Good afternoon. My name is Julie and I will be your conference operator today. At this time, I would like to welcome everyone to the Starbucks Company's Fourth Quarter and Fiscal Year 2016 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. Thank you. Mr. Shaw, you may begin your conference.

Thanks and good afternoon, everyone. This is Tom Shaw, Vice President of Investor Relations at Starbucks Coffee Company. Thanks for joining us today to discuss our fourth quarter and fiscal 2016 results, which will be led by Howard Schultz, Chairman and CEO; Kevin Johnson, President and COO; and Scott Maw, our CFO. Joining us for Q&A are John Culver, Group President, Starbucks Global Retail; Cliff Burrows, Group President, Siren Retail; Matt Ryan, Global Chief Strategy Officer; and Michael Conway, President of Global Channel Development. I'd like to remind everyone that our fiscal 2016 year had 53 weeks as opposed to the usual 52 weeks. This happens every six years as our fiscal year ends on the closest Sunday to September 30 and the extra week is reflected in our results for the fourth quarter. We'll be presenting our GAAP results for the 14-week quarter and 53-week full year, but some of our discussion will be on the non-GAAP basis, excluding the extra week. As a further reminder, non-GAAP earnings also continues to exclude certain costs related to our purchase of Starbucks Japan discussed on prior earnings calls. Please refer to the reconciliation table at the end of our earnings release and on our website at investor.starbucks.com to find a reconciliation of non-GAAP financial measures referenced in today's call with the corresponding GAAP measures. This conference call will also 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 our 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. And with that, I'll turn it over to Howard Schultz. Howard?

Thank you, Tom, and, Tom, welcome to Starbucks. This is your first conference call, wonderful to have you. And welcome to everyone on today's call. Starbucks record fiscal 2016 financial and operating results highlighted by an 11% increase in global revenues, a 17% increase in non-GAAP EPS and record operating margins despite persistent economic, consumer and geopolitical headwinds and the significant investments we continue to make in our people and our business and once again demonstrating the power, relevance and resilience of the Starbucks business and brand. Today, Starbucks is delivering an increasingly elevated Starbucks Experience to over 85 million customers through our 25,000 stores in 75 countries every week. The trust and confidence our customers have in the Starbucks brand is propelling our business forward in markets and channels around the world as never before. But our record performance does not yet reflect what may be the most important strategic developments since Starbucks first changed how the world consumes coffee. The initiatives we have underway that are elevating the Starbucks brand, transforming the customer experience and setting the foundation for the next wave of growth in our business, starting right now with holiday, with premiumization as a core defining theme. On today's call, I will provide context around several of these initiatives and open a window on exciting new innovations that are coming to life and will begin contributing to our sales and profits this year, and increasingly more so in the quarters and years ahead. And Kevin will provide highlights of our Q4 and fiscal 2016 operating performance, and Scott will take you through the details of our Q4 and fiscal 2016 financial performance and share our 2017 performance targets. Perhaps nowhere in the world has the Starbucks Experience come to life more powerfully and been embraced more…

Thank you, Howard. Good afternoon, everyone. Starbucks' strong performance in Q4 capped off another record year for the company. In fiscal year 2016, we opened over 2,000 net new stores, which are outperforming the prior classes of new stores. We grew global same-store sales by 5%. And we gained share of at-home coffee and ready-to-drink down the aisle. We also advanced several long-term growth priorities that include new Roasteries, a new Reserve store concept, enhanced CPG growth platforms, and we continue to execute against our long-term commitment in China. I believe these results demonstrate the value we are realizing from the investments we are making in our partners, innovation, and the digital flywheel. Our approach of investing for long-term value creation, while driving excellence in execution today, is enabling us to deliver results in a challenging operating environment while positioning our business for long-term growth. Serving as a member of this leadership team is a privilege, and I want to take this opportunity to thank each of my partners for their passion, teamwork and focus. On today's call, I will share an overview of our Q4 segment performance, provide insight into the work we are doing to expand our customer reach and frequency, and update you on our upcoming holiday campaign. Let's start with our Americas segment. Our Americas business, with more than 9,000 company-operated and 6,500 licensed stores in 17 countries, delivered 5% comp growth in the quarter, driving record Q4 revenues, up 17% year-on-year. Please note that all references I make to revenue on this call will be on the 53-week basis. AUVs for both our existing and newest class of U.S. stores reached record levels, giving us confidence in our decision to open approximately 800 net new stores throughout the Americas in fiscal 2017. This was where…

Thank you, Kevin, and good afternoon, everyone. Starbucks Q4 of fiscal 2016 was the most profitable quarter capping off the most profitable year in the company's history. Q4 EPS was $0.54 and on a 14-week non-GAAP basis it was $0.56 with the extra week contributing approximately $0.06. Excluding the extra week, our non-GAAP EPS in Q4 grew by 16% over last year, representing our 15th straight quarter of non-GAAP EPS growth of 15% or greater. Please note that for comparability purposes, all remaining non-GAAP references on today's call will exclude the extra week. Our consolidated operating margin in Q4 came in at 21.5% on a GAAP basis and 20.9% on a non-GAAP basis, improving 90 basis points over last year's fourth quarter non-GAAP operating margin. Operating margin improvement was driven primarily by sales leverage and favorability in commodity costs that more than offset the impact of increased partner investments and certain additional G&A costs. For the quarter, consolidated operating income increased 27% on a GAAP basis and 13% on a non-GAAP basis. I'll now take you through our Q4 operating performance by segment. Let's start with the Americas. The Americas segment delivered both record operating income of $1.1 billion, and operating margin of 27.6% driven by strong performance in our businesses across the region. Non-GAAP operating income increased 18% over last year to $988 million, while operating margin expanded 210 basis points to 26.9%. This improvement was primarily driven by sales leverage that was partially offset by partner investments. I'd like to call out two specific additional items in the Americas results this quarter. First, you will note that we saw leverage on store operating expenses during the quarter compared to deleverage for the full year. This result was driven by several factors, including a somewhat lower run rate of…

Our first question comes from the line of Andy Barish from Jefferies. Andy, your line is now open.

Yeah, just wondering on the U.S. comp and the round-down. Did you see sort of some of the afternoon pressures and Frappuccino declines as the summer went on with your summer beverage program? Or did things get a little bit better there and you kind of have some products that can maybe pick up the slack for Frappuccino?

Yeah, Andy, this is Kevin. First of all, we saw growth in every day-part in the U.S. this last quarter. And Frappuccino contributed a bit of comp. So, from the weakness we had in Frappuccino in Q3, we saw positive contribution towards comp from Frappuccino in Q4.

Your next question comes from the line of David Palmer from RBC. David, your line is now open.

Hi. Good evening. This is Eric Gonzalez in for Dave Palmer. I think you said your mobile payment mix is about 25% during the quarter. I think this implies that, similar to last quarter, I think they have flattened out on a sequential basis. Have you analyzed why this might be? And do you think that there's steps you could take to jumpstart the growth in that mix?

Yeah, this is Kevin. First of all, the order consolidation impact has an impact on this as well. Keep in mind, this is 25% of transaction paid for with the mobile app. And so, with the order consolidation, you have customers actually doing more spend on the mobile app, but the number stays the same. And I think late in the quarter, we've seen that tick up 26%. So you have – the big contributor, though, was the order consolidation that impacted that.

And your next question comes from the line of Sara Senatore from Bernstein. Sara, your line is now open. Sara Harkavy Senatore - Sanford C. Bernstein & Co. LLC: Thank you. I wanted to ask about the Roastery and the Reserve stores. And I guess the halo you mentioned. Can you talk perhaps about anything you're seeing in terms of customer perception that you might track? And I guess for those of us in New York, we see a lot of these so-called third wave coffee shops opening up. So is this sort of a beachhead for Starbucks against that? Are you not seeing an impact from that? Just wanted to get a sense of what the Roasteries and the Reserve stores are doing for you. Thank you.

Thank you. Sara, can I just ask you, have you seen the Roastery in Seattle? Have you been there? Sara Harkavy Senatore - Sanford C. Bernstein & Co. LLC: I have.

Okay. Would you agree with me that you've never seen anything quite like that? Sara Harkavy Senatore - Sanford C. Bernstein & Co. LLC: It is magical. That is an accurate assessment.

Okay, all right. I guess if you're a lawyer, you're never supposed to ask a question you don't know the answer to, so I took a little risk there. But I think anyone who has seen the Roastery understands that in addition to it being the kind of coffee experience, it has really no peer in terms of any retail experience. But all along, we set out to build a new brand and that was Starbucks Reserve, with the understanding that we had an opportunity to elevate the core business and really take the brand and the coffee up to a new level. Now, many of us have seen this take place in other industries, the fashion industry, the automobile industry, I think a good analog is what Nike's been able to do with Air Jordan and that is build a profit center and a sub brand that unto itself is a growth engine and, as a result of that, shines a halo on the entire company. Now the Roastery itself has created the kind of retail experience that we are learning a great deal from. And the primary thing we're learning is that the Reserve bar, which in our parlance, that's the espresso bar and where all the coffee is made in multiple brewing methods, that has created excitement, interest, education, romance, theater, but it also has created the opportunity for us to provide our customers with a different coffee experience and, candidly, at a higher ticket. And so, we're taking learning from that and we're integrating that into existing and new Starbucks stores. Those are the four stores that opened in Manhattan. They've opened in Lake Forest, Illinois. They've opened in Japan and China. And what we're seeing is the core Starbucks customer is coming into the store,…

Our next question comes from the line of John Glass from Morgan Stanley. John, your line is now open. John Glass - Morgan Stanley & Co. LLC: Thanks very much. It seems that membership in My Starbucks Rewards is sort of the beginning of the funnel, you get consumers in at these mobile payment, mobile ordering, and yet I'm always surprised at how few people are actually members when I talk to friends, families, whatever, the members of the program. So how do you accelerate that? And I thought one of the reasons that you were changing the point system was enable to use the points outside – or the Stars outside of the Starbucks stores. We haven't heard much in terms of new alliances, for example, to broaden that to people who may not have been Starbucks customers become members through other organizations or affiliations you may have. Where do you stand on that process?

Thank you, John. Matt Ryan here. First of all, we see this as an enormous opportunity moving forward. We know that very few of our customers, relatively speaking, have become members. And that, to us, represents an enormous opportunity moving forward. What we do know is that when we are able to convert somebody into being a member of the program, we see tremendous incrementally as they join the program. And we continue to see that accelerate. Over the past few months, we have worked on successfully transitioning our program to a spend-based program, and we are now seeing the uptick in spend per member and engagement that we anticipated from the launch of the program. So we're completely on track and accelerating in that regard. Our next big opportunity moving forward, especially in the natural window that we have ahead of us in the next two quarters is to take advantage of the traffic we see, the card volume we do to convert even more people into Starbucks Rewards. And just on the topic of extending outside of Starbucks, it's never been our intention to have Starbucks Stars be used at other venues. But we are going to be giving customers the opportunity to earn Stars at other venues, starting with a partnership with Chase, which we previously announced.

Your next question comes from the line of David Tarantino from Robert W. Baird. David, your line is now open. David E. Tarantino - Robert W. Baird & Co., Inc. (Broker): Hi. Good afternoon. Scott, I wanted to ask about the guidance. I know you mentioned that you expect mid-single-digit comps for the year and perhaps a lower part of that in the first half of the year and the upper part of that in the second half of the year, if I heard you correctly. So could you just talk about what you might be trying to signal there about the first half of the year? Whether it's kind of more of the same versus what we've been seeing in the recent quarters? And then maybe talk about why that would be the case? Is it just comparisons? Or are you thinking there's certain initiatives that start to kick in in the second half of the year that will help the comps?

Yeah, thanks, David. I think I would start with the fact that Howard covered around the environment that we're facing right now in many of our major markets around the globe. So the consumer remains under pressure in many places in Europe and Asia as well as here in the U.S., economic uncertainty around the overall consumer environment, around the election, that continues to weigh on our customers around the globe. And I think we can see that continuing as we get into 2017. And then I would point to the fact that the comparisons that we had over the last couple quarters have been particularly difficult and impacted our comps that we reported in Q3 and Q4. And those comparisons, if anything, they get a little bit tougher as you get into Q1 and certainly stay as tough in Q2. So that weighs into the guidance. And then the third thing, perhaps the most important thing is, we do have a number of initiatives that we'll be rolling out and accelerating over the course of the year. And we're going to spend a lot of time talk about this during Investor Day, but they include innovation around store development and store design, even beyond what Howard's talking about in Reserve focused stores. But as we go through a pretty significant cycle of remodels, we see ways to do those remodels to both improve the customer experience as well as our partner experience and productivity. When you get on the digital front, Kevin talked about some of this, but we just launched Favorites from an item standpoint and from a store standpoint. I'm sure John you've used the Favorite stores. It's so much easier if you're in a dense, urban area that to pick among your stores and save them and quickly get what you want. Same thing with Favorite items for highly customized beverages. So that's just rolling out. And over the next couple of quarters, we'll get to suggested selling, where as the customers building their order in the app, we'll be able to make relevant product suggestions to them. So that's all coming. Then product and food or food and beverage innovation is coming. Kevin talked about holiday. As we get into the new calendar year, there's a number of things that we'll talk about on the food side that we'll sample at Investor Day. So I think as we look into calendar year 2017, there's a number of things that make us a bit more optimistic that we might be able to get in the middle of that mid-single-digit range versus I think the first six months or so it will be towards the lower-end of that range.

Your next question comes from the line of Andrew Charles from Cowen & Co. Andrew, your line is now open. Andrew Charles - Cowen & Co. LLC: Thank you. Can you walk us through how that 1% headwind from transaction splitting in 3Q widened to the 2% in 4Q? It's basically implying that there's going to be with one person used to do three transactions or two people used to do three transactions consolidating that into one. I understand the benefits obviously of the program and why that would normally happen but I guess I'm curious about why that widened?

Sure. It's Matt Ryan here. Let me take a stab at trying to answer that. It's a little bit complex so bear with me here. What we are seeing is basically how we record the transactions of customers in our stores and what we had in the past, but we didn't necessarily have visibility to, are people or parties of people coming in and buying multiple items. We could predict and forecast based upon what we saw on a singular account, somebody coming in and buying something and then right away using the same account again to buy something else. And that accounted for about 1 point of, what we call, transaction splitting going away. But what we were able to see through the end of the second quarter, especially as people adjusted their habits, was that there was actually consolidation taking place between multiple accounts. And, of course, there would have been no way for us to see that before. But what we saw were multiple beverages being put on Starbucks Rewards accounts where they hadn't been put on there before. When you roll that all up together, what that means is we had two total points of what had been recorded on separate accounts before, now being consolidated onto a single account. So while the actual traffic wasn't any different, we're seeing consolidation of two points when you take both of those things into consideration.

I'd just add one thing to what Matt said. We started to see that in beverage attach, so as we got into the summer we had the point that we expected but when we looked at beverage attach that really started to increase significantly and that's when we knew that multiple accounts were putting beverages on a single transaction where they were splitting it before.

Your next question comes from the line of John Ivankoe from JPMorgan. John, your line is now open.

Hi. Thank you. Howard, I was going to ask you to maybe apply the current environment in terms of what we're seeing both in the U.S. and around the world in the consumer environment, to what you've seen elsewhere in your decades of experience at Starbucks. And I guess a lot of us who are on the call are wondering if the environment can actually get better from where we are today. And as you kind of think about the election and getting that behind us, whether there's kind of an opportunity for the overall consumer sentiment in spending and the external environment perhaps being more of a tailwind than a headwind that's been in the last couple of years.

John, I wish I was as smart as you might expect me to be. I mean I think we're asking ourselves the same questions that you have just posed. And also I think as we get around our table and we talk about the business, if you were in the room you'd hear us talking about the fact that we don't want to use weather and we don't want to use the uncertainty in the election as an excuse. But nevertheless, we are all trying to navigate through a difficult time. I mean I would label this time as just a high degree of uncertainty that obviously is domestically driven but has affected the rest of the world. John and I and Cliff just last week we're in China and Japan, and Cliff and I will be in Europe next week, and I think it's safe to say that wherever we have been, I don't think we've ever witnessed such concern about what could happen in the U.S. as a result of the election. And I think there's no question, as I speak to other retailers and other merchants both in and out of our sector, that there isn't one exception where everyone is experiencing, I think, a very unpredictable and erratic chain of events where it's very, very hard. I think what's equally hard, it's very hard to cut through all of the noise and try and get access to the customer and try and get your message out. So I think we've tried to be very disciplined and very thoughtful about how we spend our money, both in traditional advertising and social media, so that we are not in any way kind of getting caught into all of this. I think everyone is hoping that post the election,…

Your next question comes from the line of Jason West from Credit Suisse. Jason, your line is now open. Jason West - Credit Suisse Securities (USA) LLC (Broker): Yeah, just two quick clarifications and a question. Just one, Scott, on the guidance on the investments. Just to be clear, that $250 million is incremental to the $160 million? It's not $90 million over the $160 million? And then on the coffee outlook, can you just say if that's kind of looking flat or up or down for next year on what you have locked? And then the bigger picture question is just on the disruption I guess you saw last quarter when you switched the loyalty program, and people getting used to that new structure. Do you think there's still some disruption there that needs to get worked through or has that been sort of fully understood and people moving forward now with that?

Thanks, Jason. I'll take the first couple and then I'll pass it over to Matt. The $250 million is incremental, so it would be on top of the $160 million. And then we see coffee a little bit favorable year-over-year. But as I mentioned in my prepared remarks, it's pretty much offset by slightly negative foreign exchange impact.

Great. And as for the disruption, a couple of key things. I think we're through with anything you might characterize as disruption, but I want to be careful with what I mean there. Number one is that we saw no attrition from the so-called disadvantaged people. We studied this issue very carefully and tracked it all through the summer, and we did not see those people who are not earning Rewards as quickly diminish in any way within the program. The thing that we did want to see last quarter but which we saw this quarter was an acceleration in spend per member. So keep in mind that the reason why we did this was to able to have the lever not just of transaction but also of ticket. That didn't materialize in Q3 but did materialize in Q4. And we are seeing acceleration in the spending per member. So we're feeling very, very good about having come out of the program transition with very minimal collateral damage in any way and a good trajectory in front of us, especially as we lean into acquiring new members.

Your next question comes from the line of Joe Buckley from Bank of America. Joe, your line is now open.

Thank you. One follow up as well and then one additional question. Could you share with us – this is the follow-up – could you share with us the My Starbucks Rewards, what percent of either sales or transactions the total program represents? I mean whether people are doing it on their phone or doing it kind of in a more old-fashioned way or however they're doing it, what that total is? And then secondly, wanted to ask about the espresso bars and where you stand in that rollout and if you could talk a bit about the type of sales impact you see when you install that in an existing Starbucks.

Sure. Matt Ryan here. Very quickly on the percent of tender. So we see 33% of tender coming in from Starbucks Rewards across mobile and registered Cards. We see an additional 5% coming in from non-registered Cards. So between Card and the Starbucks Rewards program is at 38%. And mobile of course is at 25% right now.

Joe, with regard to the espresso – sorry – with regard to the espresso bars...

No, no. Thank you.

What's very interesting about the evolution of the espresso bars is that we actually started this, believe it or not, in China. That the China experience and the design of the stores gave rise to the understanding that we had an opportunity in existing Starbucks stores and some new stores to offer the customer an alternative based on what was going on and what we were initially learning in the Roastery. So it's very early on domestically and we've been doing this in Asia for a while. But if we look at what's happened in the Roastery and we say to ourselves, could we transfer the opportunity of premiumization in an existing or new Starbucks store? What we're learning is in the stores that have opened in New York – and I'll mention them again – 85th and Madison, 10 Waverly, Brookfield Place, and 9th and Broadway, a new store in Lake Forest, Illinois – what we're seeing, and it's early days, is that customers are moving their core beverages to the espresso bar. They're enjoying the opportunity to sit at the bar because of the theater and the romance of watching their beverage be made. And the ticket is going up. But it's early. So this is an opportunity that we have to integrate those Reserve bars in many of the stores that are going to be naturally on a remodel cycle as well as open new stores from scratch. And then as I said earlier, the Reserve stores coupled with their Roastery is going to create an opportunity for the brand to be elevated with a lot of awareness and a lot of trial. So this is part of a comprehensive all-in strategy that, we believe, will create an incremental opportunity for profit and revenue as a result of this new brand and, as a result of that, shine a halo on the core brand of Starbucks. John, you want to add something?

Yeah, I just want to add one thing, Joe. This is John Culver. What we saw in China and what we're seeing in the U.S. is really the enablement of the partner and customer connection, really come to life in a very special and unique way. And it really played out for us very clearly in China by the fact that a lot of the Chinese consumers didn't have a lot of education around coffee, and didn't have a lot of education around brewing methods, espresso-based beverages. And it's interesting to see in China how the customers gather around the bar, basically pull out their cell phones, take pictures, take videos and really we are educating customers one at a time in China around great tasting coffee and a great experience that Starbucks is able to provide. You walk into New York City, we were there a couple weeks ago with Howard, and we saw firsthand a similar type of experience from the standpoint of the number of people sitting at the bar, wanting to interact with the baristas and really wanting to understand the various brewing methods. And it's really something that really elevates the experience, and the customer response has been incredible, number one. And even the partner engagement around this has been remarkable as well. So we're very positive and optimistic about what the future has for this for us.

Your next question comes from the line of Karen Holthouse from Goldman Sachs. Karen, your line is now open. Karen Holthouse - Goldman Sachs & Co.: Hi. Thanks for taking the question. China/Asia Pacific comps came in a little bit lighter than I think what most folks were modeling. And in the past there's been I think a degree of seasonality to the China business related to changes in gifting practices. So just curious if you could help us understand sequentially how much of that trend was driven by China and within that maybe some seasonality to the comp? And what sort of gives you confidence that can reaccelerate? Thanks.

Okay. Karen, this is John. Just real quick on China. Again, very optimistic about where we sit in the marketplace. We delivered a 6% comp in the market, far above any of our peer set in that environment over there. What we are seeing across China is just very strong acceptance for the Starbucks brand. You look at the number of customers that we're attracting into our stores. Our brand has never been stronger. And the customer engagement has never been stronger as well. So we're increasing frequency of existing customers, and we continue to attract new customers. What you saw in Q4 was very similar to what we saw last Q4. Last Q4, last year we delivered a 6%. This quarter we delivered a 6% as well. There is some seasonality going from Q3 to Q4. We've seen that historically play out in China. I don't think you need to read anything into it other than the fact that our business there remains strong. We had record openings in terms of stores in the quarter in China, opening over 200 stores in the market. Our new store performance is the strongest it's ever been. Our average unit volumes, our return on investment, and our overall store level profitability remains best-in-class within the company. So very optimistic again about China and the opportunity that we have there to continue to grow. And the investments we're making on our people and the infrastructure are critical to the success going forward.

Your next question comes from the line of Jeffrey Bernstein from Barclays. Jeffrey, your line is now open.

Great. Thank you very much. I just had a question broadly on the U.S. comps. I know last quarter there was talk about the re-acceleration in trend to a 5% plus. I'm wondering if you were to look at that, maybe qualitatively, how much do you think was the elevated macro headwinds versus maybe any kind of internal headwinds that made it more challenging to hit that. And with that as a backdrop, and we've talked a lot about the broader macro challenges we're facing and starting the year kind of at the lower end of that range, so just wondering whether the mid-single-digit or better is still the best assumption to make once you get to a system your size? Or whether or not maybe we should just be tempering the expectation a little bit so it becomes less about the quarter-to-quarter of achieving a certain 5% or whatnot? I'm just wondering how you think about that holistically there. Or maybe just define what that mid-single-digit range actually means in terms of numbers?

That's the easiest part. Mid-single-digits is 4% to 6%. I think what I would say, Jeffrey, as we started the quarter, we guided really on Americas to get to a 5% comp, and we got there. Obviously, as you know, and it's the nature of your question, the U.S. business is the biggest piece of that. What I would say is, with the Americas at 5% and the U.S. at 6% and minus 1%, it gives you an indication of exactly how close we were to 5% in the U.S. I don't want to split hairs. I'd much rather have a 5%. But clearly comps accelerated both in the U.S. and Americas from the third quarter and I think we feel pretty good about that, given the environment. Kevin talked a little bit about what drove some of that acceleration. We had a really good summer around innovation including limited time offers, Teavana Iced Tea, we had a pretty good quarter in food and Frappuccino recovered a bit and helped us as well. So while we didn't quite get to 5% in the U.S., it was pretty close. And I think as we look forward, I think mid-single-digit comps, if you look at the U.S. comp in the first quarter, it's 9% and the global comp is 8%. And so I think it's just prudent for us to say there's a range in mid-single-digit comps for a reason. And I think in the first half with those types of compares and the backdrop we have, I think we're just thinking we're going to be at the lower-end of that range. And, of course, as always if we can beat it, we will.

Can I add one thing? Without putting anyone on the defensive and recognizing this is like the third rail, I would just ask you to consider that for a company our size and the track record that we have had domestically and now internationally, and as Kevin said in his remarks, the fact that our business went up on our scale during this quarter in every day-part. And if you look at our history of trying to do everything we can to really add shareholder value in everything we do, to just try and just take a step back every now and then and recognize that comp store sales, although we all recognize its importance, is not the driving force of a company that did $20 billion in revenue and $4 billion in operating profit and is adding a store a day in China and is on its way to building one of the most recognized and admired brands in the world. And yet, we're so focused on something that, yes, it is important and it is strategic, but it is not everything. So just maybe every now and then recognize that we will have comps that will over-achieve and we'll have some comps that probably will disappoint. But we are here for the long game. This is a 24th year of our public life. The company had a market cap of $250 million at that point. It's at almost $80 billion today. And it's just the beginning. So maybe every now and then just recognize we're all in this together and comps is not the end all of everything.

Your next question comes from the line of Matthew DiFrisco from Guggenheim. Matthew, your line is now open.

Thank you. And I appreciate that commentary you gave on the comps. Actually, my question is with respect to that a little bit and the 2,100 stores, I would think a couple years ago you did point out that you mentioned three years ago about the changing dynamic and you spoke also about the changing in traffic for the consumer out there. I guess the 2,100 stores does sound like a very good number, a very strong number on a global basis. I wonder can you talk about that as far as what are the different type of – you talked about highest volumes in some of these markets as well. What is the biggest driver behind that? Is it the new products you're doing now? Is it the mobile app? Can you give us some color on what do you think is behind? Is it better real estate sites? Have you changed the way you select these sites on a global basis?

Yeah, thanks for the question, Matt. I'll give it a shot. I think if you go back five years ago or so into the mid-2000s when we were opening our highest number of stores, most of those stores were company-owned stores in the U.S. I want to say it was something like 80%. And now you look at where we're opening our stores today with 60% of those stores coming in markets outside of the U.S., two-thirds of those stores are licensed stores. And even end markets like China and the U.S. where we're opening significant numbers of company-owned stores, we're using different formats as we go into markets. And so, drive-thrus remain well over 50% of our stores. So we're going into different real estate than we were back then. We have smaller footprint stores. We have the larger footprint stores including Reserve bars that Howard talked about. So the toolset that we're using as we build stores out, both from a product offering standpoint with Reserve and flexibility for our customers with drive-thrus in international markets really helps us gain confidence with our store growth.

I would add one other thing. And as Kevin said in his remarks, the fact that on our base for the new store performance this year, both in the U.S. and China, the best performing class of new stores in our history. And then the other thing I'd say is we're opening stores now in places that 10 years ago, even five years ago, I don't think we would have considered. And we were in Inglewood outside of Chicago last week. We've opened in Jamaica, Queens and, of course, we're so proud of the fact that we've opened in Ferguson, Missouri. In all these cases, the stores are performing at or above plan as we recognize more than ever that there's a lot of white space and opportunities to extend the reach of Starbucks. So I don't know, Kevin, if you want to add anything?

Yeah, I think the strength of the brand and the fact there's latent demand in these markets for Starbucks. And so, we're very thoughtful about where we locate these stores. And the teams have put together a number of tools and things to ensure we're being thoughtful about where we locate stores but when we locate them, there's demand for those stores that shows up very quickly. And it's not cannibalizing existing stores. And that just shows that there's more customers we can reach and if we're thoughtful about how we do it, it strengthens the brand and strengthens the connection with the customer.

Yeah, and I would just add that going back to what we learned during the transformation in 2007 and 2008, we've put in all new processes and all new ways in which we're evaluating real estate, evaluating new stores, monitoring the progress and making sure that they are in fact meeting the customer demand that's out there, the latent demand that Kevin spoke about. In addition, I would also say that the level of innovation from a product standpoint that we're bringing into our stores has never been stronger. And so you look at Cold Brew, you look at Nitro, you look at Teavana, you look at some of the food gains that we've had. We continue to innovate and then add in the digital footprint and being relevant to our customers from a digital standpoint. We are engaging our customers more now than we ever have, and the stores or that place where they come for their favorite Starbucks beverage each and every day.

Your next question comes from the line of Nicole Miller from Piper Jaffray. Nicole, your line is now open. Nicole Miller Regan - Piper Jaffray & Co.: Thank you. Good afternoon. I want to understand a little bit more about the CPG trends with – and, again, an amazing operating margin there. Can you talk about the organic top-line growth from existing and new relationships and what kind of leverage that provides to operating margin? And then when you think about the grocery store price inflation or deflation, how does that impact operating margin and is the volume growth still outpacing revenue growth? Thank you.

Hi, there. This is Mike Conway. I'll take that question. So from a top-line perspective, we're feeling good about the top-line performance that we've had certainly this quarter. If you look at our growth as measured by IRI both for our key businesses, Roast and Ground and K-Cup, we're up 8%. We're actually growing at a pace double that in the category. And that's really behind, number one, our strong brand. Number two, the great execution that we have on our holiday programs or LTL like Fall Blend and our innovation, and innovation that we have to come. So we feel very good about the kind of growth and share that we've been able to drive. And what I would say is that volume versus the price, our volume and price growth are fairly close which means that we've been able to really get the right balance of promotional pricing, base pricing in the marketplace and we feel good about that. If you look at that and the margin expansion that we've been able to realize in the quarter, I think that's kind of the right balance for us, to continue to grow both the category, grow our brand and also drive share.

Let me just add to Mike's comments. Nicole, this is Kevin. The CPG business, in many ways, is about scale economics. And so certainly the more we're gaining share in the grocery and mass merchants that we sell to, the more efficient we are at delivering that product. So that's helping. Number two, I'll remind you that we renegotiated our agreement with Keurig and so we've got favorable K-Cup tolling fees which are also helping. So there's a variety of things that are contributing to that but I think the strength of the brand and the share gains that we continue to get for at-home coffee, Roast and Ground as well as K-Cup and establishing Starbucks as the number one share player in premium Roast and Ground and K-Cups is a big part of that.

And your last question comes from the line of Matt McGinley from Evercore ISI. Matt, your line is now open.

Thank you. My question's on the free cash generation this year in...

We can't hear you.

Can you hear me now?

Can you speak up a little louder?

Sure. Can you hear me?

Yes.

Sorry about that. So my question is on the free cash generation over 2016 and the cash balance you had at the year end. You had a very good step-up in that ability to generate cash in 2016. It was about $1 billion higher versus last year. So my question is how much of that step-up in the cash generation was driven by durable increases in cash conversion relative to more one-time things, like a 53rd week, or favorable year-end timing on working capital or things like that? I think the margin commentary that you gave for 2017 made it seem like that is probably durable. But I'm curious if those balances are as good as they look?

Yeah, the vast majority of the increase in cash is due to the core operating cash flow of the business. So that's a good thing.

Anything else?

No.

All right. Thanks again, everyone, for joining us today. And we look forward to seeing many of you at our December 7 Investor Day in New York. Have a good night.

This concludes Starbucks Coffee Company's fourth quarter and fiscal year 2016 earnings conference call. You may now disconnect.