Starbucks Has a Share Price Problem
As Starbucks battles to keep unions out of its stores, its stock price is in trouble as well.
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As Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) battles to keep unions out of its stores, it faces another hurdle. Its stock price is in trouble.
Starbucks has battled the unions for over a year. Howard Schultz, who took the company from very small to huge, based on store count and revenue, returned recently. He and the board thought he was a better solution than his predecessor to repair growth trouble. Problems multiplied, certainly with workers, rather than getting better. (Customers are abandoning these 25 brands.)
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Schultz was hauled before Congress for what some politicians considered a litany of sins. He had undermined the organizing of unions, fired one major union organizer (for being late to work several times–maybe) and Starbucks has been officially branded as a union buster by the National Labor Relations Board.
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The share price of Starbucks is up 4% this year, against a 16% increase in the Nasdaq. Why? Earnings have been reasonable. Revenue rose 8% to $8.7 billion in the most recently reported quarter. Net income rose 4% to $855 million. Investors may be worried about a slowing economy. Of course, they may be worrying about the rising costs of ingredients Starbucks uses in its food and beverages and whether those can be passed along to customers.
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The reasons for the share price problem are muddy. However, investors can never turn away from the fact that, at food retailers that pay modest hourly wages, a union’s success will squeeze margins. This potentially extends to companies like Walmart and McDonald’s. But those two do not have that problem today.
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The more unionized workers Starbucks has, the more pressure that will be put on the stock. There is always a chance that battles with labor lead to boycotts.
The share price problem at Starbucks is not out of the woods.
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
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A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
