Howard Schultz’s first book, Pour Yourself Into It, describes how he came upon Starbucks Corporation (NASDAQ:SBUX) in the first place. A brief review of his past will give a little extra insight into how his departure will affect Starbucks stock.
Working in New York for a Swedish company that made coffee makers, Schultz marveled at how a small Seattle company was buying more of his drip coffee makers than Macy’s Inc (NYSE:M).
The year was 1981.
Schultz trekked out to Seattle to convince the owners to hire him as their head of marketing. Joining the company a year later, the rest is history.
As CEOs go, Howard Schultz was one of the best and also one of the good guys.
His departure from the company is a lot like when Jim Sinegal departed Costco Wholesale Corporation (NASDAQ:COST) in February of this year after a 35-year association. He too was both a great person and CEO.
You can’t replace people like this because they just don’t grow on trees. Good managers are hard to find; both companies will have to work hard to maintain the vision and discipline these two men demonstrated over the years.
But by no means does this mean shareholders should abandon Starbucks stock because Howard Schultz has left the building.
Heck, if he runs for president, Starbucks will have a free commercial running all the way up to voting day on November 3, 2020. Perhaps longer if he prevails over the Republican candidate.
So, if you have Starbucks stock you might want to start praying that he does run. I believe he’d be very good for the country, but I’m a Canadian, so I have no dog in this fight.
Kevin Johnson’s Firmly in Command
Although Schultz was a fixture at Starbucks since 1982, Kevin Johnson’s been the CEO since April 3, 2017. Schultz began preparing for his departure a year ago; if not for the crisis in Philadelphia in April, he’d likely have left the building much earlier.
There’s no question Starbucks is Johnson’s baby now and that’s just fine with Schultz.
“Kevin Johnson is a true servant leader, and he will lead Starbucks as this great company enters its next journey. It’s our duty as leaders to constantly reimagine Starbucks. I am honored to call Kevin my friend and partner. And Starbucks is fortunate to have him,” Schultz stated in the company’s press release announcing his departure. “This leadership team is extraordinarily capable. They, too, believe that Starbucks has a responsibility to use our scale for good.”
There’s been a little dip in Starbucks stock since the announcement but nothing that couldn’t be just as easily be due to investor concern about its quarterly sales.
This is a non-issue because Schultz and the rest of the Starbucks executives worked hard over the years to ingrain a certain corporate culture.
As I said in April, Starbucks will always try to do the right thing, which is more than I can say for a lot of companies in North America.
“There are very few companies who would have handled this egregious situation [Philadelphia] with as much honesty and contriteness as Starbucks,” I wrote April 18. “If you’re a shareholder, you ought to be proud, because adversity brings out genuine leadership, something Kevin Johnson’s got by the boatload.”
If Schultz doesn’t run for president, perhaps Johnson should; but I’m getting off course.
It’s the Company, Silly!
What really matters is what Starbucks is doing to profitably grow its business.
In its most recent quarterly report, a good one, Starbucks didn’t up its guidance. The current market environment has investors wanting more than just good earnings; they also want an optimistic outlook.
SBUX didn’t give them that. As a result, Starbucks stock has gone sideways over the past month. I wouldn’t be surprised if it continues to move sideways until management becomes tangibly more optimistic about its business.
I just don’t see that happening given it is still trying to rectify its managerial shortcomings laid bare by the Philadelphia incident.
Bottom Line on Starbucks Stock
While the U.S. market is still important to Starbucks, it is China that will push its stock higher.
While it already has 3,300 stores in 141 cities across China, the Starbucks expects to triple its revenue and double the number of stores there by 2022.
That’s where investors ought to be paying the most attention.
Schultz will be missed for sure but let’s not confuse an emotional goodbye with the successful operation of a global brand.
There are plenty of good people on the front lines selling the Starbucks way of doing business. Johnson will ensure they continue to have the tools necessary to get the job done.
Hell no, you shouldn’t sell.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.