Key points:
- Third-time returning CEO Howard Schultz suspends share buyback program
- SBUX shares dropped around 4% in Monday premarket trading
- Schultz plans on investing back into the business after a difficult few years
Investors generally react kindly to the idea of a stock repurchase program. A return in value for shareholders, an increase in EPS, and an investor-focused framework are all the sum of a buyback scheme. Today, Starbucks (NASDAQ: SBUX) investors sold off on news that the previously arranged stock repurchase program was to be suspended, on visionary grounds from none other than Howard Schultz, the company’s third-time returning CEO. Currently trading at a premarket loss of just under 4%, the move erases much of last week’s gains.
While buybacks provide value for shareholders, Schultz has undertaken an internal approach to filling in company cracks by choosing to invest more in the brand’s people and its stores; working towards long-term strength at a time when economic hurdles have created an uncertain environment; including supply chain and pandemic difficulties as well as mounting political unrest.
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Schultz has been responsible for the company’s largest period of growth since the coffee company started to gain traction. Taking over in 1987, his four-year reign saw growth from just 11 stores to more than 28,000 across 77 global markets; it’s no surprise that shares jumped around 5% when his return was announced last month.
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Schultz’s repurchase suspension demonstrates a shift in momentum, and a head-strong approach to repairing wounds inflicted over the last year or so. Investors shouldn’t cling to the lack of return, but rather the optimization of Starbucks moving forward, in order to benefit from increasing long-term value by undertaking a company-focused growth plan.