Starbucks (SBUX) founder and CEO Howard Schultz had his company release the list of 600 stores that coffee chain would close. It is a tombstone for the 12,000 company employees that Starbucks will push out of work and a monument to the firm’s arrogance.
At one point three years ago, the former CEO of Starbucks said it would eventually have 40,000 stores. It was a mad statement made by someone who thought his company was immune from the economy and competition. But, Starbucks kept added stores without caution.
Howard Schultz was the Starbucks chairman while most of the expansion was going on, but he certainly knew what was happening. Almost two years ago, he sent his executives a memo saying that Starbucks rapid growth was undermining the experience of the company’s customers. It appears he did nothing other than that until he sacked his CEO at the beginning of this year and returned as chief executive.
Starbucks is now trying to undo much of what it has done in the US over the last half decade. It will take a long time and cost both shareholders and employees a great deal. Schultz will still be rich and he can still blame his former underlings.
The real story of Starbucks problems is not that McDonald’s (MCD) and other companies came into the market as competitors. It is that the company sacrificed profits for growth and expansion for demand.
No one makes mistakes like a management drunk with on the feelings of their own invincibility.
Douglas A. McIntyre