Starbucks Must Address Failures, Says Former CEO After Weak Quarter

Starbucks’ Former leader has offered some sage words of wisdom to his former company after the coffee giant reported its first drop in quarterly revenue in recent years. 

Disappointing First Quarter

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Starbucks has had to face up to a disappointing earnings call after the company’s quarterly report was released this week. Now, a former leader of the coffee chain has given some blunt, but wise advice.

Former CEO Steps In

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Former chairman and CEO Howard Schulz took to LinkedIn over the weekend, shortly after Starbucks released its weak earnings and sales numbers for the first quarter of 2024. He encouraged Seattle company to “own” their shortcomings and avoid making excuses.

“Own the Shortcomings”

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“At any company that misses badly, there must be contrition and renewed focus and discipline on the core,” Chulz wrote. “Own the shortcoming without the slightest semblance of an excuse.”

Focus on Customers and Coffee

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He also urged company leaders to fixate on the coffee and the customer, rather than obsessing over sales figures and other data.

The Stores Are the Answer

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“The stores require a maniacal focus on the customer experience, through the eyes of a merchant,” he wrote. “The answer does not lie in data, but in the stores.”

2% Revenue Lost

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His advice may be just what Starbucks needs to begin bouncing back from the 2% drop in revenue that accounts for Starbucks franchises nationwide. It is the first quarterly revenue to fall since the beginning of the Covid-19 pandemic in 2020. 

Plummeting on the Stock market

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To add to that, company share value has plummeted by 17% since the company made its quarterly report available to the public. 

20% Loss Since January

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Altogether Starbucks’ shares have dropped by 20% since the beginning of the year. Its market value has now fallen to $82.8 billion.

New CEO Steps Up

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The new CEO, Laxman Narasimhan, who was appointed as Schulz’s successor last spring, seems to be shifting his focus to stores. He is now working a monthly half-shift in major stores around the country.

A Long Legacy

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While Schulz is no longer actively employed with the company, he built a long and significant legacy with Starbucks. He worked as Chairman and CEO from 1986 to 2000, then again from 2008 to 2017, and was again appointed as interim CEO from 2022 to 2023.

Largest Individual Shareholder

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Though he has only recently stepped down from the company, he owned $1.5 billion worth of shares with the company at the close of 2023, making him Starbucks’s largest individual shareholder. It’s no surprise he is still heavily invested in company success – and its failures.

Not the First Time

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Schulz also kept elements of his advice light and positive, adding that he had also seen his share of disappointing earnings calls as CEO.

“It’s Inevitable”

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“I, too, experienced some quarters of financial disappointment in my four-plus decades leading Starbucks,” he added. “Ask any public company CEO and they will tell you that “a miss” is virtually inevitable, even at the best-managed, fastest-growing firms.”

“Starbucks’ Will Recover”

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“Starbucks will recover—of that, I am certain,” he added on a firmly positive note. “Starbucks created an industry that did not exist. The brand is incredibly resilient, but it’s clearly not business as usual.”

The Company Responds

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Starbucks also publicly acknowledged Schulz’s LinkedIn advice, releasing a public statement that read: “We always appreciate Howard’s perspective. The challenges and opportunities he highlights are the ones we are focused on. And like Howard, we are confident in Starbucks’ long-term success.”

Experts Aren’t So Sure

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But experts and market analysts aren’t all as confident as Starbucks and Schulz. In fact, due to the coffee chains’ ubiquitous presence in markets around the world, many see Starbucks’ performance as a chief indicator of future market trends.

Sign of the Times?

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Some are now speculating as to whether Starbucks’ underperformance is a sign of specific problems with the company, or general problems for the US economy.

“Cautious Consumers”

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Narasimhan himself attributed the results in part to the generally “cautious consumer” attitude when it comes to current spending habits.  

“There Are Issues At the Company”

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“Consumers have less demand for expensive coffee,” said Albert Wang, a finance professor at Auburn University. “There are also issues at the company.”

Political Problems Arise

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One of these issues is the decrease in Starbucks’ foot traffic worldwide. Some analysts have speculated that the ongoing conflict in Gaza may be a cause for flagging consumer spending, as social media users have called for boycotts of the brand due to its stance on the issue.

The post Starbucks Must Address Failures, Says Former CEO After Weak Quarterfirst appeared on Liberty & Wealth.

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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.

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