Scholz Returns, Halts Starbucks Stock Buyback... "Investing in Stores and Employees"

Howard Schultz, Interim CEO of Starbucks
Photo by AP Yonhap News

[Asia Economy Reporter Jeong Hyunjin] Howard Schultz, the interim CEO who returned as Starbucks' "savior," has taken the first step by announcing the suspension of Starbucks' share buyback program. This move aims to secure funds to expand investment in stores and employees amid growing internal unionization efforts.

According to the Wall Street Journal (WSJ) and others on the 4th (local time), Schultz CEO announced his return and the suspension of the share buyback program in a letter to employees. Starbucks announced last month that CEO Kevin Johnson stepped down and honorary chairman Schultz would serve as interim CEO. This is Schultz CEO's second return.

Schultz CEO said, "This decision (to suspend the share buyback) will allow us to invest more in our people and stores, thereby creating long-term value for all our shareholders." He added, "If the company is designed to share success with each individual and for the joint success of all stakeholders, shareholders, customers, and communities will all benefit," and said, "We will hold 'design sessions' with employees to create mutual prosperity in an era with diverse stakeholders."

The reason Schultz CEO delivered this message is interpreted as the unionization issue being the most urgent problem to solve. At Starbucks, unionization efforts are intensifying due to excessive workloads and dissatisfaction with the work environment. Since a union was first established at a Starbucks store in Buffalo, New York, in December last year, more than 140 Starbucks stores nationwide have held unionization votes. While Schultz CEO is basically negative about unionization, he appears to have expressed a willingness to resolve issues through communication with employees.

Along with this, rising wages and raw material costs, supply chain issues, the suspension of operations in Russia due to Russia's airstrikes on Ukraine, and the resurgence of COVID-19 in China are immediate challenges Schultz CEO must address. Schultz CEO said, "We face a new reality in a changed world," and added, "Starbucks must choose between growing or just remaining idle at this point."

With Schultz CEO's declaration to suspend the share buyback program, the share buyback plan announced by former CEO Johnson in October last year is also expected to be suspended for the time being. At that time, Johnson announced plans to repurchase shares or pay dividends worth $20 billion over the next three years. In the three months following the announcement, Starbucks spent $3.52 billion to buy back 31.1 million shares and announced in February that it could purchase an additional 17.8 million shares.

After the announcement of the suspension of the share buyback program, Starbucks' stock price closed down 3.72%.

This content was produced with the assistance of AI translation services.