Coverage: Starbucks CEO Schultz to step down in 2017

Starbucks chief executive officer Howard Schultz announced Thursday that he plans to hand over the reins of the company to his hand-picked successor next year, leading to speculation about the coffee retailer.

Charisse Jones of USA Today had the news:

Schultz will become the company’s executive chairman, concentrating on ramping up Starbucks Reserve Roasteries, a new premium experience that the company is betting on to boost growth worldwide, as well as the company’s well-known forays into community activism. Kevin Johnson, the company’s current president and COO will become the CEO, retaining the title of president.

“In all my years at Starbucks  I have never been more energized or exhilarated about the opportunities that lie ahead,’’ Schultz said in a conference call Thursday afternoon. “I’m not leaving the company. I’m here every single day, and I’m going to contribute to what I consider a significant growth opportunity. … But Kevin and the team are in charge.’’

It’s the second time since Schultz bought the Starbucks Coffee Company in the late 1980s that he has stepped down from the role of CEO. He resigned in 2000, only to return to the helm eight years later.

But “the differences between then and now couldn’t be greater,’’ he said,  noting that when he returned to the top job in 2008, Starbucks and other companies were riding out the dramatic financial downturn that was the Great Recession. “The management team at that time … just did not have the capability or experience to really navigate through that difficult period.” In recent years, he says, the company has assembled “the strongest leadership team in our history.”

Julie Jargon of The Wall Street Journal reported that no research has been done about the premium coffee strategy:

But the big bet is based solely on Mr. Schultz’s instinct that it is the right thing to do. “There was no research,” he said. Convincing his board and senior management team to create another brand wasn’t easy.

Mr. Schultz changed the way Americans drink coffee and even socialize, creating what he called a “third place” where people could gather outside home and work.

Starbucks showed Americans that coffee could be more ambitious than home-brewed Folgers. Mr. Schultz joined the original company as its marketing director in 1982 and, after a dispute with its then-owners, left in 1986 to open his own coffee shop, which he named Il Giornale. He later bought the Starbucks coffee business from the original owners, renamed his own shop Starbucks and went on to expand the brand to more than 25,000 stores across the globe.

Mr. Schultz said the move to opening high-end coffee shops marks the company’s biggest strategic change since it began opening shops overseas 20 years ago. Mr. Schultz said the approach would provide an experience that would entice consumers, who are increasingly shopping online, to leave their homes.

Victoria Craig and Suzanne O’Halloran of Fox Business note that the last time Schultz stepped down, the company’s stock fell 50 percent:

Still, some on Wall Street worry Starbucks could lose its way without Schultz at the helm. Rob Lutts, Cabot Wealth Management chief investment officer, during an appearance on the FOX Business Network’s ‘After the Bell’ worried the CEO’s decision to step back will be a “blow for all shareholders.” Shares of the company fell more than 3% on the news in extended trade Thursday.

Still, Schultz reassured investors the announcement, which comes about five months after changes among the company’s senior management team, was the final of its planned leadership changes.

While the news of Schultz’s departure was unexpected to Starbucks fans, it’s not the first time he’s vacated the CEO seat. In 2000 he departed, only to return eight years later after the company lost its way and shareholders saw the stock drop nearly 50%.

Since then, Starbucks shares have gained nearly 500% on a price basis as Schultz expanded the chain’s business strategy – experimenting with high-end retail stores and reserve coffee offerings – as well as café menu items that now include breakfast and tea.