As Starbucks faces a rising wave of employee unrest, its new chief executive is abruptly shifting how the coffee chain splits its profits between workers and shareholders.
In a letter on Monday to employees, customers, investors and others titled, “On the Future of Starbucks,” Howard Schultz announced that the company would suspend stock buybacks immediately. It was his first act on his first day back in the top job, which he has held twice before.
Mr. Schultz said that stopping buybacks would allow Starbucks “to invest more profit into our people and our stores — the only way to create long-term value for all stakeholders.” When a company uses its funds to repurchase and retire its own stock, it often raises its share price, rewarding investors and executives who typically hold large amounts of stock.
During Mr. Schultz’s last stint as chief executive, between 2008 and 2016, Starbucks spent more than $6 billion on buybacks. Last month, Starbucks announced that Mr. Schultz would return as chief executive on an interim basis, replacing Kevin Johnson, who took over from him in 2017. Mr. Schultz helped turn the Seattle company into a global powerhouse.
Now, Starbucks is under pressure from a growing effort to unionize its stores, which it has resisted, as workers push for better wages, hours and benefits. Starting late last year, a handful of stores have voted to unionize, the first in the company’s history. Over 100 locations in more than 25 states, out of nearly 9,000 company-owned stores across the country, are planning to hold elections.
Starbucks spent $10 billion on buybacks in 2019, but paused at the start of the pandemic. It recently resumed the practice, spending $3.5 billion on buybacks in its most recent quarter, which ended in early January. Last October, Starbucks said it would spend $20 billion on buybacks and dividends over the next three years. That program is now suspended under Mr. Schultz, less than six months after it was announced.