Home Markets Starbucks will unveil a “reinvention” strategy at an investor day on Tuesday.

Starbucks will unveil a “reinvention” strategy at an investor day on Tuesday.

by SuperiorInvest

Starbucks CEO Howard Schultz in New York.

Steven Ferdman | Getty Images

Starbucks is expected to unveil a turnaround plan on Tuesday as the coffee giant grapples with changing consumer behavior, outdated store design and pressure from U.S. unions.

The strategy is the brainchild of outgoing interim CEO Howard Schultz, who returned to the top job in the spring following the retirement of Kevin Johnson. Schultz passes the reins to incoming CEO Laxman Narasimhan in April but he will stick around to help carry out the plan.

Starbucks said Tuesday’s investor day in Seattle will include presentations and meetings with management, but it’s unclear if Narasimhan will speak to investors for the first time.

Schultz’s new strategy is to address how the coffee chain plans to manage growth in a post-pandemic world. The company’s stock fell 24% year-to-date, pulling its market value down to $102 billion. A sluggish recovery in China, pressure from the union in the United States and broader economic uncertainty have weighed on stocks, but Wall Street’s approval of the turnaround plan could boost stocks.

In August, Schultz told investors that the plan would address “increasing efficiency” in U.S. coffee shops as consumer behavior changes as a result of the pandemic. Customers are increasingly ordering coffee from their phones or from drive-thru lanes instead of sitting in coffee shops. Three-quarters of drink orders in the last quarter were cold drinks, usually with expensive add-ons.

But the company is also trying to appease baristas who have complained about being understaffed and feeling overworked. More than 230 company-owned coffee shops in the U.S. have voted to unionize under Workers United. The Schultz-led company is working to curb union support efforts such as the refusal to extend higher wages to union cafeterias and the organizers of the shooting.

Union pressure has eased in recent months, but Starbucks still struggles with high turnover. A quarter of US baristas leave their jobs within 90 days, up from about 10% before the pandemic, according to The Wall Street Journal.

In addition, Wall Street expects an update on the company’s long-term outlook on Tuesday. In May, Starbucks suspended its forecast for fiscal 2022, citing the quarantine in China, investment in its US workforce and high inflation.

The company’s previous long-term forecast called for adjusted EPS growth of 10% to 12%, revenue growth of 8% to 10% and global same-store sales growth of 4% to 5%. Barclays analyst Jeffrey Bernstein wrote in a note to clients that he believes most investors would prefer the company cut its outlook slightly so it can consistently beat expectations and raise its forecast.

This was reported by Starbucks in the last quarter global same-store sales growth of 3%, supported by strong domestic demand. But COVID-19 restrictions in China have dented same-store sales growth in the second-largest market.

Tuesday’s investor day is scheduled to begin at 10:30 a.m. and end at 6:00 p.m. ET.

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