CEO of Starbucks Howard Schultz in New York.
Steve Ferman | Getty Images
Starbucks is set to unveil a reinvention plan on Tuesday as the coffee giant grapples with changing consumer behavior, outdated store designs and a union push in the United States.
The strategy is the brainchild of outgoing interim CEO Howard Schultz, who returned to the role in the spring following the retirement of Kevin Johnson. Schultz will hand over the reins to new CEO Laxman Narasimhan in April, but will stay on to help implement the plan.
Starbucks said Tuesday’s Investor Day in Seattle will feature presentations and a Q&A with executives, but it’s unclear whether Narasimhan will speak to investors for the first time.
Schultz’s new strategy aims to determine how the coffee chain plans to drive growth in a post-pandemic world. The company’s shares are down 24% year-to-date, dragging its market value down to $102 billion. A slow recovery in China, labor pressure in the United States and broader economic uncertainty weighed on the stock, but Wall Street’s approval of the reinvention plan could revive stocks.
In August, Schultz told investors the plan would tackle “increasing efficiency” in U.S. coffee shops as consumer behavior changes in the wake of the pandemic. Customers are increasingly ordering their coffees from their phones or drive-thru lanes instead of sitting in cafes. Three-quarters of drink orders in its last quarter were cold drinks, usually with pricey extras.
But the company is also looking to appease baristas who have complained about understaffing and feeling overworked. More than 230 company-owned cafes in the United States voted to unionize under Workers United. The company, led by Schultz, worked to limit union support through efforts such as refusing to extend higher wages to unionized cafes and firing organizers.
Union pressure has slowed in recent months, but Starbucks is still struggling with high turnover. According to the Wall Street Journal, a quarter of American baristas leave their jobs within 90 days, up from around 10% before the pandemic.
Additionally, Wall Street is expecting an update on the company’s long-term outlook on Tuesday. In May, Starbucks suspended its guidance for fiscal year 2022, citing lockdowns in China, investment in its U.S. employees and high inflation.
The company’s previous long-term guidance called for adjusted earnings per share growth of 10% to 12%, revenue growth of 8% to 10%, and worldwide same-store sales growth of 4% to 5%. Barclays analyst Jeffrey Bernstein wrote in a note to clients that he thinks most investors would prefer the company to lower its outlook slightly so that it can consistently beat expectations and raise its forecast.
In its most recent quarter, Starbucks reported global same-store sales growth of 3%, fueled by strong demand in its home market. But Covid-19 restrictions in China have hammered its same-store sales growth in that market, its second-largest.
Tuesday’s Investor Day is scheduled to start at 10:30 a.m. and end at 6 p.m. ET.