Howard Schultz suspends buybacks as he returns to Starbucks

Howard Schultz is suspending Starbucks’ share buyback programme, 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 comes as Starbucks faces a growing unionisation 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 new 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,” Mr 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 Mr Schultz was returning on an interim basis.

Shares in Starbucks, which have lagged the S&P 500 over the past year, but rallied on news of Mr Schultz’s return, were down 5.7 per cent at $86.27 in morning trading in New York.

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Starbucks put stock repurchases on hold in 2020 to focus on reducing debt taken on during the pandemic, but Mr Johnson announced plans last October to spend $20 billion (€18.2 billion) on buybacks and dividends over the next three years.

The company reported in February that it had repurchased 31.1 million shares of common stock in the three months to January 2nd, at a cost of $3.52 billion (€3.21 billion). At the time, it had another 17.8 million shares available for purchase under its current buyback authorisation.

Revive Starbucks

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”, Mr Schultz said on Monday.

He would also be travelling to meet people across the company and launching “design sessions” with employees “to co-create a future of mutual thriving in a multi-stakeholder era”, he added, without giving details of what these would entail.

Mr Schultz’s comments echo his attempts to revive Starbucks on his first return as CEO in 2008, after he had issued an internal memo warning of what he called “the commoditisation of the Starbucks experience”.

The company was facing “new realities in a changed world”, from pinched supply chains to “a rising generation which seeks a new accountability for business”, Mr Schultz added in Monday’s message to staff: “As Starbucks, we can either choose to rise to this moment – or stand idle.”

A group of shareholders led by the ESG-focused Trillium Asset Management, urged Mr Schultz on Monday to consider the risks of “antagonising” employees who were looking to unionise.

In a statement accompanying Mr Schultz’s letter, the company noted that in Mr Schultz’s previous four decades as either CEO or chair the company had grown from 11 stores to 28,000 and its stock had increased by 21,000 per cent between its 1992 stock market listing and his departure in 2017.

– Copyright The Financial Times Limited 2022