Starbucks reinstates Schultz

Tue., Jan. 8, 2008

Associated Press The Spokesman-Review

SEATTLE – Starbucks Corp. said Monday it is bringing back its chairman and former chief executive, Howard Schultz, to lead a major restructuring initiative, replacing CEO Jim Donald.

The move, coupled with plans to open new U.S. stores at a slower pace, comes as the world’s largest chain of coffee houses has seen its stock plummet 50 percent over the last year amid declining traffic in its domestic stores.

Starbucks shares closed up 27 cents, or 1.5 percent, to $18.38, then rose $1.31 in after-hours trading.

In a statement released before the markets closed for regular trading, Starbucks said the leadership shuffle is part of a series of steps the company is taking to boost shareholder value.

Other initiatives include closing U.S. stores that aren’t performing well, introducing new products and store designs, and improving training for baristas.

Schultz said he is returning to the CEO role “for the long term” and that his agenda will also include streamlining the company’s management and accelerating expansion overseas.

Schultz previously served as CEO from 1987 to 2000.

Donald had been CEO since March 2005, when he was promoted from president of the company’s North American division to replace Orin Smith, who retired.

The world’s largest chain of coffee houses has struggled in recent months as consumers have cut back on spending amid declining home values and higher fuel prices. Meanwhile, competitors like Dunkin’ Donuts and McDonald’s Corp. have cut into Starbucks’ customer base by launching their own lines of gourmet coffee.

“We must address the challenges we face and know what has to be done,” Schultz said in a statement the company released after the markets closed for regular trading.

Some analysts have questioned whether the company has saturated certain markets as it opens an average of six stores a day.

Starbucks has stuck to an ambitious long-term goal of having 40,000 stores worldwide, but in November it announced a slight scaling back of U.S. store openings, among other moves aimed at improving operations.

Starbucks has more than 15,000 stores worldwide and plans to open 2,500 stores this fiscal year, 1,600 of them in the United States – about 100 fewer than it originally planned.

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