Howard Schultz, Chairman of Starbucks at the grand opening of the Starbucks Reserve Roastry in Shanghai, China on December 5, 2017.
Justin Solomon | CNBC
Starbucks-led Howard Schultz’s first day began with an announcement that the coffee chain was suspending stock buybacks to reinvest in operations.
Shares of the company in premarket trading reportedly fell nearly 3%.
The decision comes as Starbucks faces a union push from its barristers. To date, nine of its locations have voted in favor of the union, including a cafe in its hometown of Seattle and its reserve roster flagship in New York City. More than 180 company-owned locations have filed a petition for a union election, although it is still a small fraction of the overall U.S. footprint of nearly 9,000 Starbucks stores.
In a letter to staff, Schultz said his first job was to spend time with staff. Another task he deems necessary is to suspend the company’s share repurchase activities.
“This decision will allow us to invest more profits in our people and in our stores – the only way to create long-term value for all stakeholders,” he wrote.
In October, under former CEO Kevin Johnson, Starbucks pledged to spend $ 20 billion on buybacks and dividends over the next three years. It ended its fiscal year 2021 without repurchasing any of its shares in 2021 due to sales pressures due to the epidemic.
Schultz is only expected to serve as interim CEO until the fall so that the company’s board can continue its search for the next long-term chief executive of Starbucks.
Schultz’s decision comes as President Joe Biden and some Democratic leaders push for a tougher line against the buyback. The White House’s recently released budget plan calls for executives to be barred from selling their shares for years after a corporate buyback.