Starbucks has been doing great since Howard Schultz stepped down and handed the reins of the company to CEO Kevin Johnson.
Shares of Starbucks hit an all-time high Monday and are up more than 20% since his departure.
Under Johnson and COO Rosalind Brewer, who joined Starbucks in September 2017 after a stint as the head of Walmart’s Sam’s Club unit, Starbucks has successfully expanded in China, and it boosted its mobile offerings.
Starbucks said in its latest earnings report that it continues to grow in China, even as that nation’s economy slows down in the wake of trade tension with the United States.
Apple may be having a problem selling pricey iPhones in China, but expensive coffees and teas don’t seem to be too rich a luxury for Chinese consumers just yet.
In its most recent quarter, Starbucks reported same-store sales growth of 1% in China and total sales growth of 18% as the company continues to add more stores.
China still a big, growing market for Starbucks
Johnson isn’t worried about any potential slowdown in consumer spending in the near-term.
“We remain bullish on our path in China and the growth that lies ahead. We are playing the long game in China,” he told analysts during a conference call last month.
Then there’s mobile. Starbucks has done a tremendous job getting people to download its app, and order and pay for lattes and Frappuccinos before going to a store.
Starbucks said at the end of its last fiscal year in November that 14% of its US transactions were done via mobile. To put that into context, rival Dunkin’ announced last week that mobile orders made up just 3% of its transactions.
“Starbucks has done an amazing job with technology. The app really separates them from the competition as we move more toward a cashless society,” said Brad Cohen, chief equity strategist at North Star Investment Management. His firm owns shares of Starbucks in separately managed accounts for clients.
The company also is aggressively going after consumers who want to have coffee delivered. Starbucks has a partnership with UberEats in the United States and Alibaba in China.
The Alibaba deal helped lead to a solid increase in transactions in Beijing and Shanghai, Wells Fargo analyst Bonnie Herzog noted in a report after the company’s latest earnings release.
Life without Schultz 2.0
Of course, it’s still not clear how Starbucks will do over the long haul now that Schultz has ostensibly left for good to pursue political ambitions.
Schultz, a legend in business circles, not only helped build Starbucks into the juggernaut that it is today, but he had to come back in 2008 and help resurrect the company after it stumbled following his departure as CEO in 2000.
Upon his return, he made the decision to scale back — both on the number of stores the company was opening as well as the amount of products, such as fresh breakfast sandwiches. He helped the stock price rebound.
But the company now seems to be doing just fine without him. And it also seems unlikely that any bad press from a possible presidential run would hurt the stock for the long haul.
Sure, Schultz may alienate some liberals who feel that a presidential run could jeopardize the chances of the eventual Democratic candidate for president. But the company has often courted controversy.
Starbucks weathered some bad press in 2015 when the company asked baristas to write the words “Race Together” on coffee cups. And it faced a far more serious issue in April 2018 when two black men were arrested in a Philadelphia Starbucks.
Johnson did a media blitz to apologize and also shut down Starbucks stores on May 29 so that employees could get racial bias training.
Despite many negative comments about Starbucks on social media and even some calls for boycotts in the wake of the incident, it’s clear that customers haven’t shied away from the company.
The strong sales growth and record high stock price are proof of that — and that has more do with Johnson in the past year than Schultz.
