Starbucks CEO Could Face Tough Questions Over ‘Re-Founding’

The CEO of Starbucks could reportedly face tough questions from investors at the coffee chain’s upcoming meeting.

This week marks Starbucks’ investor day, the first such event since Laxman Narasimhan became chief executive, as Bloomberg News reported Wednesday (Nov. 1).

“Laxman has talked about ‘re-founding’ the business,” Sharon Zackfia, an analyst at William Blair & Co. told Bloomberg. “What does that mean?”

She added that concerns about the health of consumers have grown since Starbucks gave its last guidance more than a year ago. As Bloomberg noted, investors will likely want to know whether the company can still reach 7% to 9% comparable sales growth amid upheaval in China and a shaky consumer climate.

While consumer spending has remained strong, there are signs of weariness. A consumer confidence survey from last month indicated that higher-income consumers might embrace strategies such as cutting back and trading down, which could translate to cheaper coffee or fewer Starbucks runs.

Under the leadership of former CEO Howard Schultz, Starbucks last year announced its Reinvention plan, which involves a major investment in “purpose-built store concepts,” tailoring store designs to a variety of uses and occasions.

“The company sees tremendous opportunity to further diversify and expand formats across cafes, pick up, delivery-only and drive-thru only locations,” the chain stated at the time. “The diversified portfolio of stores and customer channels such as Mobile Order & Pay will enable Starbucks to further meet its customers whenever and wherever they want.”

If Narasimhan has a different take on Reinvention, “this would be the time to address it,” TD Cowen analyst Andrew Charles said, per Bloomberg.

However, it’s likely that Narasimhan — mentored by Schultz before becoming CEO — is “very much aligned” with the founder’s vision, said Sarah Henry, a portfolio manager at Logan Capital.

Narasimhan has also spoken of easing tensions between between baristas and management, which have apparently dampened the company’s expansion plans, with employee turnover rates threatening its goal of 18,400 stores by 2030.

Starbucks has promised to spend $1 billion to increase wages and benefits, while some baristas are working to unionize to obtain better demands, with workers organizing at hundreds of stores in recent years.