Starbucks CEO steps down
to focus on high-end coffee, shares fall
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[December 02, 2016]
By Lisa Baertlein and Gayathree Ganesan
(Reuters) -
Starbucks
Corp co-founder Howard Schultz will step down as chief executive to
focus on new high-end coffee shops, handing the top job to Chief
Operating Officer Kevin Johnson, a long-time technology executive.
Schultz, who will become executive chairman in April 2017, said he would
focus on building ultra-premium Reserve stores and showcase Roastery and
Tasting Rooms around the world as well as setting the brand's "social
impact agenda" that includes sending employees to college and recruiting
veterans.
Starbucks had signaled the change in July, but its shares fell 3.6
percent to $56.41 in extended trading on Thursday, as investors recalled
the company's decline after Schultz handed over the reins in 2000. He
returned in 2008.
"Having him step down as CEO raised the anxiety level," said Stephens
analyst Will Slabaugh, who said that Schultz is the heart and soul of
the brand, its entrepreneurial leader and its savior.
"We're in a much better position on every level," said Schultz, who
returned for his second stint as CEO in the depths of the "Great
Recession," when Starbucks' stock was trading below $10. Late last year,
it hit an all-time high above $60. Schultz has put Starbucks in the
national spotlight, asking customers not to bring guns into stores and
urging conversations on race relations.
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Many of the campaigns have generated controversy, but analysts have not
seen a hit to financial results and the efforts have raised the profile
of the coffee company and cemented Schultz's status as a national
figure.
"The idea that he's replaceable, I think that's erroneous," said Bill
Smead, CEO of Smead Capital Management in Seattle, which owns Starbucks
shares. He compared the change to the retirement of long-time McDonald's
Corp <MCD.N> CEO Ray Kroc, who turned a handful of hamburger stands into
the world's biggest restaurant company.
The announcement on Thursday also came as investors worry about the
restaurant industry's stubborn traffic declines. Starbucks has held up
better than most, but it has not been immune.
Johnson is a former technology executive who became president and chief
operating officer at Starbucks in March 2015.
Johnson has been on the Starbucks board since 2009 but most of his
career was in the technology industry. He was the chief executive of
Juniper Networks Inc from September 2008 to January 2014 and prior to
that held several senior positions at Microsoft Corp.
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![](../images/120216pics/busine41.jpg)
Starbucks Chief Executive Howard Schultz speaks during the company's
annual shareholder's meeting in Seattle, Washington March 18, 2015.
REUTERS/David Ryder
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On a conference call after the announcement, analysts pressed the
company on timing and whether, with Schultz stepping aside, senior
management still had the "merchant gene."
"Not having retail experience could be a problem over time," said Howard
Penney, an analyst at Hedgeye Risk Management.
"I'm not leaving the company and I'm here every day," said Schultz,
whose office is connected to Johnson's.
Traffic at established Starbucks cafes fell in the last quarter, which
Johnson has attributed to a change in the company's loyalty program, and
Starbucks forecast a mid-single-digit rise in 2017 same-store sales.
The company dismissed speculation that Schultz could be preparing for a
new career in politics.
"He has no plans to run for political office, as he has said many times,
and will remain with the company as Starbucks executive chairman,
focusing on premium coffee," a spokeswoman said.
(Reporting by Gayathree Ganesan and Siddharth Cavale in Bengaluru;
additional writing by Peter Henderson; Editing by Bill Rigby and
Jonathan Oatis)
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