Howard Schultz, the founder and CEO-for-life of Starbucks (SBUX) is almost completely responsible for the catastrophe at his company. Two years ago, he pointed out the problems with the coffee chain’s approach. He waited another year to do anything about it. He has been the company’s largest shareholder since it was founder and was chairman for most of that time.
Schultz now gets to cast himself as a heroic figure, marching back into Starbucks (SBUX) to save it from incompetent management, like Arthur returning to England to restore justice in the land. Someone’s missteps cost 12,000 Starbucks employees their jobs. The SBUX public relations staff called the move "the next step in its multi-faceted plan to transform the company." In other words, Starbucks is in deep trouble and a number of people will pay with their jobs.
But, it was the overreaching ambition of Schultz that got the company into hot water. Starbucks did not need to build out stores at the rate that it did. Why did it add sales of music, breakfast sandwiches, and Apple (AAPL) iTunes? Schultz thought the premium coffee business could not be hurt by a recession. He was terribly wrong.
Aside from the poor souls being booted out of the company, the victims of the Schultz approach are the shareholders. The company has lost well over half of its value during the last two years.
Schultz can’t make himself look good now, no matter how hard he tries.
Douglas A. McIntyre
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