Believe it or not, Howard Schultz has tried to leave Starbucks Corp. (NASDAQ: SBUX) before. This time looks like it will be for real. Starbucks announced on Thursday that Howard Schultz is departing the day-to-day operations as CEO of the company.
Wall Street and investors hate to see iconic CEOs resign. Still, some people will not consider this announcement a surprise. When Starbucks conducted its most recent management reshuffling, it sure looked like a semi-formal CEO succession plan was being put in place.
The big question to ask is far different from a decade ago when Schultz was not running the company: Has Starbucks best days of growth peaked?
Schultz will not be departing the company entirely. He is set to become executive chairman, and the Starbucks press release shows that he will focus on retail innovation and will accelerate the growth of Starbucks ultra-premium retail formats. He also will lead the company’s social impact initiatives.
Some good news is that this change will not take place immediately, as the effective date will be April 3, 2017. Kevin Johnson, president and chief operating officer, will expand his responsibilities as president and chief executive officer. Johnson also has been a member of Starbucks’ board of directors for seven years.
Starbucks shares were up 0.9% going into Thursday’s closing bell. They were down roughly 4% at $56.45 in the after-hours session about 15 minutes after the close. Also in that 15 minutes, some 1.4 million shares traded hands.
Starbucks has a 52-week trading range of $50.84 to $62.54. Investors will want to pay attention to one trend here. The consensus analyst price target already has been on the decline, with Thomson Reuters showing a consensus analyst price target of $64.12 ahead of the Schultz departure. That consensus price target was $64.60 a month ago, $65.88 just 60 days ago and $66.21 some 90 days ago. That target was closer to $68 in July and slightly over $68 at the start of 2016.
One issue to consider is whether Starbucks still will be able to double its footprint in China. Some investors are going to be surprised to have a Schultz-less Starbucks. Others will think this was telegraphed in earlier management reshuffling.
It still seems more than fair to wonder if this marks the beginning of the end for the endless growth at Starbucks. After all, in many ways Schultz is to food and coffee what Steve Jobs was to Apple and tech. Starbucks had annual sales of $21.3 billion in 2016. That compares with $10.7 billion in 2010, $6.4 billion in 2005 and $2.2 billion in the year 2000.
Again, it just seems fair to wonder about the days of endless growth. At a minimum this represents the leadership change of a legend. Again, it has happened before — but this time looks real.
Schultz offered up a few words regarding his departure as CEO:
Starbucks consistently outperforms the retail industry because our stores, our offerings and the experiences our partners create make us a destination. The best evidence of the success of the core strategy driving our business is that we continue to deliver quarter after quarter of record, industry leading revenue, comp sales and profit growth, and that the newest classes of Starbucks stores continue to deliver record-breaking revenues, AUV’s and ROI — both in the U.S. and around the world.
As I focus on Starbucks next wave of retail innovation, I am delighted that Kevin Johnson — our current president, coo, a seven-year board member and my partner in running every facet of Starbucks business over the last two years — has agreed to assume the duties of Starbucks chief executive officer. This move ideally positions Starbucks to continue profitably growing our core business around the world into the future.