June 4, 2018 / 8:56 PM / in 5 months

Starbucks exec Schultz to step aside, mulling 'range of options'

LOS ANGELES/NEW YORK (Reuters) - Starbucks Corp (SBUX.O) Executive Chairman Howard Schultz is stepping away from the coffee chain he built into a global powerhouse, putting management firmly into the hands of Chief Executive Kevin Johnson, who had an office connected to the co-founder’s and regularly turned to Schultz in times of crisis.

Johnson faces a raft of challenges on the horizon. He is facing cooler growth in Starbucks’ dominant U.S. market and intense competition from rivals - ranging from high-end coffee shops to more affordable fast-food chains - as the company undertakes a massive expansion project in China.

While Johnson, a former technology executive, can turn to new Starbucks Chairman Myron Ullman and his decades of retail experience, the news left some investors questioning how the iconic coffee brand will evolve after the June 26 departure of Schultz, who has been a near-constant presence for nearly four decades and crafted the company’s inclusive culture.

“It removes a perceived leadership ‘safety net’ and creates a degree of uncertainty at a time when Starbucks faces a number of challenges,” said BMO Capital Markets analyst Andrew Strelzik.

The announcement also fuelled speculation that Schultz, 64, a liberal-leaning executive known for being outspoken on social issues ranging from gay marriage to government gridlock, will make a U.S. presidential bid.

“For two years, I have offered that Schultz will seek the 2020 Democratic presidential nomination. I still believe so,” said Douglas Kass, founder of hedge fund Seabreeze Partners Management Inc, who has a “short” position on Starbucks shares.

Schultz has repeatedly denied that he has political ambitions, but he appeared to be more open to the idea in an interview with CNN last week.

Asked specifically about a U.S. presidential run, Schultz said in a New York Times article on Monday: “I intend to think about a range of options, and that could include public service. But I’m a long way from making any decisions about the future.”

Starbucks declined to make Schultz or other Starbucks executives and board members available for comment.

FILE PHOTO: Starbucks Chief Executive Howard Schultz speaks during the company's annual shareholders meeting in Seattle, Washington March 18, 2015. REUTERS/David Ryder/File photo

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Schultz, who introduced many inexpensive drip coffee-drinking Americans to lattes and other espresso drinks, took the Seattle-based company from 11 cafes to more than 28,000 in 77 countries and brewing up outsized gains for many investors.

He stepped down as CEO in 2000, but retook the helm in 2008 after the U.S. housing crisis sent Starbucks, which had been on an expansion tear, spiralling.

Schultz, who closed hundreds of stores and turned the company around, remained hands-on after transferring the CEO job to Johnson in April 2017.

He was heavily involved in steering the company through an anti-bias training programme last month.

That effort came after a Starbucks cafe manager’s call to Philadelphia police in April resulted in the arrests of two black men who were waiting for a friend - leading to protests and accusations of racial profiling at the chain.

Schultz was also overseeing the opening of upscale Reserve stores and massive Roastery showrooms as part of an effort to shore up Starbucks’ coffee leadership.

“He’s leaving when it’s still in its nascent form,” Bernstein analyst Sara Senatore said of that project, known as Siren Retail.

“The last few times he’s tried to step away, he’s ended up stepping back in,” Tony Scherrer, director of research at Smead Capital Management, said.

Schultz will resign from Starbucks’ board and be named chairman emeritus on June 26, the company said.

Starbucks shares were down 0.8 percent at $56.64 in extended trading.

Reporting by Tamara Mathias in Bengaluru, Lisa Baertlein in Los Angeles and Jennifer Ablan in New York; editing by Anil D'Silva and G Crosse

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