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Starbucks investors mourn end of an era as Schultz exits

Reuters logo Reuters 6/5/2018 Aishwarya Venugopal

Video by CNBC

Starbucks shares fell more than 2 percent Tuesday as the departure of Howard Schultz, the architect of the company's move into a cafe format in the late 1980s, added to a run of worrying headlines for the world's biggest coffee chain.

Schultz, who took up the post of executive chairman after he stepped down as Chief Executive in 2017, will be stepping away from the company after nearly four decades of service to mull a "range of options".

The coffee maker has been battling competition from bigger rival JAB Holdings as well as independent coffee shops while also striving to fend off damage to its image from the arrest of two black men at a Philadelphia store in April.

"Investors did not anticipate Schultz (would) return to the CEO role to help improve domestic trends, but we view the resignation as an incremental negative for shares given the loss of a powerful mind," Cowen & Co analyst Andrew Charles wrote in a note. It is the "end of an era."

Starbucks shares have fallen nearly 4 percent since the decision by a Philadelphia store manager to call the police on April 12 sparked public outrage, leading it to shut 8,000 stores for anti-bias training sessions last month.

Schultz will depart on June 26, 26 years to the day since taking the company public, putting management firmly in the hands of Chief Executive Kevin Johnson and new Chairman Myron Ullman, who was previously the CEO of J.C. Penney.

"He was the founder, but more importantly, he was (Starbucks') compass," Morgan Stanley analyst John Glass wrote in a note to clients.

"He was the one who could and did step in when needed. Yes, SBUX has a deep bench and talented board ... but there was only one Howard."

Schultz's departure also fueled speculation that the liberal-leaning executive, known for his views on social issues ranging from gay marriage to government gridlock, could make a U.S. presidential bid.

"The surprise move amplifies the likelihood Schultz ultimately pursues public office," Cowen & Co's Charles wrote.

Separately, Starbucks on Tuesday announced the departure of independent director and former Pepsi North America chief Craig Weatherup from the board at the age of 73.


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