On his first day back as Starbucks CEO, Howard Schultz paused billions of dollars in buybacks and said his immediate focus would be on coffee, customers and employees, not the stock market.
“I’m not in the business, as a Starbucks shareholder, to make any decision based on the share price for the quarter,” Schultz told a forum of employees at the company’s offices on Monday.
“Those days, ladies and gentlemen, are over,” Schultz said to applause, in a speech to employees seen by the Wall Street Journal.
Wall Street responded in turn, and shares fell 3.7 percent to $ 88.09.
Schultz’s remarks, along with news that the company will discontinue the buyback program that began in the fall, were a very clear indication so far of Schultz’s plans to return to his third term as CEO. , The coffee servers in the branches, have made the most significant move in the history of the chain towards unionization.
Schultz said Starbucks had to grow faster and reshape the buying experience to stay relevant to customers, even if it meant sacrificing some quarterly profits and returns to shareholders in the short term.
New York – Starbucks / Photo: Einat LeBron
Navigation between workers’ union attempts
He returns as acting CEO to run the coffee shop chain he built for several decades after Kevin Johnson, who has been Starbucks CEO since 2017, vigorously announced his intention to retire. Schultz said he will focus on renewing Starbucks as the chain navigates price increases and attempts to incorporate U.S. bars, as well as preparing to set up thousands of new branches around the world in the coming years.
During a workers’ forum in a conference room at the company’s offices on Monday, Schultz greeted some of the employees on their behalf and asked newer employees to introduce themselves to the company’s veterans.
Schultz, who was standing next to a full coffee machine, assured employees of the company’s good days even before it. He said that while Starbucks is usually in a leading position in the industry, it has not been doing enough in recent years. “We need to look at the role and responsibilities of being a public company in today’s America,” he said.
Schultz said he did not oppose unions but would not have been able to build Starbucks from a few individual branches into a coffee giant had he faced a union. “Starbucks needs to recognize that the corona plague has made the work environment more difficult for branch employees,” he said, “and the company needs to do more.”
“We did not do enough,” Schultz said. “I promise to get better”
In the past, Starbucks stopped repurchasing shares in 2020 after the epidemic hit its business. The company told investors in October that it would make a new $ 20 billion authorization in dividends and self-purchases (buybacks) over three years. “About two-thirds of the expense will go to in-house purchases of shares,” the company said at the time. In February, Starbucks issued $ 1.5 billion in debt for corporate purposes including self-acquisitions.
The company announced in February that it had repurchased 31.1 million shares in the quarter ended January 2, and had another 17.8 million shares available for purchase under the current authorization.
Self-purchases can support the share price by increasing earnings per share and encouraging investor sentiment regarding the company’s financial prospects. This year companies are spending more money on dividends and self-purchases of shares after having kept cash since the first wave of the plague. Self-acquisitions help support the battered stock market.
Starbucks shares are lagging behind other restaurant stocks in the past 12 months and the chain is navigating between rising costs of supplies and raw materials and higher wages for employees. Investors want to know what Schultz’s plans are and whether the profit margins can be squeezed further, Wall Street analysts said.
Self-buybacks of shares have been under scrutiny in Washington for a long time. Barristers who want to unionize and politicians who support their efforts have criticized Starbucks ‘self-acquisitions and dividend distribution, saying that money should have been invested in workers’ salaries and benefits for them.
Starbucks Workers United, the union formed by branch workers in the Palo, New York area late last year, announced Monday that the union wants to have a real voice in the company, and that Schultz should stop trying to prevent the union from supporting workers.
Some Starbucks investors said Monday that a break in stock repurchases could help the company in the long run, if it helps slow down Starbucks Workers United’s incorporation effort. A group of shareholders who previously urged Starbucks to stop all anti-union messages the company sends to employees announced on Monday that they still want the company to continue to avoid it.
In his speech on Monday, Schultz said that Starbucks has a winning strategy and millions of loyal customers, and that it is not worth focusing on the company’s stock. He said he faced opposition when he invested stock refunds in part-time employee benefits in the days he founded the company, but it was the right thing to do for Starbucks and employees.
“For anyone who is following the stock price today and the stock is down, it is a short-term matter,” he said.
Schultz said he is back to help shape the next Starbucks phase, and first aimed to spend time with employees to hear their concerns and inspire them. He said he and other leaders in the company will visit stores and manufacturing plants around the world in the coming weeks to better understand what employees’ concerns are. That feedback will be included in the company’s future decision-making, he said.