Howard Schultz Does the Unthinkable: Time to Sell Starbucks?

Andy Snyder|April 6, 2022

Editor’s Note: The last two weeks have been absolutely incredible for Manward. On March 28, we went live with Andy’s hit conversation with Buck Sexton. The response has been huge. It’s been so big, in fact, we’ve decided we need to pull the video offline sooner than expected. It goes away… potentially for good… in less than 48 hours. It’s now or never if you want to learn about a booming new market… one that HSBC says could explode by 2,400,000% in the next five years. Click here before the video goes offline.

---

Uh oh… there’s trouble at Starbucks.

Input prices are surging. It can’t find key ingredients. And workers – sorry, baristas – are looking to unionize.

Call in Mr. Schultz… the CEO savior who put the coffee chain on the map.

His first move on the job (which he’s held twice before) was a doozy.

Longtime readers surely know about our googly-eyed love for companies that buy back their own shares. Despite pessimism from the uninformed, share buybacks have been a leading – if not the leading – cause of share price appreciation since interest rates first plunged to zero more than a decade ago.

The idea behind a company buying back its own shares is simple…

It stirs demand for the stock and reduces the number of shares outstanding. If, for example, a company has 1,000 shares divvied up amongst its owners and suddenly buys back 500 of them, each share that remains is now worth twice as much.

The buyback surge on Wall Street works exactly the same way.

The anti-buyback crowd (including the fella in the White House) says buybacks are bad. They’re immoral. A company shouldn’t use its profits to make shareholders money… It should spend more on employees.

Those sound like the words of somebody who’s never run a company, right?

Shultz certainly isn’t dumb. He’s run a company before. In fact, he’s run Starbucks before – twice.

He knows how to get out of a jam.

Busting the Union

Remember how we said Starbucks employees are looking to unionize? It’s a big problem. The folks at several stores have already voted in favor of the idea.

“Sorry, I can’t make your tall mocha latte,” the high school dropout will say. “I’ve hit my union-mandated limit for the day. Another barista will be here to help you when she’s off her break.”

Shultz knows this is trouble.

As if price hikes weren’t hurting the company enough, increases in labor costs – with a simultaneous decline in productivity – will be damaging.

So the “once bitten, thrice shy” CEO has done the unthinkable.

“Starting immediately, we are suspending our share repurchasing program,” he wrote in a letter to Starbucks employees during his first day on the job this week. “This decision will allow us to invest more profit into our people and our stores – the only way to create long-term value for all stakeholders.”

And, of course, it will help slow the unionization push.

“See,” he’ll soon tell the angry assembled, “we’re doing all that we can for you. We’re not here just to make shareholders more money.”

“Well, heck. If that’s the case,” shareholders will say… “we’re outta here.”

Shares dropped nearly 5% on the news.

The Truth Behind the News

But should they have fallen? Or was Schultz just playing the game he’s so dutifully played all along?

Yes, Starbucks announced a $20 billion investment plan last fall… hoping to keep investors happy after sales and profits missed their mark.

But that plan included buybacks and dividends.

There was never any concrete spending benchmark for buybacks… and the new CEO said nothing about the company’s dividend this week. Slashing the 2% yield on this sinking ship would have been suicide.

Digging further (that’s why you come here, right?), we see it may just be a bunch of hot air frothing up this cup of burnt coffee.

Starbucks hasn’t materially reduced its share count since it embarked on a big buyback push more than two years ago. In the many months since, the count has been relatively flat – even rising at times.

and the media behind it – is trying to build.

If we were to believe them, we’d think that the money earmarked for buybacks – billions of it – was going straight into the tip jar of those angry baristas.

But it turns out it may just be a bit of smoke and mirrors.

Golly. Whodathunkit.

We wish Mr. Schultz the best of luck with his union fight.

It’s not looking pretty.

Note: The biggest thing Manward has ever done… closes at midnight ET tomorrow. If you haven’t tuned in to our huge interview with radio and TV sensation Buck Sexton, do so now before it goes away… and your access to the FREE ticker I reveal is gone for good.