Kevin Johnson, CEO of Starbucks
Scott Millian | CNBC
Starbucks CEO Kevin Johnson has defended the coffee chain’s plans to raise barista wages at least twice next year, saying the move would help the company gain market share.
Investors are less confident in the plan, which sent shares down 7% in Friday morning trading. On Thursday afternoon, the company announced its fourth-quarter fiscal year earnings and shared its financial forecast for 2022, which included a weaker-than-expected forecast for its full-year earnings. Starbucks expects earnings per share on GAAP principles to shrink 4% and adjusted earnings per share to rise at least 10%, less than Wall Street’s forecast of 15% growth.
Stifel downgraded the stock on Friday, citing inflationary pressures and investments, such as wage increases. Starbucks announced a plan to raise wages on Wednesday. By summer 2022, the minimum wage will be $15 an hour, with an average hourly wage of $17 an hour, up from the current median of $14.
“This investment is best made now as clients become increasingly mobile, and we think it’s the right strategic bet,” Johnson said on CNBC’s “Squawk on the Street.”
He said the coffee chain wants to make sure it gains market share as consumers leave their homes for their daily coffee. Other restaurant companies such as Domino’s Pizza and McDonald’s have had to shorten business hours or close dining rooms to deal with staff shortages, pressure on sales and possibly the loss of some customers.
Johnson also said that gaining market share would allow the company to increase its operating income.
Including Friday’s losses, Starbucks shares are down about 2% this year, giving it a market value of $124 billion.