Starbucks Stock Faces Hit From Labor Fiasco

Unions representing Starbucks Inc. (NASDAQ: SBUX) workers are about to hit the coffee shop giant with strikes in major cities. It is among the many difficult challenges facing the company turnaround plans of new CEO Brian Niccol. It is also part of the legacy of former CEO Howard Schultz, who attacked workers with his hardline anti-union stance.

Effects of the Strike

Bad news for customers and investors.

Starbucks workers in Los Angeles, Chicago, and Seattle will walk out today. The company was founded and has its headquarters in Seattle. The five-day strike is likely to spread to other locations.

So many cities being involved shows that the action has national coordination. That bodes poorly for Starbucks in the future.

Workers United, representing Starbucks workers in over 500 stores, said the strike will include 10,000 baristas. In a released statement, the union said, “Since the February commitment, the company repeatedly pledged publicly that it intended to reach contracts by the end of the year, but it has yet to present workers with a serious economic proposal.” Given the language, this is not the only labor disruption the company may face. The current one is likely to hurt the company with large numbers of customers looking to stop into Starbucks for a holiday drink.

Niccol’s turnaround plans are on the ropes. He hopes that treating customers and employees better will reverse the trend of declining same-store sales. He also hopes to erase the labor trouble brought on by the aggressive anti-union practices of Schultz, who has been Starbucks CEO three times. It has left a bad taste in the mouths of many workers.

Niccol has only been in his job since September. Starbucks stock has decreased 9% over the past year, while the S&P 500 is 23% higher. In the most recently reported quarter, management said revenue fell 3% to $9.1 billion and same-store sales dropped 7%.

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