This year has been filled with transition and turmoil at Starbucks. But don’t tell that to Wall Street.
Despite negative publicity in 2018 that stemmed from the arrests of two black customers in a Philadelphia store in April, worries about more competition from Dunkin’ and McDonald’s and the retirement of its iconic leader Howard Schultz, shares of Starbucks are up more than 15% this year and are not far from an all-time high.
Starbucks (SBUX) CEO Kevin Johnson has had to make some tough decisions that appear to be paying off.
Johnson was widely praised for how Starbucks handled the aftermath of the Philadelphia incident. He personally apologized and vowed to do better. Starbucks ultimately decided to close more than 8,000 stores for a few hours in late May for racial bias training.
In late June, shortly after Schultz said he would step down as executive chairman, Starbucks announced it would shutter 150 underperforming US stores this year – triple the usual amount of annual closures.
Johnson had to make some bold moves quickly
Shares of Starbucks fell more than 9% on that news – and the stock continued to slide. It hit a 52-week low in late June.
That brought back painful memories of when Schultz last took a break from Starbucks. He stepped down as CEO in 2000 but wound up coming back as CEO in 2008 after sales started to slump and the stock tanked.
Schultz eventually helped lead a big comeback for Starbucks with aggressive moves into China and other overseas markets.
Johnson took over as CEO in April 2017, but it wasn’t until Schultz decided to step down as executive chairman this year that Johnson truly had the spotlight to himself. And he was quickly thrust into crisis mode.
But Johnson was vindicated after Starbucks reported earnings and revenue that topped forecasts for both the third and fourth quarter in July and November.
Sales in the company’s two biggest markets – the United States and China – are rebounding. The company’s bet on mobile ordering and payments have been a hit, too. Mobile now accounts for nearly 15% of all transactions in US stores.
A new global licensing deal with Nestle to make and sell Starbucks-branded coffees and teas has been praised by analysts. Starbucks also continues to expand internationally. It finally opened its first location in Italy in September.
Even activist investor Bill Ackman seems pleased. His fund recently bought a $900 million stake in Starbucks but is not pushing for any major changes, saying he’s pleased with the actions Johnson has taken.
So it seems that Starbucks is in good hands with Johnson.
It helps that he also has a pretty potent management team behind him, most notably Rosalind Brewer, the former CEO of Walmart’s (WMT) Sam’s Club division. She joined as COO of Starbucks in September 2017.
With the US economy in solid shape, unemployment at a nearly 50-year low and wages rising, consumers seem willing to spend at multiple places for their coffee.
That means Starbucks can thrive even as its competitors are also doing well.