Starbucks Stock Edges Higher Ahead of New CEO Narasimhan's First Investor Day

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Starbucks  (SBUX)  shares edged higher Tuesday ahead of the group’s much-anticipated investor day presentation, the first under new CEO Laxman Narasimhan, later in the session.

Starbucks, which forecast long-term earnings growth of between 10% and 12% during and investor presentation last December, will soon be under new leadership following the appointment of Narasimhan as CEO earlier this month. The former CEO of Reckitt, will replace Howard Schultz in April of next year, but will work with the group founder as part of a multi-month transition.

Analysts are looking for details with respect to the coffee chain’s plans to boost in-store investments with equipment upgrades and broader refurbishments, as well its effort to retain staff and manage a growing drive to unionize its 15,000 U.S. locations. 

Narasimhan’s key task, with the help of Schultz, will be to repair an increasingly antagonistic relationship with union-supporting employees around the country.

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Last month, the Workers United union representing employees at around 200 stores organized walk-outs in Seattle and Kansas City over safety and food standards concerns and urged the National Labor Relations Board to allow union elections.

Starbucks halted union elections in August, however, telling the NLRB that Workers United agents were manipulating votes.

In a move to placate existing workers, Starbucks raised its hourly wage threshold to $17 an hour, with higher rates for tenured staff, but excluded those tied to a union from the pay increases. 

The wage investments followed a springtime move by Schultz to freeze share buybacks and redirect cash towards investing more into our people and our stores”. The interim CEO said it was “only way to create long-term value for all stakeholders.”

Rising input costs, however, as well as enhanced pay packages, trimmed Starbuck’s second quarter margins, which fell by 400 basis points to 15.9%, partly offsetting improvements in same-store sales. Starbucks posted better-than-expected June quarter revenues of $8.15 billion, with a bottom line of 84 cents per share. 

Starbucks shares were marked 0.2% higher in pre-market trading to indicate an opening bell price of $89.24 each.

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