STARBUCKS: SCHULTZ TO STEP DOWN AS CEO, FOCUS ON INNOVATION

December 2, 2016

NEW YORK (AP) — Starbucks Chairman Howard Schultz is stepping down as CEO of the coffee chain he joined more than 30 years ago and transformed into a globally known brand. Howard Schultz

Schultz will become executive chairman in April to focus on innovation such as high-end shops and social impact activities, the Seattle-based chain announced Thursday. Kevin Johnson, who was named president and chief operating officer last year, will be chief executive as of April 3.

Since returning as the company’s CEO in 2008, Schultz is credited with turning around Starbucks’ fortunes. He has overseen the expansion of the chain’s food and beverage offerings and the growth of its popular loyalty program and mobile app.

Starbucks has credited the rewards program and app for helping consistently increase sales in the U.S., although growth has slowed more recently and traffic slipped in the latest quarter. Schultz has said such technology adaptions will become increasingly critical for brick-and-mortar retail businesses to thrive as shopping habits change.

Investor concerns about the change sent shares of Starbucks down 3.6 percent to $56.41 in after-hours trading.

During a conference call about the CEO announcement, an analyst called Schultz a “master merchant” who has been able to determine and even stimulate “what the Starbucks customer wants and needs” and asked if that “merchant gene” would still be present in those leading the company. Another noted that Starbucks struggled after Schultz stepped away as CEO in 2000, and asked what was different this time.

Schultz, 63, said Starbucks has built a strong leadership team in recent years. He also noted that he is not leaving the company, and will be working on developing the Starbucks Reserve Roasteries, which are high-end retail concepts featuring coffee beans and drinks like “cold brew” coffee. Schultz called it the “next wave of retail innovation.”

“But Kevin and the team are in charge,” Schultz said.

In a note issued before Starbucks’ announcement, RBC Capital Markets analyst David Palmer said he believed the company can regain its domestic sales momentum by focusing on expanding its rewards program and the changes it is making to its food menu.

Over the years, Schultz has said that people expect more from public companies, and has aligned himself and Starbucks with social issues like race and jobs for underprivileged youth. In September, he publicly endorsed Democratic presidential nominee Hillary Clinton in an interview with CNN, and did not rule out running for office at some point.

In a call with employees, Schultz said the company was not perfect, but it was authentic. Starbucks was criticized for having baristas write, “race together” on cups last year in the wake of police shootings – a move Schultz told employees he’d do again “in a heartbeat.”

“It was one of my proudest moments,” he said.

Johnson, 56, will take charge of the company’s global business and operations. He joined the Starbucks board in 2009, and spent years at technology companies including 16 years with Microsoft and five as Juniper Networks CEO.

Wells Fargo analyst Bonnie Herzog said she believes Johnson’s technology background will help ensure Starbucks’ digital initiatives will remain a priority.

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