Starbucks Announces Record Second Quarter Sales, Improves Worker Benefits

Starbucks’ sales hit record highs in its fiscal second quarter, but its profits were hit by rising labor costs.

And those costs are expected to rise even more in the coming months as Starbucks introduces new wage increases and other benefits to improve the employee experience __ and stave off a growing unionization drive.

The Seattle coffee company __ which welcomed former CEO Howard Schultz last month as interim chief __ said its revenue rose 15% to a record $7.6 billion during her 13-week term, which ended April 3. That’s in line with Wall Street estimates, according to analysts polled by FactSet.

But net profit rose only 2% to $674 million. Starbucks’ adjusted earnings of 59 cents per share were below analysts’ forecast of 60 cents.

Starbucks noted that it faced higher labor costs during the quarter. Last fall, the company announced a $1 billion investment in employee wages and benefits with the goal of raising wages for American workers to at least $15 an hour by this summer.

On Tuesday, after a series of meetings with workers across the country, Schultz unveiled $200 million in additional investments in worker compensation and training. This includes increases for employees who have been with the company for at least two years as well as a near doubling of training time __ from 11 p.m. to 40 p.m. __ for new baristas and shift supervisors. Starbucks is also reintroducing a coffee mastery program for employees and considering other perks like increased sick leave.

But there’s a catch: Workers who voted to unionize or stores that called for union elections won’t be eligible for the enhanced benefits announced Tuesday. Instead, Schultz said U.S. labor law requires stores to negotiate their own contracts with Starbucks.

“We don’t have the same freedom to make these improvements to sites that have a union,” Schultz said.

Starbucks Workers United, the group behind the organizing effort, disagrees and said it filed charges with the National Labor Relations Board against Starbucks on Tuesday. The group said the company violated labor laws for threatening to exclude unionized stores from receiving the new benefits.

“These benefits, including those we have been asking for since the start of our campaign, are a response to our organizing efforts and we should celebrate the hard work that the partners who stood up to Howard Schultz’s bullying have put in to let this happen,” the band said. said Tuesday in a statement.

On Tuesday, workers at more than 250 U.S. stores filed petitions with the labor board to hold union elections, union organizers said. At least 50 of those stores voted to unionize with Workers United, a branch of the Service Employees International Union.

Schultz opposes unionization. But he noted that employees are under “tremendous pressure” due to high customer demand and pandemic-related changes to the business, including an increase in mobile and drive-thru orders. Stores are built to serve hot drinks, for example, but 80% of US orders are now cold drinks.

“These young people have very valid concerns given today’s uncertainty and economic instability. They look around and they see the burgeoning labor movement as a possible remedy for how they feel,” Schultz said. “But compare any union contract in our industry to the ever-growing list of wages and benefits we’ve offered our employees for decades, and the union contract won’t even come close to what Starbucks offers.”

Schultz said the new investments will improve employee recruitment and retention. Starbucks is also planning additional changes that it will outline at an investor meeting in September, including adding credit and debit card tipping to its stores and accelerating the rollout of new ovens and coffee machines. espresso.

“If we want to exceed our customers’ expectations, we have to exceed our employees’ expectations,” Schultz said.

Schultz bought the Starbucks chain in 1987, ran it until 2000, then ran it again between 2008 and 2017. He returned as interim CEO and joined the Starbucks board in April after former CEO Kevin Johnson announced his retirement.

Schultz said the board is interviewing candidates and plans to name its new CEO in the fall. After training that person, Schultz said he plans to leave the company __ but not the board __ in early 2023.

Investors seemed happy to find him. Starbucks shares rose 5% in after-hours trading on Tuesday.

Schultz said customer demand for Starbucks remains strong despite several price increases over the past year.

Starbucks same-store sales __ or sales at stores open for at least one year __ rose 7% globally in the second quarter, beating Wall Street’s estimate of 6.5%. This was largely due to strong activity in North America, where same-store sales increased 12%.

International same-store sales fell 8%, primarily due to coronavirus restrictions in China. China, which is Starbucks’ largest market outside the United States, saw same-store sales drop 23% in the quarter, the company said. About a third of stores in China were closed or only offered mobile ordering at the end of the second quarter.