Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to Starbucks Coffee Company’s First Quarter Fiscal Year 2014 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.

Thanks, Mike. Good afternoon. This is JoAnn DeGrande, Vice President of Investor Relations for Starbucks Coffee Company. Joining me on the call to discuss our Q1 results are Howard Schultz, Chairman, President and CEO; and Troy Alstead, CFO. And also with us today are John Culver, Group President, China, Asia Pacific and Channel Development and Emerging Brands; Adam Brotman, Chief Digital Officer; and Curt Garner, Chief Information Officer. This conference call will include forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and the risk factor discussions in our filings with the SEC, including our last annual report on Form 10-K. Starbucks assumes no obligation to update any of these forward-looking statements or information. This conference call is being webcast and an archive of the webcast will be available on our website at investor.starbucks.com. Please also note that Starbucks 2014 Annual Meeting of Shareholders will be held in Seattle at 10 a.m. Pacific Time on Wednesday, March 19th, that meeting will also be available via webcast. With that, I’d like to turn the call over to Howard Schultz. Howard?

Thank you, JoAnn, and welcome to everyone on today’s call. I’m very pleased to discuss the record Q1 results that Starbucks announced today. Strong operating and financial performance from all business segments around the world and increase operating leverage and store efficiency enables us to deliver record quarterly revenue of $4.2 billion, record quarterly operating margin of 19.2%, record quarterly operating income of $814 million and record quarterly EPS of $0.71 per share. Strong customer response to food and beverage innovation contributed solid Q1 comp sales growth of 5%, consisting with our previous mid single-digit guidance representing our 16th consecutive quarter of 5% comps or greater. Noteworthy is that the 5% comp growth driven by our important EMEA region with over 2,000 stores, was a strongest growth in more than three years, demonstrating the success of our strategy to transform our EMEA business based on the learnings from our U.S. transformation. Also, noteworthy, is that our Q1 U.S. comps were approximately twice the national retail sales average during holiday shopping period this season. And that our Q1 results do not reflect the significant future sales benefit from the year-over-year increase of $230 million in deferred revenue over $1 billion resulting from extremely strong new Starbucks Gift Card activation and Starbucks Card reloads in Q1. At the outset, I want to take a moment to comment on two pronounced shifts in consumer shopping behavior that retailers experienced, but that we unlike many retailers or any competitor were prepared for this past holiday season and explaining why and how Starbucks global business will increasingly benefit from the acceleration and convergence of these shifts going forward. Then I will provide an overview of segment performance in Q1 and Troy will take you though Q1 financial and operating results in detail. Holiday 2013 was…

Thanks, Howard and good afternoon everyone. The strongest start to fiscal ’14 across all of our operating segments led to consolidated results that eclipsed every meaningful record. Revenues of $4.2 billion from a 12% increase over last Q1. Our 5% global comparable store sales growth was the largest driver and particularly encouraging is the strength of sales growth around the world. In fact, this was the first quarter since Q4 of 2010 that all regions posted comp growth of 5% or better. And traffic continues to fuel that comp growth, growing 4% in the quarter with a 1% contribution from average ticket. The strong performance from our more than 1,500 net new startups stores opened over the past year also contributed to the revenue growth in Q1. Consolidated operating income grew 29% to a record $814 million in the first quarter. This includes a $20 million credit as a result of paying our obligation in the Kraft settlement earlier than anticipated. Operating margin expanded 260 basis points to 19.2% in Q1, far above any quarter we’ve ever had even when excluding litigation credit. Operating margin expansion was due largely to the lasting of several non-routine expenses in the Americas segment in Q1 of last year. Commodity costs improvement and sales leverage also contributed towards the expansion. Earnings per share grew 25% to $0.71 per share in the first quarter to a record even when excluding the $0.02 impact of the litigation credit. Our tax rate of 34% was up significantly over the last Q1, as we lost an $18 million benefit recorded at Q1 of last year, primarily from state income tax expense adjustments for returns filed in prior years. Our performance this quarter clearly demonstrates the comp growth in the heart of our target range, resulting significant gains and…

(Operator Instructions) Your first question is from Joe Buckley with Bank of America.

Troy, for the current quarter, for the second quarter, one of the guidance was stepped up marketing, I believe around both [indiscernible] and the Starbucks card. Are you still – is that service you’re still executing that and could you give us an update on where [indiscernible] is used now in terms of store penetration?

Yes, we continue to expect the same guidance we’ve given you previously which is something about higher marketing spend as a percent of sales in the second quarter and frankly in Q3 and Q4 also anticipating morally higher marketing spend as we really continue investing, driving our business, supporting level launch for food broadly and driving innovation throughout our stores. So that will continue and that is also a – progress guidance to the second quarter. Level launch, to be hot in terms of the lower new stores in the first quarter to largely to focus on the big holiday through the quarters. That will resume here beginning in the second quarter and we continue to expect to be fully rolled out with the first wave of this bakery program only across the U.S. by the end of fiscal year.

You mentioned the complexity of the level line is rolled out and really it is a huge undertaking and a major change. But has there been more complex being expected or what are the intricacies of rolling out that you discovered from your experiences?

No, nothing anymore complex being anticipated, a big change like this across a huge system like Mihow [ph], with the decline of transaction volumes we have per store is a big change, the big operational change, the big supply chain change and all that is anticipated and then of course a goodwill we are providing at a better experience, new experience on as the product innovations we learn as we go, we continue to fine tune labor deployments and working routines and product assortments, fortunately customers want broader products, you will see us a respond and track back as we learn from last year’s launches and proceed to the rest of this year. But that’s a normal part of the process. Everything – part is right on technically we expect, we are extremely pleased with the results we are seeing in terms of the uplift, the fact that fruit continues to be an incremental comp driver in our business and we think this is big an opportunity we ever had just as we continue to roll out from here.

The next question is from John Ivankoe with JPMorgan. John Ivankoe – JPMorgan: Troy, you made a mention that there might have been some slowdown in comps in December and I was just hoping in the US – just hoping you could provide a little bit more color on that? Whether it was related to core food and beverage or perhaps other items that you saw in the store, whether you think you may see any implications of that as we enter 2014?

Thanks, John. Yes, we did see some slowing in December relative to previous quarters and relative to the early part of the quarter relative to October and November. And we really attribute that fundamentally to discussions Howard had early on in the call, which is fundamentally that significant shift in consumer behavior less retail traffic that we are all hearing about from other retailers that we are hearing about in Retail Traffic report that is published. Now, all that’s out there has some impact on our traffic roads in December particularly. Now, as I’ve said it’s important to note, we still serve record numbers of customers. We had record traffic coming to our stores in December, had record sales volumes in the month of December and for the quarter overall. We continue to drive traffic, however just at a slightly slower system we had coming into that bigger month. Now, with that said, no comments about the particular quarter or implications beyond that other than just to point out and acknowledge what you already know is we’re underscoring. The advantage we have, we expect that significant change in consumer behavior is the fact that we ended Q1 with more than a $1 billion of deferred revenue on our balance sheet. Dollars that customers have loaded on the card that will become revenue in our stores as we proceed from here, that’s an important advantage that we have a leadership position and we will continue to further our leadership as we proceed from here. John Ivankoe – JPMorgan: But maybe there is an evidence in the conference I made that 1% less than average tickets or just that maybe you sold less than some of the higher ticket, maybe gift related items outside of the card in the quarter. Is that a right comment because obviously composition of the comp is not just traffic it’s also average ticket. You just had very low average ticket growth in this most recent December quarter and can you just give us a sense of what that may trend going forward especially with the addition of things like global launch and evolution and what have you?

There is no message there. In fact, I think if you look at each quarter for the last two to three years you would see our typical average 1% mini quarters, two same quarters, but more often and not within that 1% to 2% range. So you saw the first quarter coming with ticket that was sold receipts from most of our trends. That will tend to be at point or two the either way. But again that’s been evidenced by most of our countries like. And the slowdown we saw -- the large slowdown we saw in the month of December in traffic was very broad based. It wasn’t unique to any particular region. It was unique to any particular day part or product set or product line. It clearly demonstrates, improves stuffs and there was just a fewer people out there shopping and so fewer people for us to capture and provide some great experiences in our stores. John Ivankoe – JPMorgan: Understood. Thank you.

Your next question comes from Sara Senatore with Sanford Bernstein. Sara Senatore – Sanford Bernstein: Very much. I wanted to follow-up on that again and I guess I just have a couple of questions about the shift in the spending habits, kind of one big and one small. In terms of the small, other restaurants have pointed to weather. Can you disentangle when you look at your data, something that tells you when weather was good your comps were better or worst, I mean is there -- are there data that you can look at and say that definitively not the case, it’s much more about the shopping habit? And the second point is in bigger picture, can you just talk about why you think we’re seeing this inflection point now in terms of how people are spending and does this have any implications for Starbucks going forward. I always think of Starbucks as kind of a destination as oppose to a convenience, but its sounds like there is some pieces of business that gets hurt if there are just fewer people shopping.

This is Howard. Let me try and answer your questions. It is sometimes easy to kind of bifurcate what happens specifically in the quarter. It was about weather and other things, but there is no gap. Throughout the quarter, there were unusual events and don’t forget we had the government shutdown, which certainly had a adverse effect on consumer confidence and consumer behavior both before and after. And then obviously, there was a lot of weather. But in my prepared comments I spoke specifically that I don’t think that was the driving issue here. I strongly believe that the month of December and what Troy just described in terms of John’s earlier question will go down as a turning point in the overall way in which people are shopping. I think, clearly, the month of December was the gift giving time and as a result of that people spent much more time on the web than ever before than you saw that in the online ecommerce sales. As a result of that on the margin, there were fairly less people out shopping and as a result of that, in certain day parts in the month of December, there weren’t as many people captured. Now what Troy just said in terms of the follow up, your question in terms of going forward, I do believe that there will be a real seachange for many, many retailers who are going to have a hard time navigating through what I believe will not be December-ish problem, this is going to be an ongoing issue and it’s going to have them faster than people think in terms of the way people are shopping and how they are spending their time, and the value that you can get on the web. Now when I mentioned…

Your next question comes from Jeff Bernstein with Barclays.

Just two questions. Just one to follow up on the La Boulange, wonder if you can give some incremental color in terms of what you are seeing in the store that already have it, whether it be mix, frequency, average check, or what can you talk about, what the contribution is to the comp or any update on the lunch rollout and then I had one follow up question.

First, I would say, the role of the retailer we’re probably hoping for, we’re just very encouraged across all aspects of this food program. It still is a rolling in partner stores across the U.S. and it needed only the part of our new elevated food program which is basic category as you know. But all indications are we have found something that resonates service to customers, gets us a change to dramatically see their expectations around food, because it’s a chance to continue to drive food as faster growing part of our business which we have been for some time and that continues to over time elevate food as a mix of the stores overall. One part that I should that, that is connected in food is that while all day parts food for us is a healthy cliff in the first quarter, mid day and afternoon outpaced growth of the other day parts and that’s consistent with some recent trends and it’s partially fueled by food, by people recognizing that there is a fantastic food opportunity now at Starbucks in most day than the afternoon snack items, bakery choices for all day along, they are not that it used to be. So every indication for us continues to be very positive. We’ve got a ways to go to continue this rollout around the US. The lunch program will continue to be fine tuned and which is really that stages right now and we are very excited as that will begin rolling out late in fiscal year or early next fiscal year more broadly, we are very excited about that next wave of food. And what we have seen from is a multi year elevation of food that we think give us a tailwind in comp growth and tailwind in volumes through the stores over that same service downtime.

And just follow on the earlier question thing that you have – it’s now 13,000 plus stores around the U.S. You talked about the shift from brick-and-mortar to perhaps online which obviously you guys seem that are positioned in most to deal with that. Would you say that at this kind of the holiday timeframe, where I guess that becomes pronounced. Do you think there has been a change in the underlying health of the consumer or they're really just around shopping in the holidays and therefore there hasn’t really been a change in the health of the consumer per se just the matter of how they spend or how they spend their time shopping?

I think we have a lens on consumer behavior and consumer spending perhaps unlike any other retailer with the national footprint we have. I would say this is in quantitative. It’s more qualitative and more personal. I think the health of the consumer today is better than it was a year ago. But I do think it’s still a fragile issue and what we saw with the government shutdown on October, is any isolated events of that magnitude can have a very drastic and dramatic effect on behavior and I think that's speaks to the fragility. Now having said all that, I think one of the underlying benefits of Starbucks for many, many years is that we are an affordable luxury. We have been -- we continue to be that. And as a result of that the demography and broad-based diversification of our customer base and our store base insulates us from some of the underlying problems and may exist in one geography versus another. I also think what Troy said is that our ability to take the fiscal asset of Starbucks and our fixed costs. If you look at store today versus even three years ago, the ability with La Boulange, carbonation coming and thing that we're going to do with tea are going to extend the date, leverage our fixed costs and give us incrementality, not only on the introduction of certain products. But many of these things are linked to the opportunity to increase food attachment not as a result only of La Boulange with the beverage and the innovation that we're bringing that are skewed towards that.

Helpful. Thank you very much.

Your next question comes from Michael Kelter with Goldman Sachs.

I wanted to follow-up on La Boulange a bit further and there are two questions. The first are you able to rule out the possibility that any of the same-store sales slowdown may have been associated with reduce throughout during the peak sales quarter as a result of the complexities in the store associated with La Boulange? And then the second is, can you talk to us about what you expect as it relates to hot breakfast and hot lunch that are coming next under the platform. And how far are you able to go with respect to product offerings, how it's going to be managed logistically at the stores et cetera?

Yeah let me speak to the first thing Michael and Howard may want to jump in here too. There is absolutely nothing -- nothing whatsoever to the idea that -- what’s happening with our food programs and La Boulange rule out is impacting throughout or is impacting service in the stores or have any thing to do with comp growth, still down in the quarter, absolutely nothing. We can completely rule that out. We have an opportunity and analysis to look at stores with La Boulange and stores without La Boulange. I appreciate you don't get to see that side-by-side set of analytics that I do. There is no change in our key transaction day part, there is no impact we think to discern from that. Now perhaps in -- we’ll appreciate this. I think sometime there is a customer perception that things are different in stores, food is being warmed out, multiple order in food, the case looks different. That change requires some adoption overtime. And I think that it may have created some case’s perception, but you could find out in the rule out, if there is any meaningful impact on what’s happening there. And at the same time, we’ll continue to deploy more labor and revise the labor routines against food that grows in our stores. We'll make sure we’re best in right parts of our business to both dry volumes, to meet the customer needs and to grow profitability on our stores as time goes on.

If you cry, one thing about that. Not only it's absolutely nothing to suggest that there is a throughput issue, but I would also remind you that because of the Starbucks card and the quick adoption of mobile payment that we are speeding up the level of service and our stores. And when you look at the amount of people that are now paying with the card and with the unbelievable rate of adoption and how accretive global payment is -- there is no issue whatsoever. This is a myth that absolutely has no legs and for all of you listing on the call, you should just eradicate that it does not exist. Now Michael, with respect to your second question, I have only some surprises out there. I’ll tell you we've got some great new innovations coming both in that morning category around the savory items and warm items, as well as in lunch. Everything we have seen so far encourages us that we just beginning to go after where is there big, big good opportunity, both in our busy day part to drive increase the cash. But also as I said before, it continues food as we have (inaudible) into lunch program and mid-day as an attached as we rolled out the carbonated beverage platform later December, all these things work together. Of course, we know the food as an elevated quality in our stores not only drive our food sales but by the way it drives higher beverage sale as when people come in they buy food, they also buy beverage. So the whole shift rise the level of earnings in stores and that whole product pipeline tend to increase as we find ourselves all that include. So more to come, more details, but I think you really like the food we have coming out balance of the year.

Very helpful. Thank you.

Your next question comes from Matt DiFrisco with Buckingham Research.

Thank you. I just wanted a little clarification and then a question with respect to the promotion? You mentioned that for promotional side of the business, you may have impacted the average check in the most recent quarter reported. Should we read into that then in a environment where you have $1.4 billion worth of pent-up demand call it that we would probably not see as much promotional activity? And then, just, I just want to clarify, when you keep referring to sort of the change in overall retail, doing more online sales in the brick and mortar guys softness, historically shopping happens on the weekend? So would we read into that then you anecdotal -- you literally saw then tangible evidence that the business that might have been correlated with brick and mortar traffic associate with weekend business was your weakness in December because you said pretty much that it wasn’t day part position or timing of the day or timing of the week I run into that?

I think the latter which is no evidence with specificity that there was a weekness issue. So I think this was to spread across multiple days. One thing about the issue of weather that was brought up earlier, currently any weather problem in the city where people are living and enjoying the Christmas holiday season. The initial reaction was not wow and so the weather plays I think a positive roll for the online ecommerce opportunities because it was so convenient. But we did not see a weekend issue and I think one thing I want to go back to is we anticipated this level of change. The investments we made in the car, the investments we made in mobile payment, all these things were in anticipation of what we saw in December. They probably came at us and everybody else that they faster clip. But we were in a position to take advantage of in the best evidence of that not only $1.4 billion but the $200 million, it’s sitting in the reloads. And that’s just underscored product, however at this point, they are in holiday period in past years. We would see elevated holiday traffic always long, not finding, just isolated to the weekends. So I think that underscores the fact that because we didn’t see it isolated to the weekend this time that does not message anything else other than that. It actually very closely matches, how we would anticipate that traffic around the holiday. And then perhaps you can help me understand your first question, were you saying that related to promotional discount that we increased a bit in the first quarter because we have Starbucks card balances, are you asking if that means it will be lesser going forward.

Correct. So I’m assuming that you had, you addressed December slowdown with promotional activity that given the pent-up demand you probably would be correct to assume that you would not need to do as much promotional activity and its adverse effect of the check?

Let me speak specifically on this and whether we need to do promotions or not. We can see this throughout the year at various times at various offers, particularly around now striving to get the Starbucks card balances loaded and registered so that they become an integral part of our loyalty program. So you will see us very active in what we do. It may not be as specific around merchandised promotions as we did in the holiday period that for us is true. But it should continue to very actively to engage customer and keep traffic coming into our stores at each quarters to go.

Thank you.

Your next question comes from John Glass with Morgan Stanley.

Thanks. First a follow-up, Troy, what are the metrics around card usage in January, what portion of the cards are used in January and if you know this, what portion of those are actually used by first time customers, people that haven’t registered before. That’s the follow up. I also just want to ask about EMEA. We haven’t talked about any places around the world? What was the inflection point, what country or what was the piece that really changed the comp momentum. I think, for the first time in awhile that -- in that segment?

John, to the first question, in years past, most of that incremental new card load tends to come into the stores predominantly in second quarter but then also continuing into the third quarter. So going into this quarter, I won’t make any specific comments about what we are seeing in the current quarter right now, we are in the current month of January. We would anticipate that we would see that incremental load coming through the business as we progress through Q2 and even in the Q3 that would matched more of the typical historical pattern. Now in EMEA, there has been a very meaningful steady progress. I would say, I think, the first quarter was perhaps a bit of an inflection point as a number of great things came together all at once for us. But to be clear, these are all the things we have been working in our team over in EMEA has been working on for two years now around dynamic -- achieve dynamically changing the stores experience around beverage preparation, execution within in-stores around the licensing activity, all of that, all of that, really starting to shift both in the topline now and in the middle of P&L driving that margin to the all time high that we reported in Q1. So it’s a bit of an inflection point but its one that comes after several quarters in a row preparation and a lot of hard work. We would absolutely anticipate that improvement continues, not always at the pace that we have experience in the first quarter, just to be clear. But everything we have been saying for the last two years, we believe we can continue to develop EMEA into the very, very health strong contributor in our business, I think Q1 is a fantastic validation of that.

Is it just suffice to say that is it U.K. largely U.K. driven or is it some stronger performance around the peripheral that market is not as strong as the average?

No. On contrary U.K. was very strong for us, but it also broad base, so all of our major markets in EMEA company-owned U.K., France, Germany, Switzerland, we saw nice improvement prospect portfolio of markets. But the U.K was perhaps leading, we have very good quarter in U.K.

Thank you.

Your next question is from David Palmer with RBC Capital Markets.

Thanks. Regarding channel development, you mentioned some coffee innovation in your remarks, but you build up a stable of brands outside of coffee, for instance I suspect internal you would have big dreams brands like Evolution Fresh and where that can go? I just wanted to get a sense of those dreams and maybe just a timing about, will there be a big push beyond coffee with channel development, one of these quarters will sort of wake and you will be pushing harder and marketing more than you ever had before? Thanks.

Thanks Dave. The answer is yes. We have big aspirations for what more we can do through our standalone/ business. Particularly as we have acquired and driving our stores and really began to nurturing and integrate these new brands and businesses we have. Now I won’t have you expect any meaningful change in any immediate quarter right in front of us, but we are progressing with the rollout of Evolution Fresh across the country, sold within the Starbucks stores but as we go building up that distribution into the CPG channel that will continue. We have big aspirations for what we can do with Teavana in this channel with all the business in time, first priority for Teavana though is our standalone Teavana business, as well as bringing those pieces into Starbucks business. But in time as we build equities of Teavana, as we develop the following around Evolution Fresh all of these products have great opportunity within the extended into the channel development business. And really leverage on top of the infrastructure we have, the relationships and trade we have, the distribution that we built, so you will actually see us build more overtime in that space.

Thank you.

Your next question comes from Jason West with Deutsche Bank.

Yeah. Just going back to the discussion around the shift in the consumer over the holidays? I am just wondering if you guys have past through the store base and if you have identified maybe a percentage of the store base that would be more exposed to that shift, if you could talk about what that number might be and are there different things that you are going to do in those stores that are little more retail oriented to kind of address this issue or is it really sort of the chain-wide effort that’s going to be addressing this?

I would say that the any bricks and mortar company that is heavily skewed to malls will be more susceptible to this new change. I think we are in a unique position in that. Our mall based business is a very small component of our overall national footprint. So I don’t think that you are going to see us be at a disadvantage because of our real estate portfolio. I think we introduced this subject to you, not to create fear and trepidation but willing to share with you what we believe to be a new dynamic change in consumer behavior. But linked to that once again, it’s our strong belief that not only did we anticipate this but we have the resources, the capabilities and the assets unlike most traditional bricks-and-mortar retailers to be a beneficiary of this change. And I think once again the Starbucks card platform and the Starbucks mobile card -- mobile transaction platform is still in its nascent stage. And we believe there is an opportunity to extend that value to our customers in ways that we have not yet shared with you. And we also think there is an opportunity overtime to take full advantage of what every other tech company is chasing with regard to mobile payments.

Just a quick follow-up on that, I mean the mobile ordering you guys alluded to in the past, is it something that would be sort of early stage or I guess, earlier in the pipeline to kind of be of pre-orders with your phone before you get to the store, just wondering that’s something that’s coming soon?

I’m not going to explain with specificity of when that is coming. But I can tell you that we understand the value that that will create for our customer base and also we believe is significant incrementality as a result of it. And if you look at how quick we were and how early we were to adopt mobile payment in our stores, you can assume that over time we will meet in this area.

Thank you.

Your next question comes from Andy Barish with Jefferies.

Hi guys. On a margin question in the Americas, obviously the performance in the first quarter was fantastic but regard to the rest of the year, it’s sort of moderate increases which implies kind of flattening of margin, maybe even, some challenges in the two key to maintain margins with some of the investment marketing spend you spoke about, Troy. Can you give us a little help directionally there for the rest of the year on America’s margins?

Yeah, Andy. No absolutely not. We would anticipate the balance of the year to be able to moderately expand the margin in Americas. Now the first quarter was more than -- actually more than I would say it’s moderate. Remember that was fueled by some unusual events from a year ago, like the leadership conference as an example. Like Superstorm Sandy certainly had impact on us as it did all of the retailers. So the degree of expansion, life won’t be as high but balance of the year has it -- wasn’t that first quarter where we had every expectation to continue to roll the top line and improve possibility to our store system.

Thank you.

Your next question is from Keith Siegner with UBS. Your line is open.

Thanks. I just want to follow-up on some of the comments related to the promotional activity in December. If you take it out, this is a uniquely Starbucks’ capability to leverage the dramatic increases in the amount of customers in the social and mobile and digital. Has that usage picked up? How has this advantage may have picked up. In other words like how quickly can you respond to these things. How customizable or personalized can you take initiatives and that you have so many more customers on this program. Does the uptick change or uptick change from what you would have seen in years passed. Some color on that would very…

Thanks Keith. Let me ask Adam Brotman, our Chief Digital Officer to respond to them.

Hi Keith. It’s a great question. And the answer is absolutely, we’ve never been more nimble in terms of our ability to respond using our digital assets. We saw that this -- I mean, the holiday period, where we’re able to react. A very personalized level, even some geo-targeted aspects of what we’re doing and it is significant improvement over where were in the same quarter last year. And it speaks to the number of customer participating not only in My Starbucks Rewards but on the mobile platforms. This puts in a great position to be even more nimble as we go forward.

Thank you. Your next question comes from Will Slabaugh with Stephens. Your line is open.

I think just a quick follow-up on Europe, a nice surprise there. I was wondering if you could break down sort of where you feel like you’re winning right now, where you turned that inflection point where there still an opportunity. And then secondarily, are you seeing a difference in your company owned traditional stores versus performance in some of the license with a more captive audience.

Thanks. Well, our license business has been a healthier component of our business in EMEA for quite sometime. We frankly struggled more over the last handful of years in our company operated business. Now as I look at the first fiscal quarter and break it down price little bit, what’s very encouraging to me is that the revenue growth we saw and the trajectory change we saw was almost evenly split between the licensed business and company operated comp growth driven. The licensees have tipped a little bit stronger but not much. Both were very strong contributors to the increasing revenue and were built around profitability. And that’s two messages there. One is the significant focus we’ve had on store execution and operations, on management of the stores, on supply chain into the stores. All of that has been a heavy focus of ours as you’ve been hearing us talk about for a couple years now and that’s paying off. Absolutely, fundamentally, we are seeing topline response. We are seeing customers respond and bottom lines improving. We also -- now, as we really being to mature and flush out our licensed strategy to the region, we understand much better today what component of that region should have the licensed execution as it would have accelerated that. And even over the last year and a half, we converted and sold off some former company operated stores to licensees as we made that transition that has contributed nicely and of course that has a higher margin execution. It gets us back towards the customers to your point that we couldn’t have a lot easier. And in some cases it positions the licensee to better able to operate in a particular geography of venue that we are in currently. So both of those things are progressing and I will have to say I think we are winning right now, both in company operated and in licensed part of our business there.

Thank you.

Your next question comes from David Tarantino with Robert W. Baird.

Hi. Good afternoon. My question is on the new store development within the U.S. And it sounds like you are seeing some very good results from some of your, the newer class of openings and you mentioned there was opportunity or wide space related to drive through. So, I’m just wondering if all of that is giving you more confidence and maybe stepping up the unit growth rate as you look out to maybe 2015 or ’16 or beyond. Is this maybe a precursor for accelerating the growth?

Maybe I answered that. I spoke about drive throughs and I spoke about the $1.2 million for new stores. In addition to that, we’ve had unusual success in very unique configurations and store types. Many of you probably got red that we’ve opened up about four, five stores that are literally old containers and they are drive-through only and walk up. So volumes on those stores against the cost to build them are -- it has given us great confidence than you have unusual opportunity in traditional stores, drive throughs and what I just previously described as unique configurations both in size and location. We’ve also done a lot of work on verticals, for example hospitals, where we do not have a lot of penetration. So, I would say that you probably will se us go after a significant build of additional market share in the future with an acceleration of U.S. stores that are highly targeted against the return on investment and the sales that we are currently achieving in the kind of stores that we have not opened before. And in addition to that you will certainly see traditional several stores around the country. But I think that despite commentary on key change in customer behavior that we have underestimated for the last two, three years, the opportunity that we have across North America for additional stores and specifically additional store types meeting with directors. There is no job to drive through, has surprised all of us in terms of its volume, return on investment and the opportunity to build stores that we didn’t think existed in the past and you will see us do that in great numbers in the future, coupled with what I’ve just described.

Thank you.

Your next question comes from Diane Geissler with CLSA.

Good afternoon. Thanks for the question. I wanted to ask on the mobile payments in China. I think it is fair to say that smartphone technology has vastly improved from when you launched this program in the U.S. But even if we look at the U.S. as sort of examples, the early years where you saw card loads certainly in the 70%, 80%, 90% range and now they’ve sort of stabilized in the 30%, 40% range? Can you talk a little bit about your expectations for China? I mean the China consumer have embraced smartphone technologies. So I think the market is bright for the launch of this type of platform? But maybe you could give a little bit of more detail about what you plan there, how it will differ from what we see in the U.S.? And then your expectation sort of how you are going to measure yourself in is it heading your goals or not? If you could give us some details around that, I would really appreciate it? Thank you.

I mean, I think, Adam, is going to answer that question. I will -- I’m not saying that I’m -- I think we’re all sitting here in surprise that we haven’t done one question with regard to the biggest opportunity in front of us in terms of geography about China and market that we have over thousand stores are best performing market outside of the U.S., you are talking about wide space, its uncharged with opportunity. Adam go ahead?

Yeah. Diane, it is a great question and the answer is, absolutely we believe the opportunity for mobile payments is something that we’ll spend not limited China but frankly there are many markets around the globe. We have already bought it to all of ten markets and China we believe will be no exception, highly technologically savvy, consumer base, one where they were talk about MSR offering and growth and we believe that China will be a great opportunities to do the kinds of things there then we are trying here in terms of mobile payment, mobile royalty, innovation of the store. So, yes, I can’t get any specific but that’s coming soon.

John, go ahead.

Yeah. Diane, this is John Culver. With regards to just add on to what Adam is saying. Two years ago we launched the Starbucks rewards program in China and in that short period of time we now have nearly 4 million members on the platform. And to Adam’s point, we are laying the rails right now for a much more accelerated digital experience for our customers in China. We just launched some in concert this Chinese New Year, the first ever store value gift card in our stores in China. And then, obviously, continue to rollout the opportunity as it relates to Starbucks app on both the iPhone, as well as the Android application. So a big opportunity for us to take what we’ve done in U.S., transfer that knowledge and capability into China and look at a whole new way of reinventing the experience for our customers there.

Mike, we have the time for one last question today, please?

The last question comes from Karen Holthouse with Credit Suisse.

Hi. Another quick question on the drive throughs. This is something that’s been talked about more on the last couple of calls and I’m just curious for units have already have them. Is there an opportunity to really go into those units and optimize throughput, find better ways to ensure order accuracy and if so, what’s the opportunity for that and what’s the timeline for addressing it? Thanks.

Hi. Another quick question on the drive throughs. This is something that’s been talked about more on the last couple of calls and I’m just curious for units have already have them. Is there an opportunity to really go into those units and optimize throughput, find better ways to ensure order accuracy and if so, what’s the opportunity for that and what’s the timeline for addressing it? Thanks.

Thanks, Karen. The answer to that is absolutely yes. One of the things that we fundamentally know is that in our drive throughs, not only do we have huge opportunities for more directors around U.S. The economics are strong, they have -- as we said in past quarters cost higher than our full portfolio including the non drive-through starts. So we see every great indication of drive throughs and including by the way to improve throughput to up-level the experience for the customers as they come through, to change how our mix engages with the customer in that line, help move that deck of cards more quickly. We have significant work underway to do exactly that. And part of that by the way includes enhanced technologies. Some of the same things you’ve heard us talk about we would see it innovate around in terms of payment and ordering into cafe, inside the store will be very through and very beneficial in the drive through. So much more to come but we will go back to all of our existing drive through of this mix enhancements today. I’m quite confident there will be incremental drivers to our business.

Great. Thank you, guys.

Great. Thank you, guys.

Thank you, Karen. That concludes our earnings call for today. Thank you all for joining us. We will talk to you again next quarter. Good night.

This concludes today’s Starbucks Coffee Company’s first quarter fiscal year 2014 earnings conference call. You may now disconnect.