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Starbucks Founder Howard Schultz Says Company Needs to ‘Revisit’ Strategy as Problems Mount
Pressure from the old Starbucks (Image: Twitter)SBUX) CEO Howard Schultz is starting to brew.
Schultz, who no longer has a formal role at the company, was quick to weigh in on the coffee giant’s decision. last foul. In a LinkedIn post on Sundaythe founder and former CEO said he was asked by “people inside and outside the company” about his opinion on the loss of profits.
He wrote that the problems need to be resolved in the US first, with the need to “review” the current strategy and focus on “coffee-forward” innovations and essential products.
Schultz remains the chain’s largest individual shareholder, with nearly 21.8 million shares, worth about $1.6 billion.
Some investors are wondering whether this means a potential fourth return as CEO, with current boss Laxman Narasimhan only recently completing a year in the role. Narasimhan plans to reinforce declining sales trends with several tactics such as value offers, new items like boba tea, pearls, energy drinks and faster service.
When he left for the third time last year, Schultz said publicly he had no plans to return.
Former Starbucks CEO Howard Schultz testifies on Capitol Hill on March 29, 2023, in Washington, D.C. (Anna Moneymaker/Getty Images) (Anna Moneymaker via Getty Images)
Some people on the street seem willing to give the executive team time to turn things around. ship sinkingalthough Starbucks shares have fallen 17% in the last month alone.
“It’s been a relatively short time [for Narasimhan as CEO] … time will tell how successful some of the strategies they implemented were and how the business turned around,” Bank of America analyst Sara Senatore said by phone.
Senatore, who has a Buy rating on Starbucks, said the 14% drop in the company’s share price the day after its second-quarter earnings results was “outsized.”
“Restaurants have recovered from worse things than this,” she said, pointing to Chipotle’s 2015 E. coli outbreak fiasco. Chipotle shares recently closed at record following a stellar earnings report.
But don’t discount the power Schultz has.
“I never underestimate Howard’s advice, or … how close he is to the issue, especially when it comes to employee engagement,” Senatore said. In March 2022, Schultz resumed the role of interim CEO following the retirement of then-CEO Kevin Johnson as unionization efforts increased in the US.
Schultz stepped down in favor of Narasimhan in March 2023 and had to testify at the Capitol about his company’s union response later that month.
But investors are feeling Schultz’s frustration.
“I actually think they’re going in the wrong direction… the business should simplify and focus on the core,” Andy Barish, an analyst at Jefferies, told Yahoo Finance over the phone. “They are going in too many directions at once when the business is deteriorating.”
The story continues
Starbucks CFO Rachel Ruggeri recently told Yahoo Finance that the company does not plan to lower prices, but said it “did not respond quickly enough” when a one-time customer reduced spending. She pointed to upcoming digital initiatives and rewards programs to help win back customers.
Others say the company needs to explain more explicitly how it is turning the tide.
“A lot of investors are very frustrated right now and want to have a lot of control over not just what they’re going to do from a sales standpoint… [but] ‘simple things’ they can do from a cost reduction standpoint,” Citi analyst Jon Tower told Yahoo Finance.
On Wall Street, the stock currently has 12 buy ratings, 24 hold ratings, and one sell rating, with four recent downgrades in the mix.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke DiPalma or send an email to bdipalma@yahoofinance.com.
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