Starbucks Brings Back Schultz as CEO, Shares Jump

By Alice Turner
11:48, January 8th 2008

With the stock dropping and the competition breathing in its back head, Starbucks Coffee decided to bring back Howard Schultz as the company’s Chief Executive Officer. Schultz, founder of Starbucks and its current Chairman, will take back the CEO post from Jim Donald, with the goal of battling the weakening sales of the U.S. coffee shop chain.

Besides bringing back Schultz, Starbucks Coffee also plans to close some of its U.S. stores and slow down opening new ones as its stock dropped 50 percent over the last year amid declining traffic in its domestic stores. The Company’s slow decline came amidst slowing U.S. sales growth, soaring dairy prices, and competition from fast-food rivals such as McDonald's Corp.

By closing some of its stores and stopping the opening of new ones, Starbucks hopes to improve performance at existing locations by "re-igniting the emotional attachment with customers."

After Starbucks announced that Schultz is CEO again, the company’s shares rose 6.6 percent in extended trade.

"I am enthusiastic about returning to the role of chief executive officer for the long term," Schultz said in a statement.

The largest coffeehouse company in the world which got its name after the first mate in the novel Moby-Dick also plans to expand faster outside the United States and also increase the profitability of those locations. To achieve that, the company intends to redeploy capital earmarked for U.S. store growth to the international business.

“I'm here to tell you that just as we created this problem, we will fix it,'' the 54-year-old CEO said in a conference call yesterday.

Starbucks shares went up $1.65 to $20.03 at 7:59 p.m. in late U.S. trading after the announcement, adding $1.2 billion to its stock market value.

Howard Schultz was appointed as CEO over the company which then was just Seattle chain in 1987. During his tenure which ended in 2000, Starbucks’ shares jumped almost 13-fold and the company expanded from a few Seattle espresso stands to 10,684 U.S. locations as of Sept. 30, among 15,000 worldwide in 43 countries.