Schultz reverses course on Starbucks’ $20 billion share buyback

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Starbucks

Starbucks (NYSE: SBUX) shareholders were happy to hear that former CEO and founder Howard Schultz was returning to take the reigns of his company once again. Although for a temporary period, Schultz’s appointment as interim CEO will likely last for a while until a suitable replacement CEO can be appointed. However, investors were unhappy with one of Schultz’s first decisions to dial back on a planned billion-dollar share buyback program.

Schultz officially began his first day as interim CEO on Monday and his third stretch of acting as Starbucks’ CEO. His first order of business was to stop a $20 billion share buyback program that was announced earlier in March. As of Monday, Schultz put a stop to the program. Instead, he wants to invest more heavily into opening up new stories, as well as revamping many of its existing locations in North America and Europe.

“I am returning to the company to work with all of you to design that next StarbucksStarting immediately, we are suspending our share repurchasing program,” wrote Schultz in an open letter directed to shareholders and employees. “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.”

For Starbucks shareholders, the news came as a big disappointment, as this hefty buyback program could has pushed stock prices up between 10-20%. Supporters of Schultz argue that this move is better for Starbucks in the long run, whereas just propping up stock prices with buybacks is a shorter-term solution.

Starbucks said it plans to find another CEO sometime this fall and that Schultz will help run the company while helping his successor take the wheels of the coffee giant. The new CEO is unlikely to reverse Schultz’s decision regarding this buyback plan.

Schultz is also working hard to prevent his employees from unionizing. Since December, a number of Starbucks stores have officially unionized against the company’s will, with many more considering following suit. Many politicians, including top Democrat senators, have criticized Starbucks for spending $20 billion to prop up shareholders while ardently preventing unionization, arguing that any increased labor costs would be less than the $20 billion it originally planned.

Besides these two issues, other problems Starbucks faces include the ongoing supply chain bottlenecks, which have eaten into the margins of most big companies. During

Shares of Starbucks were down around 3.9% following the news. Since 2022 began, Starbucks has slid over 20.5% in market cap, with shares largely unchanged compared to 2021. Around 19 analysts on Wall Street have a bullish rating on Starbucks stock, while around 16 analysts are neutral. None are bearish, especially now that the company’s legendary former CEO is back taking the reigns, even if just temporarily.

 

Starbucks Company Profile

Starbucks is one of the most widely recognized restaurant brands in the world, operating more than 34,300 stores across more than 80 countries as of the end of the first quarter of fiscal 2022. The firm operates in three segments: North America, international markets, and channel development (grocery and ready-to-drink beverage). The coffee chain generates revenue from company-operated stores, royalties, sales of equipment and products to license partners, ready-to-drink beverages, packaged coffee sales, and single-serve products. – Warrior Trading News

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