Howard Schultz is suspending Starbucks’ share buyback program, pledging on the first day of his third term as the US coffee chain’s chief executive to redirect the capital to its stores and staff.
The decision came as Starbucks faced a growing unionization movement in its home market, rising wage and commodity costs and potential threats to its international growth from its suspension of operations in Russia to Covid-related lockdowns in China.
“This decision will allow us to invest more into our people and our stores — the only way to create long-term value for all stakeholders,” Schultz said in a letter to employees three weeks after the company announced that Kevin Johnson was retiring after five years as chief executive and Schultz was returning on an interim basis.
His pledge was followed within hours by news that Starbucks had fired Laila Dalton, a shift supervisor in Phoenix, Arizona, a move that Starbucks Workers United branded “blatant retaliation against [a] union leader”.
Casey Moore, a barista at the Williamsville Place Starbucks in Buffalo, New York, said fellow members of the unionization campaign were “hopeful, but honestly, not expecting anything different” following Schultz’s return.
“It’s disheartening and disappointing to see that someone who is apparently the head of a progressive company. . . can be so against the labor movement,” she said, adding that staff wanted to be consulted on how the buyback funds would be entertained.
“It’s great that they want to invest in partners, but we need to be decision makers in those investments,” she said. Starbucks did not immediately respond to a request for comment.
Shares in Starbucks, which have lagged the S&P 500 over the past year, closed 3.7 per cent lower on Monday at $88.09.
Starbucks put stock repurchases on hold in 2020 to focus on reducing debt taken on during the pandemic. Johnson announced plans last October to spend $20bn on buybacks and dividends over the next three years.
The company reported in February that it had spent $3.52bn on its own stock in the three months to January 2, in keeping with a recent surge in buybacks by US companies keen to boost their earnings per share by reducing the number of shares in issue.
Shareholders, customers, communities and the planet would all benefit if the company was designed “to share success with each of us and for the collective success of all our stakeholders”, Schultz said on Monday.
He announced the launch of “design sessions” with people across the company “to co-create a future of mutual thriving in a multi-stakeholder era”, he added, without giving details of what these would entail.
Schultz’s comments echoed his attempts to revive Starbucks on his first return as chief executive in 2008 after he had warned of “the commoditization of the Starbucks experience”.
The company faced “new realities in a changed world”, from pinched supply chains to “a rising generation which seeks a new accountability for business”, Schultz added on Monday. “As Starbucks, we can either choose to rise at this moment — or stand idle.”
A group of shareholders holding a combined $1.2bn in Starbucks stock urged Schultz on Monday to consider the risks of “antagonizing” employees who were looking to unionise. Coming to the table with workers would lead to lower staff turnover and long-term success, they argued.
Dieter Waizenegger, executive director of SOC Investment Group, one of the shareholders, told the Financial Times that it was “a good first signal that [Schultz] is speaking about the long term, not short-term bumps in the share price”. He warned, however, that the chief executive’s rhetoric would be “an empty gesture” if the relationship with employees did not improve.
In a statement accompanying Schultz’s letter, the company noted that in his previous four decades as either chief executive or chair, Starbucks’ stock had increased 21,000 per cent between its 1992 listing and his departure in 2017.