Starbucks' Schultz on his execution challengeNovember 4, 2008: 1:55 PM ET
I waited 45 minutes to vote this morning. A breeze, I guess, compared to those people standing in line for hours. At 8 a.m., I walked into my Starbucks on Manhattan's Upper West Side for a free tall brewed coffee -- the retailer's Election Day promotion -- and walked straight to the counter. No line. The store filled 20 minutes later. Obviously, Americans are running about one hour late today. For a good cause that Starbucks (SBUX), to the company's credit, is encouraging.
As for Starbucks' own turnaround, I asked CEO Howard Schultz how that's going when I met with him last Wednesday in New Orleans. He paused and replied, "I don't use that word, by the way." Schultz prefers the term "transformational agenda," which seems to me like jargon. But whatever you call the challenge -- turnaround, transformation, blueprint for change -- the boss insists that the shift in strategy is "now complete." This shift revolves around closing 600 U.S. stores, prioritizing urban locations, and refocusing on what Schultz calls "our core value, humanity."
To promote that humanity -- which he believes is essential to making companies relevant in such tough and cynical times -- Starbucks is mounting a variety of efforts including a new partnersip with Bono's Product RED, which helps raise money to stop AIDS in Africa. See my post yesterday for details on Starbucks' programs with RED and Costco (COST).
"Now we're moving to the execution stage," Schultz said. He said he doesn't anticipate more store closings or any reductions in Starbucks' pricing. (The latter, he contends, would damage Starbucks' premium brand equity.) When I pointed out that execution typically is the hardest thing -- which, more often than strategic error, trips up CEOs -- he agreed. "It's always the hardest," he admitted. "But if you execute against the wrong strategy, you're going to hit the wall very quickly. We have the right strategy for the right time."
Despite Starbucks' troubles -- declining same-store sales, its first quarterly loss since its 1992 IPO, a stock that's down 50% in the past 12 months, and an intensifying rivalry with McDonald's (MCD) -- Schultz seems very comfortable back in the CEO role. When he fired his predecessor, Jim Donald, last January, some people expected him to retake the reins for a while but eventually find a replacement. That doesn't seem to be on his "transformational agenda." After our one-on-one, in a general press session, a reporter asked Schultz if he plans to remain in the CEO position. "Without question," he replied. At that instant, he chuckled, as if the truth were self-evident.