Starbucks’ Siren System plan

Starbucks this year rolled out its Siren System plan, which included updating its equipment to increase the pace of service at its stores, as the company turns to discounts and promotions to appeal to cost-conscious consumers.

The system was deployed across its U.S. company operated stores in the reported quarter, and Starbucks plans to have the equipment, such as a refit to its espresso machines, in less than 10% of its global stores by the end of year.

“We are focused on what we can control in a consumer environment that can be best described as complex,” CEO Laxman Narasimhan said on a post-earnings call.

Starbucks’ revenue

Starbucks’ operating margin fell 70 basis points in the third quarter, a sequentially smaller drop. Profit of 93 cents per share was in line with LSEG estimates.

“Quite possibly, investors are viewing this as not as bad as was feared potentially. We’re kind of impressed that they were able to open 526 new stores in the quarter,” said Greg Halter, director of research at Carnegie Investment Counsel.

Starbucks’ coming up with deals

U.S. fast-food chains have rolled out limited deals and offers to bring back to stores thrifty consumers increasingly looking to cook at home in the face of sticky inflation.

Known for its pricey lattes, Starbucks spent the summer offering uncharacteristic deals including bundled menus such as a coffee or tea paired with a butter croissant for $5 in June, as well as 50% off deals on Fridays in May.

Starbucks weak in China

In China, the company grappled with weak consumer spending and stiff competition from local coffee chains such as Luckin’ Coffee in a weak macroeconomic environment.

Still, same-store sales tumbled 14% in China, following an 11% drop in the second quarter. Sales in international markets also missed expectations, echoing results from McDonald’s and Domino’s.

Starbucks global sales down

Starbucks continued to face weakness in the Middle East, South Asia and some parts of Europe as a result of boycotts related to the war in Gaza.

The Seattle-based company reaffirmed its global and U.S. comparable sales in range of a low single-digit decline to flat, and annual profit in the range of flat to low-single digits.

The coffee chain also confirmed on a post-earnings call that Elliott Investment Management was a shareholder and talks with the activist investor had been “constructive”.

Stock update

Starbucks share price was down 22% this year. Though Starbucks shares were up 5% in extended trading after executives reaffirmed its annual forecasts. Starbucks’s share price closed at $75.93. It is up 3.86% in the last 3 months and down -25.24% in the last 12 months.

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As Schultz came back a third time to lead the global coffee chain, the director of the board also announced that the company will suspend its stock repurchasing program immediately. In a written statement, he mentioned, “this decision will allow us to invest more into our people and our stores — the only way to create long-term value for all stakeholders.”

Speaking of his vision for the company, he wrote, “Our vision is to once again reimagine a first-of-a-kind for-purpose company in which the value we create for each of us as partners, for each of us as customers, for our communities, for the planet, for shareholders — comes because our company is designed to share success with each of us and for the collective success of all our stakeholders.”

Starbucks ShareFall

Schultz’s return comes at a time when there has been rising discontent amongst the coffeechain’s workers across the US. There have been calls for unionizations and workers have asked for better work conditions and pay. He has been widely credited with growing Starbucks into a global coffee chain.

Late last year, in October, Starbucks informed its stakeholders that it will implement a $20 billion share repurchase and dividend program spread across three years, in order to return profits to investors.

However, shortly after Schultz’s announcement, Starbucks’ stock prices tumbled downward. Starbucks share prices were down almost four percent on Monday afternoon.

In a letter to employees, he asserted his commitment to the company and assured stakeholders that in the coming weeks he “will be traveling, along with our leaders, to connect with partners in our stores and manufacturing plants around the world to understand your thinking and ideas about how to build this next Starbucks.”

Analysts believe that the decision will lower earnings in fiscal 2023 by nearly two to three percent. Industry experts are of the opinion that by halting the buybacks Schultz is getting ready to invest more in the company he helped found, by fending off unions, and focusing more on employees and growth. In the letter, Schultz reiterated his commitment to the coffeechain and mentioned that he hoped everyone will work together “to create a positive impact in the world.”

Starbucks and Unionization

As workers call for unionization, most industry veterans believe that Schultz will work towards halting unionization.

Starbucks spokesman Reggie Borges, however, denied such claims and called attention to Schultz’s leadership style of prioritizing the company’s partners. He stated, “Historically, at any moment when he led the company, it’s always been partner-led. It should come as no surprise to anyone that on the first day of his role as CEO one of the first decisions he’s made is to choose to support his partners and invest in his partners.”

Baristas at over 150 US locations have petitioned the labor board for union elections. Senator Bernie Sanders of Vermont had even written to Schultz asking him to accept unionizing efforts. In his letter, he cited complaints received by the National Labor Relations Board, where workers complained of illegal surveillance and threats against union supporters.

Meanwhile, Starbucks has continually denied such claims and stated that it only took action against employees who violated store policies. In 2021, a store in Buffalo became the first one to unionize while hundred others await union votes.

During Schultz’s reign the company grew from 11 stores to over 28,000, with a presence in 77 markets. He was also instrumental in developing the rewards program for their customers. During his tenure, Starbucks stocks delivered a 21,000% return, since its IPO, to investors.

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