, our Rewards Card and ensuring the best value for our customers.

Okay, thank you.

Sara Senatore, Sanford Bernstein.

Thank you.

I just wanted to ask about some of your international markets and the idea of owning versus having a partnership.

I think China is sort of mixed, but you have recently started to bring in other countries.

So can you just talk about what -- is that the kind of thing that you would do with a rapid growth market like China because it is, I think, something that you've targeted as being your biggest market outside the US?

And I know we've talked about this before in terms of the depth or the size of the market and the possible profitability in determining what you bring in-house versus a partner, but could you talk about that specifically with China?

This is Howard; let me start.

I think between myself, Troy, and John Culver, we'll all try and take a piece of that question.

I think, with over 50 countries that we are now doing business, there obviously is a cross-section of many different ownership models that we have, and there isn't one size that fits all.

It has to do with the complexity of the market, the capability of the local partner and our ability to recognize that there is a big upside if we could take advantage of buying back a market as we did with France and most recently with Brazil.

I think Brazil is a good, maybe case study where we've been in that market for a number of years.

Our partner there for a whole host of reasons did not have the capital capability to really accelerate the business and we look at it as just a tremendous runway of growth.

And so we acquired that market because we feel we both have the capability and obviously the capital to take advantages of a market that is significantly understored.

I think as you look at China, there's an opportunity in China, I think, which we've said for years that it will be the biggest market for Starbucks outside of the US.

And over time, I think it is in our interest to have more ownership than less.

If you recall, we brought bought the Beijing business back a number of years ago, and so there isn't one size that fits all, and there's no formula for success here.

I think we are very conscious of making sure that we balance these decisions with providing maximum shareholder value, and at the same time taking advantage of making sure that we maintain our leadership position.

With that, I will just have John Culver kind of jump in and since he is closest to all of this, provide some color.

Yes, Sara, this is John; thanks for your question.

I think there are really three things that we look at.

First is the opportunity to continue to accelerate and grow that market, and continue to build the overall share of Starbucks coffee consumption in that market.

I think that's the first and foremost what we look at.

The second piece that we then dig into is understanding the complexity of doing business in that market, and where we need to enlist the help of a strategic business partner, where they have local capabilities and infrastructures that can help us grow rapidly in a market.

We then make that assessment and determine whether or not we need to leverage a partner and have a business partner, or whether we want to grow it ourselves.

Then the third piece is around where we can see the opportunity to build out infrastructure ourselves and gain operational leverage over a period of time.

And obviously there is investments that go into these markets, and what we are seeing now is the investments that we've made in the international space, in our markets are now beginning to pay off.

And we are seeing scale drive into our international business, we are seeing also operational leverage coming into our P&L.

And we'll continue to assess each of our international markets independently as we look at the opportunities to grow those in the future.

Thanks.

I'll have a follow-up question and I will get back in the queue about the CPG business.

Okay, thanks, Sarah.

John Ivankoe, JPMorgan.

Thank you.

You know, just -- I don't want you to obviously talk about anything you don't want to regarding Kraft, but I am curious whether you ending the relationship with them on bag coffee in any way influences your potential strategy in the future for single-cup brewing platforms, that you're not in in a significant way at this point.

And if there any preliminary thoughts about just general timing of that and whether you think single-cup could be as incremental, or maybe even more incremental to your business than what VIA has been.

John, this is Howard.

I certainly appreciate and respect the question, but I hope you will realize that the situation with Kraft and the statement I made is all that we can talk about today.

And at the appropriate time we will be as transparent as possible, but at this time we just can't go any further.

I'm sorry.

Okay.

Of course I understand.

Just a second follow-up if I may -- you know, you ended the year with around $1.6 billion of cash and obviously free cash flow is going to go up in fiscal '11 versus fiscal '10.

So just wanted to get a sense of how you're thinking about deploying that cash, whether just straight kind of share buyback dividend, or is there any opportunity for strategic acquisition, for example, that may possibly fit into Starbucks' portfolio?

John, what I would say to that is that we have, over the course of this year as we came through the restructuring of our business, introduced a dividend for the first time as one way to deploy capital.

We reintroduced share repurchases as another way to deploy capital.

Of course, the top message around our cash flow is to invest back in our business in our partners, in our stores, to invest in the growth opportunities we see in front of us -- VIA, our CPG business, SBC.

So we will ensure we maintain adequate capacity to fund all the tremendous growth opportunities we have in the US and outside of the US in our store channels and outside of our store channels.

John, let me answer that, the second part of that question, and I want to answer it in a way that no one on the phone overreacts to the response.

Clearly the history of the Company has been to primarily grow organically, and that has been quite successful for the Company, and we feel we have uncovered significant runways for organic growth, both in our core business and the adjacencies around the innovation that we have created.

But I do feel that the future of the Company over time will not be isolated only to organic growth.

And as I said, I don't want anyone to immediately react or respond to that.

But clearly, we are in a unique position and over time if opportunities prevail themselves, we would take advantage.

Thank you.

Keith Siegner, Credit Suisse.

This question is really for Troy, or John, possibly.

The International margins were clearly very strong in the quarter.

Troy, you said a lot of it came from sales leverage and supply-chain efficiency.

I was just wondering if you could talk about some of the US programs, like the point-of-sale system or the labor management tool, the inventory management tools.

Has this stuff been rolled out to International?

Where is the status, and what's the plan, or the timing for that eventual rollout?

Thanks.

Yes, Keith, this is John.

We are in the process of taking a lot of those tools from the US and bringing those into our International market.

The POS system that Troy spoke about around the US business is being rolled -- this, as we speak, into Canada, and then we will eventually move over into the UK this year.

We have inventory management in Europe right now as part of our GBSF platform, and we are going to continue to look at those systems and leverage those systems and bring those systems over into our International markets throughout 2011 and into 2012.

In addition to the systems, we are also taking a lot of the learnings out of the US as it relates to store operations, and in particular lean.

We've introduced a lot of the lean practices from the US, learnings that we've gotten, into our International markets and those are being phased in as we speak now as well.

So we continue to see those systems and those processes paying off, and driving more operational efficiency and helping us to increase overall speed of service into the international markets.

In addition, what we are also seeing is the opportunity to expand the loyalty in the Starbucks Card program, and we are in the process of rolling out into our International markets, introducing loyalty as a component of that, and we are seeing great success.

We discussed the UK; we've seen tremendous success as it relates to the Starbucks Card there, and we continue to see that in our other international markets as well.

And Keith, it's Troy; perhaps I would add to that and perhaps put the umbrella of the overarching question here, which is the significant improvement we've seen in International margins as we've progressed through this through this past fiscal 2010 and that evidenced by Q4, and by the margin improvement that we've announced in our targets for fiscal 2011, really is a reflection of the margin march toward that mid to upper teens that we expect in our International business over time.

It's coming earlier than we expected.

It's coming as a result of the things John has mentioned about us in a very disciplined, systematic way bringing the great learnings from the US that has helped us move the business to extreme strength and health, and applying those as appropriate, market by market internationally.

And it has given us even more confidence, both in the long-term growth outside of the US, and our ability to drive significant profitability through those channels.

Sharon Zackfia, William Blair.

Troy, I was wondering from a coffee perspective, how much do you have locked in of your projected usage for 2011 at this point?

And as you look at that $0.08 to $0.10 of penalty, I'm just curious how that kind of would spread over the different divisions.

I don't know if you feel like you have as much pricing power in consumer products to maybe offset some of the coffee impact.

Sharon, we are some handful of months forward on pricing at this point in time.

As you know -- and I think as we've discussed in the past -- at various points in our history we are a range of price-protected forwards based on crop cycles and a whole number of other factors that influence when we price and commit to some of the contracts.

So we have some protection forward now.

In terms of how the rolls and the impact of those commodity increases hits our individual segments, we are not prepared to talk about that yet.

It's a bit early in the year.

It is something that I expect we'll share more as we go through the year and as we understand how this very unusual coffee cost environment plays out.

So no additional segment commentary at this point in time, other than to say the actions we've taken as a total Company within the businesses and overall have been successful in giving us confidence that we can manage through and overcome those increased commodity costs this coming year, and able to absorb $0.08 to $0.10 of additional cost pressure and yet still deliver 15% to 20% earnings growth.

Thank you.

Matt DiFrisco, Oppenheimer & Co.

Thank you.

Looking at the Kraft agreement, I understand you don't want to talk about specific details, I'm just wondering motivation behind such a thing.

I've heard you talk a lot about managing the brand through all the channels and having greater control of that in-house.

I'm wondering, looking now, say, the next couple of years out, with this strategic decision to make this decision, bring it in-house, is that the pure motivation behind it -- is to manage it?

Or, is it also financially motivated as far as one would assume it has been accretive for you guys; it must have been a pretty strong earner for Kraft as well, so it's also got its benefits on the earnings front.

Matt, I appreciate your question.

I will just repeat what Howard said a short time ago.

We at this point will respect our partnership with Kraft and the private dialogues that will continue and ensue in the months ahead, and so no additional comments at this time.

Okay, I appreciate that but if you could give me another swing at another question on a different topic (laughter).

All right, we'll give you a backup.

Looking at the remodels, can you talk about the findings, what you've found so far from those stores that have been remodeled?

Is there a difference in the way the customer uses it?

Are they finding it more conducive to spreading out their sales throughout the day?

Are they taking in more food?

Are they higher average check?

What are you seeing as far as that, or is it just purely velocity and just a better overall magnifying the business from the older store was doing prior?

Matt, hi, it's Cliff here.

Just to say that, with each refurbishment we are really looking at it on an individual store basis, bringing obviously equipment up to date and bringing the environment up to date, but the individuality comes on focusing on the local customer and making sure catering for their needs in all dayparts, and looking at how we grow the relevance of that store, for those consumers and for the local environment.

We're also taking the opportunity to increase our sustainability of those stores and all new stores being lead-certified and many elements included in the store being local materials, locally sourced.

Same time, we are introducing the opportunity to the involve and include Starbucks Reserve through our [Clover-Bridge] system where it's relevant to the consumer.

The food range is being enhanced in terms of presentation and offer.

And you know in Olive Way here in Seattle, we have also had our first Starbucks store which goes into the evening and is focused on that day part, with a beer and wine offering.

Too early to talk about the results of that, but the encouragement is that our consumers have reacted as if it was there forever and have increased their frequency and opportunity to use that store and have given us great feedback.

So there's lots happening, and it's store by store, we are seeing a much stronger local engagement.

At the same time, we are training our people so we are more efficient, improving the quality and focused on improving the partner and the store experience.

So, lots happening.

Troy, do you want to just bring some color about the economics of both the class of stores we've opened this year, and the remodels?

Yes, I will speak to that.

In fact, it's an area that we will definitely, at the upcoming investor conference, go deeper into the economics and what we are seeing.

But as I've suggested throughout the year and I can say more strongly now that we've completed fiscal year, our new store economics this past year has been very, very strong, have met and exceeded all of our threshold again, providing to us very nice returns on capital.

And it gives us confidence both in our ability to design and open new stores and get the kind of returns that we once enjoyed, and we expect to in our targets going forward be able to enjoy those again.

And in terms of remodels, we are very selective in addition to improving the experience and the flow, are also very conscious about these return on capital metrics and expect these stores and these investments to pay off.

And we have been very, very encouraged by what we've seen.

Excellent, thank you.

Also, just on a bookkeeping thing, did I miss it yet, or have you launched in any of the markets the publications you were talking about coming out free on the Wi-Fi -- free Wall Street Journals (multiple speakers) free Zagat?

No, we launched the digital network in October.

You should be able to go into over 7000 Starbucks stores and enjoy it.

Okay, thanks.

David Palmer, UBS.

Thanks, congrats on the quarter and the year.

I know this was just one quarter, profit this quarter increased a lot and a lot of it was the US went up almost $140 million, $46 million international, and CPG division had a small decrease.

So obviously you are driving this, the EPS in this big gain this quarter without much help yet from that CPG division.

And I'm sure there's a lot left over for your analyst day on this topic, but could you give us -- sketch out how we should think about the contribution from this division and the investment phase we have seen recently, how long this would stretch, and maybe what your guidance for fiscal '11 includes, in terms of profit contribution from that division?

I think it's an important question because of our enthusiasm about CPG and leveraging the retail footprint and brand to benefit that channel.

Let's start with Troy and then we'll introduce Jeff Hansberry, who runs our CPG business.

David, the slightly reduced margins that we experienced in this fourth quarter in CPG are really a part of what we've been talking about all this year, around our primary investments in VIA and being ready to invest behind an entirely new and innovative product platform, recognizing that it has a runway for years and years to come in our business, across multiple channels.

And we've had the tremendous opportunity, given the significant strength of our US business and the improving profitability internationally, to invest back in our future growth opportunities.

I mentioned SBC earlier, which we continue to invest against and are excited about the prospects in the future, and about CPG.

In the year ahead, the targets we have for the CPG business explicitly, which are in the release today, are that 30% to 35% operating margin in that business.

We won't be more specific at this point; we will certainly talk about that in much more depth again at the investor conference in December.

And now I will have Jeff speak a little bit more specifically to what he sees coming in the business.

Thanks, Troy; hi, David.

As I look at this CPG business overall, my team and I are very encouraged at the potential going forward.

Howard spoke in his comments about VIA and the traction that we're seeing on the brand.

We continue to build out distribution on the brand.

As we move into '11, we'll continue to invest in building high quality trial and awareness.

Some of those data points that we're very excited about include the 70% incremental occasions, and what's very exciting is that we are bringing a whole new segment of users new to the coffee category -- young users, under the age of 30 -- into the category.

In fact, 18% of the volume for VIA comes from new users who have hadn't played in the coffee category previously.

Our pipeline of innovation on VIA, including flavors and iced into the CPG space, will not only improve our revenue and velocity and distribution, but it will also improve our retail presence and visibility, and help us strengthen our position in building the premium single-cup segment.

Beyond VIA, we see continued growth in our packaged coffee business where we continue to build share, and also on our premium tea business, we are growing share as well.

So we are very encouraged by the progress that we are making on the US CPG business.

Thank you, Jeff.

Joanne?

We are going to end the call after the next question, and investor relations will follow up with those of you that are left hanging.

Go ahead, operator, with the last question.

John Glass, Morgan Stanley.

Troy, you had mentioned being pleased with the returns on the new stores you've opened.

You clearly have margin and sales momentum.

So why haven't you raised your unit opening targets for the US?

Are you now building a pipeline so that we will be talking in a quarter or two about a more robust US opening schedule?

So, if you could, talk about that.

And just to clarify a response to an earlier question about the International margins, why did they get so much better this quarter versus the prior two or three where you also had good sales momentum?

Was there something that changed this quarter?

Was the extra week an additional benefit in the International segment, for example?

What happened to this quarter to make it -- go -- drive it so much higher than prior quarters?

John, let me speak to the International margin question first, and I would say, yes, the extra week contributed, as it did across all the business, so that's certainly a part of it.

I would point out that, even excluding the extra week, the margins in International business were into the teens and clearly at a record level for our International business -- so still very strong without the extra week, frankly.

And what it reflects is continued top-line growth and improvement.

John mentioned earlier a number of things that he and his team have been bringing to bear internationally, and we really are beginning to see the impact of those things pay off for us.

I don't predict that every quarter we'll necessarily make the step forward that we did this quarter, but we are quite confident as we progress through 2011 that we will make another big step forward to the tune of 100 to 200 additional basis points in '11, around the margins internationally.

And again, this is on a very disciplined, systematic move forward to get that business up to comparable to US levels, we believe.

Now, to your first question on stores, we, as I mentioned earlier, are extremely encouraged -- quicker than we thought -- on the performance we are seeing in our stores.

And that has come in two forms, the improvement, and we'll talk about this in much more depth in early December.

We have over the last couple of years improved just the health of the portfolio of new stores, the quality of the sites, the top line of new stores, the flow-through to profitability of new stores, are all higher than they've been in years.

And, at the same time, we have managed costs down where we're opening new stores now at higher quality levels to the consumer than ever before, and yet at a lower cost than they were two and three years ago.

So we have attacked all sides of the unit economics of our stores and seen that improvement come.

We fully intend to ramp up our new store growth.

In the US, that will come.

It will be disciplined, it will be paced, and it will be faster I predict in 2012 than it is in 2011, as we just continue to ramp up our capabilities and do this in a very thoughtful way.

Over time, we have said before, internationally, ultimately, we will ramp up even more quickly as we take these learnings from the US and deepen our capabilities.

And now with the increased confidence of an improving, a healthy and improving business model, that gives us increased confidence to open stores, both in the US and outside of the US.

Thank you all very much.

As JoAnn said at the top of the call, we look forward to seeing you at the analyst investor conference on December 1, and we'll provide a lot of depth and texture to many of the topics and themes that we talked about today.

Thank you very much.

Thank you.

This concludes today's Starbucks Coffee Company's fourth quarter fiscal year 2010 earnings conference call.

You may now disconnect.