Former Starbucks CEO Howard Schultz to Return as Chain Faces Union Push, Rising Costs

In leading the coffee giant for a third time, he is expected to set innovation strategy and weigh in on a successor.

By guest author Heather Haddon from the Wall Street Journal.

Howard Schultz is returning to lead Starbucks Corp. SBUX 5.16% for a third time, saying the company he helped become the world’s largest coffee chain needs to reinvent itself once more.

All captions courtesy by the Wall Street Journal

Mr. Schultz, who built Starbucks from a handful of Seattle-based coffee shops to a global giant before retiring as executive chairman in 2018, will take over as chief executive again in April as the chain confronts rising costs, challenges in its Chinese and Russian markets, and an expanding unionization push among U.S. baristas. The company told investors Wednesday that it aims to improve relations with its workers.

“Although I did not plan to return to Starbucks, I know the company must transform once again to meet a new and exciting future where all of our stakeholders mutually flourish,” Mr. Schultz said.

Starbucks last year recovered in many markets from a pandemic-driven sales slowdown and aims to open more than 20,000 new cafes around the world by the end of the decade, while shifting more business toward drive-throughs and other to-go formats.

Starbucks said Wednesday that Kevin Johnson, the company’s chief executive for the past five years, will step down as CEO and board director as of April 4. He will continue in an advisory role to the company and its board through September.

Mr. Schultz, who preceded Mr. Johnson and presided over much of the chain’s expansion, will serve as interim CEO and will return to the company’s board, Starbucks said. The company didn’t immediately say Wednesday whether Mr. Schultz’s board role will be temporary. As interim CEO, Mr. Schultz will run Starbucks’s day-to-day operations and steer its innovation efforts, while helping to select and bring on board the chain’s next permanent chief executive, the company said.

Starbucks shares rose 5.2 % Wednesday to close at USD 87.41. Wall Street analysts said a new CEO could improve investor sentiment toward the stock, which has trailed other restaurant-company shares in recent months.

At Motley Fool Asset Management, a fund that owns about 146660 Starbucks shares, investment analyst Ben Wong said his firm is monitoring the unionization campaign for potential reputational damage to the chain. “With Howard stepping back in, that gives us more confidence. These issues are complex,” Mr. Wong said.

Starbucks was one of the first U.S. restaurant chains to feel the pandemic’s impact, in the company’s China market in early 2020. As it closed cafes during Covid-19 lockdowns, Starbucks’s same-store sales fell for the first time in more than a decade.

In June 2020, the company sped up plans to permanently close hundreds of U.S. stores to pave the way for more to-go and drive-through locations. Starbucks recorded USD 29.1 billion in sales for its most recent fiscal year, up from USD 22.4 billion in 2017 after Mr. Johnson took over.

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Starbucks’s shares were down 24 % in the past 12 months through Tuesday’s market close, while a Standard & Poor’s index of restaurant stocks had declined 5 % during the same period. Wall Street analysts have said that rising wage, training, supply and other costs are likely to weigh on Starbucks’s profit in the near term.

Mr. Johnson, Starbucks’s departing CEO, has said that spending on more wages and benefits will improve the company’s long-term performance.

Mr. Schultz, 68 years old, served as Starbucks CEO from 1987 until 2000, and returned in 2008 as the company sought to improve its performance. Mr. Schultz, who remained on Starbucks’s board until 2018 and flirted with a run for U.S. president as an independent in 2019, currently heads his family’s foundation and is involved in philanthropy.

Starbucks board Chairwoman Mellody Hobson said Mr. Schultz isn’t expected to stay permanently. She said she expected Mr. Schultz to maintain the company’s culture as it transitions to a new leader, and to voice his opinions.

“We want the full deal,” said Ms. Hobson, who has described Mr. Schultz as a friend and mentor.

Mr. Schultz said that he felt a responsibility to help when called to return to Starbucks.