Starbucks CEO Howard Schultz to step aside, stay as chairman

In this Wednesday, March 23, 2016, file photo, Starbucks CEO Howard Schultz walks in front of a photo of Starbucks baristas, at the coffee company’s annual shareholders meeting in Seattle. Starbucks announced Thursday, Dec. 1, 2016, that Schultz is stepping down from the coffee chain that he joined more than 30 years ago, and that Kevin Johnson will become chief executive as of April 3, 2017. Schultz will become executive chairman on that date to focus on innovation and social impact activities, among other things.
AP FILE PHOTO

NEW YORK—Howard Schultz, the charismatic head of Starbucks, will step aside as CEO next year, turning a major page in the history of a company he built into an iconic global brand.

Having led the company’s rise from a sleepy Seattle chain into the world’s biggest coffee business, Schultz will stay on as executive chairman and chairman of the board, the coffee giant said Thursday in a surprise announcement that sent the share price down after hours.

The change will take effect April 3.

Schultz will hand the reins to president and chief operating officer Kevin Johnson, a close friend who was tapped as number two at the company in 2015 and has been a Starbucks board member since 2009.

The move comes as the firm faces an increasingly crowded market for higher-quality retail coffee shops and seeks to bolster foot traffic.

Schultz will devote his time to developing high-end superpremium coffee shops around the world known as Starbucks Reserve Roasteries, the company said in a statement.

READ: ‘Exotic’ Starbucks Reserve is here

It plans to open 20 to 30 outlets in the coming years.

“I will be here full-time,” Schultz told a conference call with analysts. “I am not leaving the company, I am here day to day.”

New initiative

Schultz, who joined Starbucks in 1982 as a sales manager, is considered the driving force behind the worldwide success of the coffee chain begun in 1971.

He briefly left in 1986 following a dispute with the then-owners to set up his own company, Il Giornale, before buying out their shares in 1987 with support from local small investors.

Starbucks now operates more than 25,000 stores in more than 75 countries, with a turnover of around $20 billion in fiscal year 2015.

Schultz, 63, told The Wall Street Journal on Thursday that the company’s new initiative would help maintain in-person sales as consumers increasingly move to online shopping rather than visiting malls, where many Starbucks outlets are located.

“I don’t have any time horizon that would limit my engagement in the company,” he said. “This gives me the entrepreneurial freedom to do what I think I do best.”

Incoming CEO Johnson is a tech industry veteran, having spent 16 years at Microsoft and five as CEO of the networking equipment company Juniper Networks.

Prior to the announcement, the company’s share price closed up 0.9 percent in New York but fell 3.35 percent in after-hours trading to $56.55 at 2250 GMT.

Socially responsible

Schultz is outspoken about social issues such as gay rights and gun violence and has worked to make Starbucks socially responsible.

READ: Starbucks cups to come with political message

The company increased the base salaries of its US employees by 5 percent in July after they expressed concerns about the effect new software enabling customers to place orders on their smartphones would have on jobs.

The company has also opened outlets in poor areas and supported initiatives against racism.

Schultz is close to the Democratic former presidential candidate Hillary Clinton, whom he supported during the election campaign. But he has dismissed persistent rumors he would run for office himself. Many, including some of his friends, have said he may run for president in four years.

He steps down as Starbucks goes ahead with plans to double the number of its stores in China over five years.

But it has run afoul of European regulators, one of several major US companies the European Commission accused of having received illegal tax benefits from Ireland.

In October 2015, the commission also ordered Starbucks to repay up to 30 million euros ($33 million) in the Netherlands, saying tax breaks there amounted to unlawful state aid.

The Dutch authorities are fighting the decision.

Schultz has sought to step away from running Starbucks before.

The Wall Street darling became the company’s chairman in 2000 before returning as chief executive in 2008 with the onset of the global financial crisis.

Shares worth $10 at that time climbed to a record high of more than $60 by the end of last year.