Wall Street Reacts To Schultz Exiting CEO Role At Starbucks

Starbucks Corporation SBUX shares are under pressure following the announcement that current CEO Howard Schultz will step down and hand over the reins to chief operations officer Kevin Johnson in April.

Schultz will now become executive chairman and will focus on the company’s emerging retail concepts including the Reserve Roastery and Reserve stores.

Voices From The Street

Wall Street, though surprised by the announcement, appeared generally of the view that the management change would not make much difference to the company’s approach to its near-term operations or its long-term strategy.

Though the investors will be disappointed, the Street believes Starbucks has the compelling fundamentals and sales drivers to steer the ship.

Following are the reaction of the various brokerages on the Starbucks’ announcement:

“We tend to dismiss comparisons to Mr. Schultz’s previous retirement as CEO (in 2000, returning in 2008) as we believe the brand, retail offering and customer engagement are all much more established today.”

Bernstein: Outperform, $65 Target Price

“While the timing was earlier than we expected, we believe the reorganization announcement in July 2016 set the stage for the leadership change.”

Analyst Sara Senatore elaborated that Johnson’s prior experience with tech companies will prove helpful as Starbucks continues to focus on its digital/loyalty platform.

Oppenheimer: Outperform, $65 Target Price

“While disappointing to see a visionary and founder step back from day-to-day operations, we believe the company is left in the capable hands of Mr. Johnson. And, we do not believe Mr. Schultz would step away from daily operations without feeling the same way.”

Deutsche Bank: Hold, $59 Target Price

“SBUX’s historical performances (sales, earnings, stock) remain the envy of nearly all consumer companies, but its impressive and successful run has not been without some softer periods, offering us a moment of pause, given these changes.”

Analyst Brett Levy said it is never easy for Johnson to step in to the shoes of a cult executive like Schultz. This creates additional uncertainty amid continuing industry-wide challenges that slowed down the company’s earnings and sales.

Stephens: Equal Weight, $58 Target Price

Analyst Will Slabaugh thinks investors are likely to be concerned, given that Schultz has the most impressive track record of any CEO in the industry. But, he said he does not anticipate a major shift in business.