Kevin Johnson, Starbucks CEO, joins Yahoo Finance's Julia La Roche to discuss the company's recent earnings report, future innovation of its restaurant locations, and much more.

Video Transcript

BRIAN SOZZI: OK, Starbucks posted beats on both its top and bottom lines last night, but the stock is under some pressure in the early going here. Our Julia La Roche is standing by with Starbucks CEO Kevin Johnson. Julia.

JULIA LA ROCHE: Thanks so much, Brian. And Kevin Johnson, thank you so much for joining us on Yahoo Finance Live this morning. I want to begin where you picked up the earnings call last night, you said you wanted folks to walk away with three words being confidence, resilience, and optimism. I think a lot of folks would be very curious, especially as it relates to optimism. Explain. Thank you.

KEVIN JOHNSON: Well, good morning, Julia. You know, first of all, you know, we've got-- we've got great confidence that the recovery plan that we've got in place at Starbucks is working, and it's evidenced by the results we just posted. If you look at the US business in the month of April during the shutdown, we were minus 65% comp. And in the month of September, we posted a minus 4 comp.

So think about that change in four-- in five months was significant. That minus 4 comp also includes the fact that we still have 3% of our stores temporarily closed. So that's another two points, basically, of impact on that. So we are within striking distance in the US. In China in the month of February, we had 90% of our stores closed. In the month of September, we posted a positive 1% comp. So great confidence that our recovery strategy is working.

Resilience, we've built these store protocols, operating protocols, into our stores that allow us to operate safely in a COVID world. You know, those protocols allow us to expand the customer experience when there's less spread of the virus, and we can tighten up the customer experiences when there's more spread of the virus. So we now have built resilience into Starbucks to operate in the world of COVID, even before there's a vaccine and therapeutics. You put those things together, our partners are rising to the occasion, the recovery strategy is working, we've built a more resilient company, that gives us optimism as we look into this next quarter and into this next fiscal year.

JULIA LA ROCHE: And Kevin, you all do deserve credit, because you all have been very mobile in recent months as it relates to the transition and the transformation that you're making. Something else that stood out to me, and I think a lot of folks would be curious, you all were talking about this kind of migrating from those dense metro centers to the suburbs, focusing on those drive-throughs and cafes. As a city dweller, what's going to happen to the Starbucks in the cities across America?

KEVIN JOHNSON: Well, Julia, what we're seeing today are consumer shifts. And because many people are now working from home and schooling from home, they'll go to their Starbucks that's near their home versus the Starbucks that's near their work in the central business district. So that's just a shift that we think is temporary. Over time when people do go back to work in the office, things will flow back into those central business districts.

But part of what we see, too, is this is an opportunity for us to transform the dense metropolitan trading area. And what does that mean? That means, you know, today-- you know, today, we have, you know, typical Starbucks cafes in dense metropolitan areas. We've invented a new format of the store called Starbucks pickup.

And where drive-throughs conserve the need state of convenience in the suburbs, Starbucks pickup is kind of a walk-through, and it serves the need state of convenience in those central business districts. So we're transforming the store portfolio in those dense metropolitan areas. We're not leaving them. We recognize right now there's a temporary customer shift to more suburban locations because they're closer to their homes. But we are now transforming the store portfolio in those dense metropolitan areas.

JULIA LA ROCHE: Right. So we can expect more walk-throughs, pickup stores. Kevin, you do look at the data. And I know when you looked at the data that was what informed your decision before the-- before any sort of government mandate or-- that we've yet to see, or even the private sector really stepping up on masks.

As someone who looks at data, what do you make of the whole future of work and work-from-home? And I mean, we've been several months at this point. As you look globally, are you seeing folks return to the office? How long do you think that might last?

KEVIN JOHNSON: You know, we see some returning to office. But fundamentally right now, I think it's still-- it's still mainly working from home in those jobs and those roles that people can do that. You know, I do think that, you know, once there's a vaccine and therapeutics that things will change. But I don't think they go back to the way they were before.

You know, I'll give you an example. Right here in the Starbucks Support Center in Seattle, Washington, we have about 4,000 Starbucks partners that work in support of all our green apron partners around the world. You know, I think in a post-vaccine/therapeutic world, we might have, you know, roughly 3,000 of those roles will be in the office more full-time, and 1,000 or 2,000 people might be working half-time, remote and half-time in the office. So I think this is going to create a whole new world of flexible work. And that's because everyone's adapted to using Zoom, and using Teams, and Webex and figured out how to get their work done from home.

JULIA LA ROCHE: Yeah, normally, I might be out there in Seattle to have this conversation. We were talking at the top of this about, you know, whether or not my store was opening up to cafe seating. I know you are opening, reopening the cafe seating in limited capacity in the US, and you have done so in China.

Curious about consumer behavior, the consumer psychology. I think of Starbucks, you know, we talk about the third place. Are people gathering? Are they using their laptops? Are they working? Are they-- talk to me about what you're seeing even in different geographies.

KEVIN JOHNSON: Yeah, well, first of all, I'll start with China. You know, when China went through the shutdown first and they reemerged, and actually China now, if you look at September positive 1 comp, we've opened seating in China. Now, everyone wears masks. We require masks in our stores. But I would say in China, it's sort of a return back to a much more normal state.

Now, you know, China does monitor if there's a spread of COVID or some COVID cases. If they find a spread start-- an outbreak starting, they are very quick to shut that city down, test everyone, and deal with it. So you know, China's in a place, I think, is a much more normal sort of customer seating and usage of a Starbucks third place.

In the US, over 60% of our stores now have limited seating. So think of it as a few tables, sometimes they're outside, a few inside that are socially distanced. As soon as we open those stores for limited seating, customers are there, and it's immediate. And it's immediate that that has an improvement in same-store comparable.

But we're also very careful, because we have to ensure we're operating a safe experience for our customers, which is why I think it'll take some time for us to get to more full seating in Starbucks stores in the US. But that said, we are still recovering. We're recovering, because we're leveraging mobile order for pickup, for delivery, for curbside, drive-throughs, and those experiences are what customers are looking for now-- safe, familiar, and convenient.

JULIA LA ROCHE: What do you think would help us get there in the US? You were just mentioning China. That's pretty remarkable to hear how China's progressed. What do you think would really help us get there, where we can actually gather again in a Starbucks?

KEVIN JOHNSON: Well, you know, I think certainly, I think it would help, you know, if we had a more national view of some of the protocols around wearing masks. You know, I think that's an important attribute. I think the ability to do more testing when there are outbreaks, contact tracing. You know, these are the things that I think China, you know, across the country has really, you know, advanced.

You know, we get daily feeds of the number of COVID cases by city in China, and we get daily feeds in the US by county. Those daily feeds go into an artificial intelligence engine that we have that helps inform us of how to set the store protocol in our stores. And so we constantly monitor that.

But look, we've built a resilient company. We've built store protocols and the way to operate in this world of COVID around the world. And that's part of what gives me optimism about this next year and optimism for the future of the Starbucks Coffee Company.

JULIA LA ROCHE: Well, Kevin Johnson, CEO of Starbucks, we can certainly use some more optimism. Thank you so much for joining me today.

KEVIN JOHNSON: Thank you, Julia.