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Schultz Back as Starbucks CEO

The coffee giant looks to regain its mojo by handing the reins back to its founder.
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Updated from 5:11 p.m. EST



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is hoping to return to its glory days by bringing back the man who created the company and brewed it to success.

Howard Schultz will add to his current position as chairman to also become chief executive of the java giant, replacing Jim Donald, who is leaving the company.

Schultz had served as CEO from 1987 to 2000, helping to grow the company from a humble chain of 100 coffee shops to about 15,000 stores today.

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But with more stores came shrinking demand, especially with increased competition from


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and Dunkin' Donuts.

And now overexpansion is the central focus of Starbucks' problems.

As CEO, Schultz said he plans to reform the chain by scaling back the number of new locations in the U.S. while shuttering underperforming stores.

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"Just as we created this problem, we will fix it," he said in a conference call with analysts after the closing bell on Monday.

At the same time, Schultz said he will push ahead with international expansion, shifting capital from domestic growth and putting it where he sees greater potential.

Shares for Starbucks were jumping 9%, or $1.66, to $20.04 in after-hours trading.

The coffee chain behemoth has been struggling with a slowing economy that has hurt many other retailers, as well as higher commodities prices, which Starbucks has offset by hiking prices on its beverages.

But Schultz also placed much blame squarely on the company itself. Starbucks' share price has sunk nearly 50% since the beginning of the year.

"I think it's one thing to look at the economy and commodities and use that as a buffer, but I strongly believe that much of the problems we have is self-induced," he said.

Rapid growth has led to unwieldy bureaucracy within the company, which Schultz said he plans to eliminate. He noted that Starbucks has lost its focus on its customers, allowing competitors to swoop in and replicate its business model.

Last February, Schultz put out a memo in which he spelled out much of what he thought had gone wrong with the company.

"Over the past 10 years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead (sic) to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand," he wrote.

On Monday, he reiterated some of those same criticisms, adding that Starbucks must work harder to distinguish itself from its competitors.

"I am not satisfied with where the business has been with our relationship with our customer," Schultz said.

Although he declined to provide specifics, saying that he would prefer to wait until the company's next earnings release on Jan. 30, Schultz said the company will now zero in on the customer experience by offering new products and more store design elements.

He noted that much of the innovation that has taken place so far has been an extension of what the company already offers to its customers.

"When you've succeeded for so long, you go a little soft," he said.

Schultz said that changes need to be made to order to re-energize the company.

"We are at that point," he said.