Updated from Dec. 1 with analysts' comments
Wall Street traders may be scared about what life will be like for Starbucks (SBUX) without Howard Schultz as CEO, but they should chill out a bit.
Schultz, 63, will step down effective April 3, 2017, the global coffee powerhouse said Thursday, just days ahead of its annual meeting with investors.
The visionary leader of Starbucks, who was CEO from 1987 to 2000 and then again from 2008 until now, will assume the role of Executive Chairman of Starbucks, shifting his focus to innovation, design and development of the chain's high-end roastery concept. Taking over as CEO will be current Starbucks President and Chief Operating Officer, long-time board member and Schultz confidant Kevin Johnson.
"Kevin has been a wise and supportive resource for me [through the years]," Schultz told analysts on a conference call, adding that Johnson is "better prepared" to be the CEO of Starbucks going forward given his "skillsets."
Shares of Starbucks fell as much as 3.5% on the news, as investors were likely surprised by the timing of the announcement. But as TheStreet has reported, the news of one of the most influential CEOs in modern business deciding to step away from the day to operations of Starbucks shouldn't be a total shocker.
In effect, Schultz has been preparing investors for this very day by restructuring his management team. And as a result of that careful planning and a rich pipeline of product and technological innovation (as well as a likely wiser with age Schultz), Starbucks is in a much better position relative to when Schultz first left as CEO back in 2000.
Incoming Starbucks CEO Kevin Johnson
In July, Starbucks promoted Cliff Burrows from group president, U.S. and Americas to the role of group president, Siren Retail. In the newly created role, Burrows has responsibility for Starbucks' relatively new Reserve Roastery & Tasting Room and reserve-only store concepts.
Schultz's first signal to Wall Street of a succession plan arguably came in 2014, when he established the new position of chief operating officer.
Wall Street is concerned about life for Starbucks after Schultz
Not only did Schultz take pride in setting up a new management structure, but he has also been giving them more responsibility as the year has unfolded to ensure they hit the ground running in 2017. "[The transition] has been an evolutionary process, duties have been shifting over time," Johnson said. Added Schultz, "Most people at Starbucks are not that surprised today [about the news]."
Understanding Wall Street's concern with Starbucks' CEO succession plan is easy, nevertheless. When Schultz announced his return as CEO on January 1, 2008, the stock had plunged about 48% over the last year amid operational missteps and growing competition in the coffee business.
"The transition of Howard Schultz, the visionary at the core of Starbucks success over time, away from the CEO role is likely to create a sense of trepidation among investors, particularly given the eventual deterioration in the company's performance after he last stepped down from the position," said BMO Capital Markets analyst Andrew Strelzik in a note. "In addition, the timing of the announcement -- as Starbucks is experiencing a period of somewhat slower same store sales growth -- may create additional concern," Strelzik said, adding that overall he is "optimistic" on the leadership transition.
"I'm not leaving the company, I will be here every day -- but Kevin and the team are in charge," Schultz said in trying to further assure a nervous Wall Street.