Starbucks Unveils ‘Reinvention’ Strategy Tuesday on Investor Day

Starbucks is expected to unveil a reinvention plan on Tuesday as the coffee giant grapples with changing consumer behavior, outdated store designs and a U.S. union action

The strategy is the brainchild of outgoing interim CEO Howard Schultz, who returned to the top position in the spring after Kevin Johnson’s retirement. Schultz will hand over the reins to new CEO Laxman Narasimhan in April, but will remain to help execute the plan.

Starbucks said Tuesday’s investor day in Seattle will include presentations and a question-and-answer session with leadership, but it’s unclear whether Narasimhan will speak to investors for the first time.

Schultz’s new strategy aims to address how the coffee chain plans to drive growth in a post-pandemic world. The company’s stock is down 24% so far, pushing its market value to $102 billion. A slow recovery in China, pressure from unions in the United States and broader economic uncertainty have weighed on the stock, but Wall Street’s approval of the reinvention plan could breathe new life into the stock.

In August, Schultz told investors the plan will address “increasing efficiency” in American cafes, changing consumer behavior in the wake of the pandemic. Customers are increasingly ordering their coffee via their phones or drive-thru lanes rather than sitting in cafes. Three quarters of drinks orders in the last quarter were cold drinks, mostly with expensive additives.

But the company is also trying to calm down baristas who have complained about being understaffed and feeling overworked. More than 230 corporate cafes in the US have voted to unionize under Workers United. The company, led by Schultz, has worked to curtail union support through efforts such as refusing to extend higher wages to union cafes and firing organizers.

Union pressure has eased in recent months, but Starbucks still struggles with high sales. According to The Wall Street Journal, a quarter of American baristas will leave their jobs within 90 days, compared to about 10% before the pandemic.

In addition, Wall Street expects an update on the company’s long-term outlook on Tuesday. In May, Starbucks suspended its fiscal 2022 forecast, citing lockdowns in China, investments in its U.S. employees and high inflation.

The company’s previous long-term forecast projected adjusted earnings per share growth of 10% to 12%, revenue growth of 8% to 10% and global same-store revenue growth of 4% to 5%. Barclays analyst Jeffrey Bernstein wrote in a note to clients that he believes most investors would prefer the company lower its outlook modestly so that it can consistently exceed expectations and raise its forecast.

In the last quarter, Starbucks reported global same-store sales growth of 3%, driven by strong domestic demand. But Covid-19 restrictions in China have hammered home sales growth in that market, the second largest.

Tuesday’s investor day kicks off at 10:30 a.m. and ends at 6:00 p.m. ET.