Starbucks CEO defends wage hikes as inventory falls 7% on its weak outlook

Kevin Johnson, CEO, Starbucks

Scott Mlyn | CNBC

Starbucks CEO Kevin Johnson defended the espresso chain’s plans to hike wages for baristas at least twice subsequent yr, saying that the transfer will assist the corporate achieve market share.

Traders are much less assured within the plan, sending shares down 7% in Friday morning buying and selling. Thursday afternoon, the corporate reported its fiscal fourth-quarter earnings and shared its fiscal 2022 outlook, which included a weaker-than-expected forecast for its full-year earnings. Starbucks is anticipating its GAAP earnings per share to shrink by 4% and adjusted earnings per share to rise by not less than 10%, under Wall Road’s expectations of 15% progress.

Stifel downgraded the inventory Friday, citing inflationary pressures and investments, just like the pay hikes. Starbucks introduced the plan to lift wages on Wednesday. By summer season 2022, its pay ground will probably be $15 an hour, with a median hourly wage of $17 an hour, up from the present common of $14.

“It is higher to do that funding now as buyer mobility is rising, and we imagine it is the appropriate strategic wager to take,” Johnson stated on CNBC’s “Squawk on the Street.”

He stated that the espresso chain needs to ensure that it is gaining market share as shoppers depart their houses for his or her every day espresso. Different restaurant corporations like Domino’s Pizza and McDonald’s have needed to shorten hours or shutter eating rooms to deal with understaffing, placing stress on gross sales and doubtlessly dropping some clients.

Johnson additionally stated gaining market share will enable the corporate to extend its working revenue.

Together with Friday’s losses, shares of Starbucks have fallen roughly 2% this yr, giving it a market worth of $124 billion. | Starbucks CEO defends wage hikes as inventory falls 7% on its weak outlook


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