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No More Starbucks Stock Buybacks? Why It’s a Big Deal.

sbux stock - No More Starbucks Stock Buybacks? Why It’s a Big Deal.

Source: Natee Meepian /

Shares of Starbucks (NASDAQ:SBUX) are under pressure today on news that another of the coffee chain’s retail outlets has voted to unionize and the company is halting its share repurchase program.

SBUX stock is down over 4% today after newly installed interim Chief Executive Officer (CEO) Howard Schultz suspended the company’s $20 billion share buyback program, saying the money could be better spent on employee compensation and at retail locations.

“This decision will allow us to invest more profit into our people and our stores — the only way to create long-term value for all stakeholders,” Schultz wrote in a letter to employees that has been made public.

It was only last October that Starbucks announced it was reinstating the share buyback program after suspending it during the pandemic. At that time, the company committed to spend $20 billion on buybacks and dividends over the next three years.

Schultz is stepping into the CEO role at Starbucks on an interim basis while the company searches for a permanent replacement for former CEO Kevin Johnson who announced his departure earlier this year. Schultz has served as Starbuck’s CEO on two previous occasions — from 1986 to 2000 and from 2008 to 2017.

News that the share buyback program is being suspended comes as another of Starbucks retail outlets in the U.S. voted to unionize. Over the weekend, a flagship Starbucks location in New York City became the latest outlet to support unionizing its workers.

To date, a total of nine Starbucks locations have voted to unionize, including a store in the company’s hometown of Seattle, Washington. Another 180 company-owned coffee shops have filed petitions for a union election. While that is a small fraction of Starbucks’ total of 9,000 outlets in the U.S., it is nevertheless a trend that has some investors and analysts worried.

Starbucks is a company that is in transition. The loss of its CEO, the return of Howard Schultz, the suspension of the stock buyback program and the union drives are all roiling what has traditionally been a rock-solid company and stock. As such, investors should be cautious when considering a stake in SBUX shares at this time.

Year to date, SBUX stock is down 25% at under $88 a share. Further declines are coming today and the selloff could accelerate if the reaction of existing shareholders to current developments worsens.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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