Decelerate a wild week on wall street and all the major indices in jeopardy we take a look at whats to expect next week. Amazon falling in premarkets. And we lost a title after a few hours when the stock of course did drop after that report also star bucks shares falling on earnings receiving two analyst downgrades well talk to johnson later in the hour first up stocks were on a record run. The nasdaq sliding mid yesterday and it comes in about where economists were looking and big Energy Earnings today. Exxon shares are down. Profits double and chevron flat of revenue beat. Royal dutch shell made comments as if theyre preparing for lower forever. He wants to get down to the oil business lower forever on going to buy an electric car yeah it would be fabulous if they switched to first solar and you cant do that. They basically said listen our business is coal they did that was the only way to understand it and the coal business other than President Trump very much involved in coal was a shocking and its the talk of everybody where theres an oil rally going on the only guy really standing in its way is the ceo of royal dutch. Back of 49 this morning shares did take a hit after reporting earnings revenue top forecast and outlook for the Current Quarter disappoints. And 46 is more than microsoft and google combined. I think we can look at the earnings number. We can look at the line of the number of people recruited to be Amazon Web Services clients. Their Cloud Business is remarkable there are some people that will say you know what, this was not the destruction of brick and mortar that we thought for retail so theyll rotate into a macys or a kohls its a Conference Call thats a stock and trade amazon Conference Call. Which is basically we love ya, were spending a lot they dont literally love it. They share with you the basics and then the rest of it is just highlights things like we introduce the new Alexa Smart Home capability for customers and you can turn your ikea spotlights on and off. I was waiting in the middle of the quarter that says dont forget at 9 30 alexa buy amazon stock. This thing when you read the quarter it was like a press release that you would read for a team saying listen wait until next quarter this was not our quarter its useless except for the list of clients that they got. Amazon web services is such an important component of their profitability and generates so much and mark for example did ask hey listen aws Revenue Growth shared almost no change and a double us operating margin is lower than we have seen in six quarters or Something Like that. The cfo said the biggest impact that youre seeing is 71 increase in assets required under capital releases and stepped up to match large usage growth and marketing as well. Yeah i sat there and i said can i make a call on this morning show that azure is starting to do better. Is there a price car going on. No, theres no. There was a little bit of margin pressure wasnt there a tiny bit. Theres a question as to whether price as good getting more competitive among amazon. Microsoft and google. Dont forget ibm would love to be in that mix. I think that theres two groups of people that are selling this morning. Theres people that are saying okay the nasdaq did some sort of reversal on the tech goolg stuff. Theres other people that are making with amazon prime theyre going to make more money. And the people are going to read through. Maybe they want to take away their clients. Because the cloud wars are starting aws margin is 2622 in two quarters. Now quitely the toughest man out there and hes a warrior he never tells you that hes in the war. And i think that walmart is plague a role. How so . Walmart doesnt want his suppliers to use Amazon Web Services this valely something people have to watch. Now could walmart get in trouble for saying to people we dont want you to use our competitors web service . Not if azure is offering a different price. The broader notion that microsoft is so ingrained with corporate i. T. To begin with such a great quarter. You have ibm will ibm break price in order to keep it. You did on the alphabet call have them say were going to be aggressive theyre talking about being the king of the cloud. Its growing so quickly its funny how were talk sog much about this as opposed to the rest of the business but 16 billion right now. 82 margin on that is not bad. Notice theres a lot of Health Care Companies moving to the cloud. Thats early i am not going to call the cloud dead i am saying that the Conference Call, the questions which are far more important than answer thes on that Conference Call indicate that people are going to say there is a margin compression. You can say wait a second this is still the greatest story ever told talking about the greatest story ever told facebook yesterday reported net income of almost 3. 9 billion gap. Amazon net income 197 million. Roughly the same market caps a few billion between them facebook has 20,000 employees. Amazon is hiring another 50,000, up to another 130,000. Whats the greatest story ever told the idea of the moving off premises moving in cloud. But i thought from an investment perspective rather youd rather own a company with 3. 9 million in net. I thought facebook when it opened up 7 and didnt go down despite the reversal, i heard that term 17 times yesterday. I urge people at home, thats a technical term that usually means the open is going to be down dont forget the cannon ball even though its raining the cannon ball plus the fact that President Trump is landing on long island will have many people exiting today if the weather were better than then the trading would really come to a halt today i am saying that amazon down 39 is not the first price id like to buy. Speaking of the president and politics as you know by now Senate Republicans failed to repeal obamacare in a dramatic late night vote on capitol hill. Three Republican Sen tors broke ranks and voted against it including john mccain. The president tweeted three republicans and 48 dem kratz let the people down. And also out of washington, dropping the controversial tax from the revamp of their tax reform plan. They want to do this better than they did health care. One of the saving graces yesterd yesterday. Alphabet is used overseas. Where are we in tax reform are we moving to tax reform now that they have not failed in health care. Is it finally really over its got to be double over. Its got to be double over and triple over. They Start Talking about on monday its different. But there is a little bit of disarray in the white house. Can you play that tape i have it ringing in my ears. Its somewhere. Ill be saying no, so i have his voice in my head. Did you consider that dissension that was like it used to be going on there. Theres other references that i dont think were quite accurate in terms of block things he could have used different anthony is and im sure you he will call in. Because he called in on cnn. This morning hes going to dramatically pair back his exposure to journalists. Dramatically. That would still mean 18 hours instead of 24. I dont know the disarray means i wanted to hear from the white house today okay were going to now approach tax reform today but instead i got that kind of i dont know, ban nongymnastic references a big new york mets fan. Its been a very emotional time for us. I think he does know actually what about the revenue raising part of the border adjustment tax . Are you going to have deficit hawks that dont come on board and face a similar situation when you have conservatives and moderates in the Republican Party that were unable to come together on health care. I think you are and thats why the president would say lets go repatriation because thats revenue positive. It would be viewed as fabulous. You would be happy to see that selfcontained . Yes if they wanted to do that. I guess hes saying its, hes speaking in that third person which always tells you youre in charge they need very much to take up something. They need a win. So the win would be repatriation because thats immediate money. What do you think of that i think many of us believe that you end up with a cut and repatriation deal. Dont think you can come here. Such an important component of revenue raising unless they do something thats going to blow up the deficit. I didnt get a lot of positive news over the last 24 hours. People dont seem to trust that. I need a starbucks. Its been a challenging week in some ways when we come back, were going to talk about starbucks. Stocks down almost 8 in the premarket. Expected sales lowering the forecast, the ceo is with us to discuss the quarter. Well talk to Kevin Johnson after a break. If you could book a flight, then add a hotel, or car, or activity in one place and save, where would you go . Expedia. [ intense music playing ] ] its here, but its going by fast. The opportunity of the year is back the mercedesbenz summer event. Get to your dealer today for incredible onceaseason offers, and start firing up those grilles. Lease the e300 for 569 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Starbucks ceo Kevin Johnson, thank you for joining us. Good morning, jim. Okay. Lets get to what i think a lot of people are concerned about. You obviously had some terrific numbers. A 5 comp. Thats what we should be talking about that a lot of problems have been solved but yet the tenor of the research this morning has come like what he has said cut to hold, ability decreases investment likely to increase. Talking about a reset where youll say that its not going to be a goodyear id love to hear your side of this commentary. Well, jim, first of all, were very proud of the fact that we posted a 5 comp in our largest market in the u. S. 1 growth in transaction. I challenge any other food and beverage margin of our scale with a 5 comp and 1 transaction. Its a Strong Performance and great result second as we saw in the back half of last quarter we saw Industry Data around away from home food and beverage that prompted us to take a cautionary postuer for q4. Keep in mind we are three weeks into a 13 week quarter and a lot can happen youll have Strong Performance but the big story is also china. The 7 comp we posted in china and the acquisition we announced yesterday to make all of Mainland China unify that around a Company Operated model we think having two major growths in u. S. And china is going to fuel the company forward. My Charitable Trust owned starbucks forever. At the same time i try to figure out why i suddenly have to worry about data away from starbucks were talking one of the great growth engines of our time i didnt think it might continue and causing your numbers to come down why didnt you take them down last night instead of adding a full quarter knowing thats going to happen last time. I understand jim. We factor that into our q4 guidance were in the middle of our physical year planning process including the acquisition of east china and so as we land those strategic actions as we put this aop together well be very clear about our guidance were three weeks into a 13 week quarter. And took precautionary guidance and a lot can happen you talk about retail disruption on the call everybody understands that but you also talk about on going macro pressures that some people wonder you got Consumer Confidence doing blowout numbers. Is this not an environment where the consumer spends comfortable spending a few dollars on a cup of coffee at starbucks thats great question the data we look at has to do with u. S. Data of thousands of restaurants that serve customers that are away from home food and beverage and, you know, over time that number just continues to grow and it has some ebbs and flows and what we see here in the last quarter say little bit of softening in that that indicates that consumers are spending their money on other things right now that caused that number to slow. Were proud of the fact thooechb with the slowing growth of the macro number we posted a 5 comp in the u. S we out performed what we see happening in the industry. This is a near term phenomenon nothing to be concerned about longterm. Nobodyquibble with that they downgraded their rating this morning and they said that starbucks has struggled to unlock the next meaningful sales driving Initiative Digital they say has been the most meaningful same store sales driver in recent years it appears to have slowed and the brand has struggled to drive meaningful traffic growth outside of your loyalty base is that a fair criticism look, i think certainly the reward program and what we have done with our Digital Mobile relationship with customers has been a big driver of our growth. That is absolutely true. In fact this last quarter we grew the number of active rewards numbers 8 we saw average spend per reward number go up 8 so the opportunity before us is how do we expand a connection of customers around our digitalmobile relationship. We announced the things that were working on last night on our call that are going to roll out early in calendar year 18 but were going to start to open up our mobile order and pay for customers that have not joined the rewards program and allow them to do some of the things that have been reserved for reward members so clearly the opportunity for us to continue to build on the strength we have in our digital relationship with customers and expand the apiture with that is a real opportunity. Im wary of being too negative with my question with the stock down 4. 49 it sends the wrong message but trying to suggest to people is this an opportunity. I do want to give you a chance to talk about the idea that china should be a needle mover and well stop obsessing on a week to week basis through the United States. First of all, i think our u. S. Business continues to perform well, a 5 comp and as we talked about yesterday, china is our second largest and Fastest Growing market now we have been in china nearly 18 years now and we have laid the foundation for a longterm growth agenda for starbucks. We now have 2,800 stores throughout china 130 cities in china. You think about what Consumer Brands have a stronger brand affinity and awareness than starbucks. And respectful way to take care of our partners and work closely with our partners and the supply chain and all of that created this foundation for us and make unifying all of Mainland China around a company on ratd market that creates a longterm Significant Growth opportunity and were going to continue to build 500 new stores in china and i would expect that number to accelerate overtime china would be larger than the u. S. Market. Your company has been a longterm success over the last two years the Company Stock has not done much as we know thats impier cal and in the previous quarter we talk about that and the socalled mosh pit global ordering problem. Thats something we got from him. We all admire from what he has done at panera they could lead to the next quarter together thats why i was surprised for the down beat nature of you as the quarter went on. Even reminded us that maybe were being too negative about the u. S. And our question. Last quarter we saw growth and certainly the morning day part is a very important one for us we saw increases and we saw overall growth and we are making Great Strides in not only improving the customer situation and also increasing group play at that moment when those mobile orders come in mobile orders pay and the number of mobile orders is 9 in the u. S. And that number continues to grow. Finally kevin you say you made efforts to reverse the trend through creative merchandising and new store designs what does that say to any other retailer that is leveraged highly to the american mall and their attempts to do the same certainly carl, the data are clear that, you know, mall traffic is on the decline and clearly every retailer has to be focused on being a Retail Destination and finding ways to create a connection with customers. Unfortunately the teavana mall based stores faced that head wind and with all the work we have done to reinvent the store it couldnt overcome that. We sell 1. 6 billion of teavana teas in starbucks and with our partnership we have a huge opportunity ahead with teavana. All right well, kevin, carl david and i thank you for coming on. Its always good to speak to you. Kevin johnson, ceo of starbucks, thank you so much. Thank you well get the opening bell after isre my experience with usaa has been excellent. They always refer to me as master sergeant. They really appreciate the military family, and it really shows. Weve got auto insurance, homeowners insurance. Had an accident with a vehicle, i actually called usaa before we called the police. Usaa was there handson very quick very prompt. I feel like were being handled as people that actually have a genuine need. Were the webber family and we are usaa members for life. Usaa, get your insurance quote today. The opening bell in about 45 seconds here we take stock overnight. The deal fails to pass the American People would say wait a second things are really bad down there whether the ag issue would turn into something in the stock market last night was the first night when i said okay if its going to be this bad, you know, maybe i just have to be a little upbeat i mean, this was really bad. I think that. Were getting nothing done a few days ago theres the opening bell on the s p at the bottom of your screen this media companynarrative fo celebrating the 20th anniversary of the launch of all recipes. Com. At the nasdaq its