Starbucks’ union battle pushes Wall Street away
Michelle Eisen, a barista at the Buffalo, NY, Elmwood Starbucks location, the first Starbuck location to unionize, helps out the local Starbucks Workers United, employees of a local Starbucks, as they gather at a local union hall to cast votes to unionize or not, Wednesday, Feb. 16, 2022, in Mesa, Ariz.
Ross D. Franklin | AP
When Starbucks announced Howard Schultz would return to the company as interim CEO, investors cheered. His first tenure as chief executive turned the company into a global brand and his second, years later, revived both the business and its stock price.
But the applause has since quieted as Wall Street forecasts that the coffee giant will keep spending money in its effort to stem a unionization tide.
The stock has slid 12% since Schultz took the reins on April 4, dragging the company’s market value down to $92.2 billion. The S&P 500 fell just 2% in the same time period. Wedbush Securities and Citi Research both downgraded shares to “neutral” ratings in April, citing the labor situation and other concerns.
The recent tension follows months of build-up.
In late August, company-owned Starbucks cafes in Buffalo, New York, petitioned the National Labor Relations Board for a union election. Since then, more than 200 of the coffee chain’s locations have filed the paperwork to unionize. To date, 24 stores have voted to unionize under Workers United, with only two locations so far voting against.
To be sure, these locations represent a small portion of Starbucks’ nearly 9,000 company-owned U.S. cafes. But analysts and industry experts are concerned Schultz isn’t taking a frugal approach to curb the union push.
“It’s hard to avoid the reality of the situation – that addressable problems in the near term are probably much more expensive and time consuming to bear results,” J.P. Morgan analyst John Ivankoe wrote in a note to clients on April 11.
Pay and benefits
In October, when Kevin Johnson was CEO, the company announced two wage hikes for all of its baristas that would take effect this year and bring its average wage up to $17 per hour. In late March, Starbucks Workers United warned Schultz could leverage those improved benefits in an attempt to curb the union’s campaign.
Starbucks did not respond to a request for comment at the time, but Schultz appeared to confirm the strategy on his first day back on the job when he announced that Starbucks would suspend all stock buybacks to invest back into the company’s people and cafes.
In meetings with U.S. store leaders last week, Schultz said the company was weighing improved benefits for all its workers, but that federal labor law precludes the chain from giving higher pay or making other changes to the terms of employment for unionized workers. Labor experts say that’s technically true, but Starbucks can still ask the union if those baristas want the enhanced benefits.
Higher benefits could dissuade baristas from organizing, but Wall Street is worried that strategy may come at too high a…