Howard Schultz, the former CEO of Starbucks, has called for a strategic overhaul of the coffee behemoth following a significant shortfall in its earnings, which failed to meet shareholder expectations.
In a candid LinkedIn post published on Sunday, Schultz, who resigned from his interim CEO position in March 2023 and left the company's board of directors a month later, discussed Starbucks' "fall from grace," particularly in the U.S. market.
The company has been grappling with nationwide unionization efforts and is also experiencing "the impact of a more cautious consumer," according to current CEO Laxman Narasimhan. Starbucks reported a 2% decrease in its quarterly net revenue to $8.6 billion last week, with same-store sales in the quarter dropping 4%, marking the first decline since 2020.
"I have emphasized that the companys fix needs to begin at home: U.S. operations are the primary reason for the companys fall from grace," Schultz stated in his LinkedIn post. He further stressed the need for a "maniacal focus on the customer experience, through the eyes of a merchant," adding that "The answer does not lie in data, but in the stores."
Since Narasimhan took the helm last spring, he has been executing the company's "reinvention plan," which he asserts necessitates a continued emphasis on long-term hiring and retention, investment in partner wages, and an overhaul of store operations.
In January 2024, eligible U.S. retail hourly partners received a minimum pay increase of 3%. In March, Starbucks introduced a new role of CEO for North America and began revamping its U.S. store portfolio with an inclusive framework designed to streamline customer ordering. Changes to lighting and structure were also made to facilitate conversation and productivity in its shops.
Despite these ongoing efforts, Schultz, who served as CEO from 1986 to 2000 and again from 2008 to 2017 before temporarily taking over in 2022, argued that "senior leadersincluding board membersneed to spend more time with those who wear the green apron."
Schultz further suggested that the company's first step should be to "reinvent" its mobile ordering and payment platform. He also called for an overhaul and elevation of the "go-to-market strategy with coffee-forward innovation that inspires partners, and creates differentiation in the marketplace," which would reinforce the companys premium position.
Schultz acknowledged that "'a miss' is virtually inevitable even at the best-managed, fastest-growing firms." However, he emphasized that the response to such a miss is crucial. "At any company that misses badly, there must be contrition and renewed focus and discipline on the core. Own the shortcoming without the slightest semblance of an excuse. There is a natural tendency to try to do too much too soon. Dont try to do everything at once."
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