Starbucks shares plunge as CEO Howard Schultz suspends share buybacks
Howard Schultz, Chairman of Starbucks, at the grand opening of the Starbucks Reserve Roastery in Shanghai, China, 5 December 2017.
Justin Solomon | CNBC
Howard Schultz’s first day at the helm of Starbucks began with the announcement that the coffee chain was suspending share buybacks to invest in operations.
The company’s shares fell more than 5% in morning trading on the news.
The decision came as Starbucks faced union pressure from its baristas. To date, nine places have voted in favor of the merger, including a coffee shop in her hometown of Seattle and flagship restaurant Reserve Roastery in New York City. More than 180 company-owned locations have petitioned for a union election, though that’s still a small fraction of Starbucks’ total U.S. presence of nearly 9,000 stores.
In a letter to workers, Schultz said his first job was to spend time with employees. Another job he considered necessary was the suspension of the company’s share buyback program.
“This decision will allow us to invest more profits in our employees and our stores – the only way to create long-term value for all stakeholders,” he wrote.
In October, under the leadership of former CEO Kevin Johnson, Starbucks committed to spend $20 billion on buyouts and dividends over the next three years. It ended its fiscal 2021 without a share repurchase for a year as sales remained under pressure due to the pandemic.
Schultz is expected to serve as interim CEO until the fall so the company’s board can continue the hunt for Starbucks’ next long-term CEO.
Schultz’s decision also comes as President Joe Biden and some Democratic leaders are pushing for tougher anti-buyout policies. The recently released White House budget plan calls for executives to be barred from selling their shares for several years after a corporate buyout.