Services

National Employee Morale Day: Starbucks Sets Layoffs Under $11 Million CEO

Douglas A. McIntyre

Published: September 25, 2018 6:20 am

Last Updated: January 11, 2020 5:24 pm

Starbucks Corp. (NASDAQ: SBUX) needs to be restructured, refined and refocused. The management decision to reorganize the coffee company will come with large layoffs. Company CEO and president, Kevin Johnson, will not be among those who will depart. However, many Starbucks problems have occurred over the course of his tenure, and last year he was paid $11.5 million for his leadership.

Several media outlets report that Johnson sent a memo to some Starbucks workers in which he wrote he needs better teams to carry the company forward. Of course, this means that the people he has in place were improperly deployed originally.

Johnson has every reason to grasp at solutions as sales slump. Starbucks shares are up only 3% in the past year, against a 17% rise in the S&P 500. A look back at the stock’s two-year and five-year performance shows it trailed the market for those periods as well.

With the most recent Starbucks earnings announcement, for the period that ended July 1, Johnson said:

Starbucks record performance in Q3 reflects successful execution against our strategic growth priorities and our commitment to deliver predictable, sustainable growth at scale -and meaningful increases in long-term value- for our shareholders. We remain confident in our global growth strategies, in the sustainability of our leadership position around all things coffee and tea and in our leadership teams around the world to navigate our next phase of growth.

The comments were a bit of an exaggeration. Comparable store sales worldwide rose only 1%, and that was driven by a 3% increase in what customers paid, which Starbucks management labels “increase in average ticket price.” While revenue rose 11.5% to $6.3 billion, the period of impressive growth is gone, at least for the time being.

Most of what Starbucks management has said since the earnings announcement is about green stores and maple pecan lattes, as well as the launch of its first store in Italy, which has a long-time reputation for good coffee.

The next time Johnson’s plans will be explained in detail will be at the company’s investor day on December 13. By then, management will know how well, or not, Starbucks has done in the current quarter. Johnson likely will have released the details of his restructuring plan and how many people will be out of work because of them. He will, however, keep his job and await another big payday for 2018.