Starbucks Corp’s SBUX-Q long-time former chief executive Howard Schultz announced on Monday the suspension of the company’s stock repurchasing program, as he returns this week to lead the global coffee chain for the third time.
Shares fell nearly 4 per cent in pre-market trading.
The suspension, effective immediately, will allow Starbucks to invest more in employees and stores, Schultz said in a letter to Starbucks workers, customers and shareholders.
The move comes as Starbucks faces a growing unionization of its U.S. work force. Employees at 10 U.S. Starbucks locations have voted in recent months to join Workers United, an affiliate of the Service Employees International Union.
Baristas at more than 170 U.S. locations have petitioned a federal labour board for union elections since August, when the union drive went public.
Starbucks announced last month that Schultz would take over as interim CEO, following the retirement of Kevin Johnson. Shares of the coffee chain shot up about 5 per cent on March 16, the day of the announcement.
By suspending share buybacks, Schultz is signalling that he wants to make bold moves and shift the company’s cash flow to invest in growth and employees as he tries to fend off unions, said Ivan Feinseth, chief investment officer of Tigress Financial Partners, which holds Starbucks stock in its clients’ accounts.
“You have to take the opportunity to invest money where it will get the best return on multiple levels both as a direct investment and to show what the company’s current focus is,” Feinseth said.
Schultz is practically synonymous with the company he took over in 1987. During his previous four decades as chief executive and chairman, the company grew from 11 stores to more than 28,000 in 77 markets worldwide, according to a news release.
Schultz said in the letter that he will travel in coming weeks to meet with employees.
“I am returning to the company to work with all of you to design that next Starbucks – an evolution of our company deep with purpose, where we each have agency and where we work together to create a positive impact in the world,” he wrote.
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