September 25, 2022
Starbucks will unveil ‘reinvestment’ strategy on Tuesday at Investor Day

CEO of Starbucks Howard Schultz in New York City.

Steven Ferdman | Getty Images

Starbucks is expected to unveil a reinvestment plan on Tuesday as the coffee giant grapples with changing consumer behavior, outdated store design and a union push in the US.

The strategy is the brainchild of outgoing interim CEO Howard Schultz, who returned to the top job in the spring following the retirement of Kevin Johnson. Schultz will hand over the reins to incoming CEO Laxman Narasimhan in April, but will remain on to help implement the plan.

Starbucks said Tuesday’s Investor Day in Seattle will have presentations and a question-and-answer session with leadership, but it’s not clear whether Narasimhan will be speaking with investors for the first time.

Schultz’s new strategy is to address how the coffee chain plans to accelerate growth in a post-pandemic world. The company’s shares are up 24% year to date, bringing its market value down to $102 billion. Slow recovery in China, union pressure in the United States and macroeconomic uncertainty weighed on stocks, but approval for Wall Street’s reinvestment plan could rebound stocks.

In August, Schultz told investors that the plan would deal with “increasing efficiency” in American cafes, with consumer behavior changing in the wake of the pandemic. Customers are increasingly ordering their coffee from their phones or from the drive-thru lane rather than sitting in the cafe. Three-quarters of drink orders in its latest quarter were cold drinks, usually with expensive add-ons.

But the company is also trying to pacify the baristas who have complained of inattention and overwork. More than 230 company-owned cafes in the US have voted to unionize under Workers United. The Schultz-led company is working to curb union support, such as refusing to pay higher wages to unionized cafes and firing organizers.

The union push has slowed in recent months, but Starbucks still struggles with high turnover. A quarter of American barists are leaving their jobs within 90 days, up from about 10% before the pandemic, According to the Wall Street Journal.

Additionally, Wall Street is expecting an update Tuesday for the company’s long-term outlook. In May, Starbucks suspended its fiscal year 2022 forecast, citing lockdowns in China, investments in its US employees and high inflation.

The company’s previous long-term forecast forecasts 10% to 12% growth in adjusted earnings per share, revenue growth of 8% to 10%, and global same-store sales growth of 4% to 5%. Barclays analyst Jeffrey Bernstein wrote in a note to clients that he believes most investors would prefer the company to modestly lower its outlook so that it can consistently beat expectations and raise its forecast.

In its latest quarter, Starbucks reported a 3% increase in global same-store sales, driven by strong demand in its home market. But the Covid-19 restrictions in China hit its second biggest sales growth in that market.

Tuesday’s Investor Day is scheduled to begin at 10:30 am and end at 6 pm.

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