Starbucks CEO Kevin Johnson admitted Wednesday that the coffee chain has seen growth slow over the past two to three years and that it will take discipline to get things back on track.
“I think we’ve got to be much more disciplined in setting our priorities,” Johnson said on CNBC’s “Squawk on the Street” on Wednesday. “We’ve got to be more data driven in terms of how we’re allocating resources and tuning the model. We have to be more agile as innovators. We set the stage for that transition to a company that is focused on growth and scale.”
Late Tuesday, Starbucks cut its forecast for fiscal third-quarter same-store sales growth. Starbucks shares fell in after-hours trading Tuesday on that news and plans to scale back store growth, and continued to sink Wednesday. The stock was down more than 10 percent midafternoon, hitting a 52-week low.
Starbucks said it would slow the number of licensed stores it opens and close underperforming company-operated locations in densely populated areas. The company historically closes about 50 of these stores annually, however in 2019 it expects to shutter about 150 stores.
Johnson said Starbucks drives more shareholder value with its company-owned locations than its licensed stores.
In addition, Starbucks expects to return about $25 billion in cash to shareholders in the form of share buybacks and dividends through 2020. This is a $10 billion increase from the forecast the company set last November. Starbucks will hike its quarterly dividend by 20 percent.
“We see last night’s pivot to more measured unit growth in the U.S., a greater focus on G&A cost containment, and increased capital return targets as evidence that [Starbucks’] management is addressing the new point in its growth curve with a more appropriate strategy,” John Zolidis, president of Quo Vadis Capital, wrote in a research note Wednesday.
“Clearly the performance we’ve delivered has not met my expectations,” Johnson said. “It hasn’t met our shareholder expectations. I’m accountable to fix it. Now, I said that yesterday and I believe that. I believe the plan we put out yesterday and shared with our investors is the right plan for the company. Now, Starbucks has been through these ebbs and flows before and we always get through them. We’re going to get through this one, as well.”
In the most recent quarter, Starbucks topped same-store sales expectations, but traffic remained flat. The beat had been viewed positively as it followed five straight quarters of misses.