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Starbucks CFO Exit, Exec Chairman Quitting May Be an Opportunity

A leadership shakeup certainly can't make things any worse for the stalled company

It's Time to Wake Up and Smell the Coffee on Starbucks Stock

Source: Shutterstock

First the executive chairman and now the CFO? If Starbucks (NASDAQ:SBUX) keeps losing its most experienced leadership, CEO Kevin Johnson — who’s only been at the helm for about a year — may soon learn the hard way he can’t do it all by himself.

Or perhaps new blood is exactly what Starbucks needs.

If that’s the case, it’s arguable that Johnson’s exit could also ultimately be a good thing for the company — even if it’s a bitter pill to swallow now. At 57, the case that he’s increasingly out of touch with the company’s younger demographic target isn’t a flimsy one. Soon-to-be-former CFO Scott Maw is now 50, for the record, while executive chairman Howard Schultz (the former CEO, by the way) is 64 years old … not exactly spring chickens themselves.

Heading for the Exit

The news came on Thursday. Scott May, who had been serving as CFO since 2014 but had been with the company since 2011, will be stepping down in November. The announcement was made less than a month after executive chairman Schultz reported he too would be leaving his post.

Both decisions were made in the shadow of disappointing developments.

In between the two reports of retirement within the executive ranks, Starbucks warned shareholders that same-store sales for the quarter currently underway would only be about 1%. And, the coffeehouse chain was still struggling to repair the damage to its reputation suffered in April, when police were asked to respond to the fact that two African American men were sitting in one of its Philadelphia stores but weren’t buying anything. As it turns out, they were simply waiting to meet with someone who hadn’t arrived yet to discuss a real estate deal.

That incident clearly wasn’t the fault of Schultz or May, or Johnson for that matter. Some scenarios are just impossible to predict and plan for; the company temporarily shuttered 8,000 stores a few weeks after the fact to offer anti-bias training.

When such an incident caps off a string of fiscal weakness that’s only getting weaker though, it’s not quite as tough to make the decision to put the job itself in the past.

A Clean Slate

It’s often said that the characters that make up the word “crisis” in Chinese mean “danger” and “opportunity.” (OK, it’s not actually true if you speak and understand the Chinese language, but the point is well taken all the same — disruption can wipe the slate clean.) That’s what the absence of May and Schultz might end up meaning for Starbucks.

And, it’s certainly possible more of its top leadership will find the door soon — some voluntarily and some not-so-voluntarily.

That’s not a dig or an insult to anyone who’s already decided to step down, or soon will. Resting the weight of a multi-billion dollar corporation is physically, mentally and emotionally draining, and given enough time it can cloud your vision of what’s happening on the proverbial front lines where customers fork over their money. Reinvention of that process is just as much a part of life in the business world as it is anywhere else.

Just look at former Ford Motor Company (NYSE:F) CEO Mark Fields and current chief Jim Hackett. Hackett took the helm last May, and is redefining what the company is. Fields’ vision wasn’t a bad one, but the business needed a fresh perspective from someone who hadn’t been jaded by it.

The same goes for Meg Whitman, now-former CEO of Hewlett Packard (NYSE:HPE). She stepped down from her post in February, making way for Antonio Neri and his new perspective on the technology sector’s bigger, institutional customers. No one disliked Whitman. Indeed, she did great things for the company, even before it split with the consumer-oriented HP Inc (NYSE:HPQ). It was just time to pass the torch.

These companies all took the wise but counterintuitive advice of business guru Robert Kriegel: “If it ain’t broke, break it.”

Bottom Line for Starbucks

So the next few months could be rough ones for Starbucks as it adapts to the absence of Schultz and prepares for the exit of May. Johnson will likely stick around for at least a little while longer, if only because most everyone will agree there has to be some level of continuity in place. This transitional period may be a tough time to hold onto SBUX stock as a result.

If you’re a true long-termer though, the disruption may prove fruitful in the end.

The ongoing advent of mobile technology as the centerpiece of our lives is changing how consumers think, feel and behave, and sociopolitical battles are making consumers hyper-sensitive to all sorts of injustices. We’re also becoming experience-oriented rather than object-oriented consumers, not to mention more health-minded ones. These are all paradigm shifts that are difficult to see, and even more difficult to manage because you don’t see them.

In that light, some fresh ideas in the company’s conference room may will rekindle the company’s sales growth in the foreseeable future. Just buckle up in the meantime.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.

Article printed from InvestorPlace Media,

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