The first chapter of Starbucks (SBUX) and Howard Schultz's story is legendary. Schultz became Director of Retail Operations of Starbucks in 1982 with four branches of the coffee company in the Seattle area. In less than two decades, Starbucks had a presence on six continents, with 3,501 total stores and well over $2 billion in revenue. In 2019, Starbucks had 31,256 stores worldwide and $26.5 billion in revenue.
Schultz left Starbucks in 2000 due to exhaustion from growing Starbucks from a regional coffee chain to a global company over a period of 18 years. He returned eight years later because he felt the coffee chain was drifting from its core values, and he was concerned about its slumping performance.
When Schultz returned to Starbucks in 2008, the company's fortunes were flagging. Its stock price had fallen 75% over the previous two years and competitors, such as McDonald's (MCD) and Dunkin' Donuts (DNKN), were eating away at sales and margins from both the lower end and the top end.
Revenue was growing across the board, but it was not keeping up with new store creation. Basically, Starbucks was dependent on opening new stores for growth while same-store sales were declining. Schultz believed this was a critical moment for the company to go back to its core values and make necessary changes to reverse these trends and preserve the integrity of the brand.
He fired nearly all executives, shut down lagging stores, and chartered a new course for the company to ensure that operations would not be sacrificed for growth. Wall Street was enthusiastic about Schultz's return and changes, which proved successful, as the stock has climbed approximately 2,100% between his return as CEO and January 2020. Schultz's original tenure as CEO also coincided with a more than tenfold rise in the stock price between its IPO in 1992 and his resignation in 2000.
Leaving a Second Time
In a press release posted on June 4, 2018, Starbucks announced that Schultz would step down from his position, but had been honored with the position of Chairman Emeritus, effective June 26, 2018. Myron E. Ullman has been appointed as the next Chair of the Board of directors and Mellody Hobson has been appointed Vice-Chair.
Schultz intends to spend more time with his family and work on a book focused on Starbucks' social impact work, according to the press release.
In January 2019, Schultz announced his intention to explore a run in the 2020 U.S. presidential election as an independent candidate. However, in September 2019 he officially announced that he would no longer be seeking candidacy.
Reuters reported on July 9, 2018, that Schultz addressed investor concerns that Starbucks is under pressure in China's fast-growing market, saying that the recent slowdown in China is temporary. He also hinted at a potential collaboration with e-commerce giant Alibaba Group Holding Ltd’s (BABA) billionaire founder Jack Ma, which came to fruition later that year and further in 2019. Starbucks and Alibaba announced a new retail partnership whereby Starbucks would use Alibaba's ecosystem of different businesses to create an order and delivery system for consumers in China.