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Starbucks (NASDAQ: SBUX) may consider itself a "third place" (after the home and the workplace) for people, but it should place first in the minds of those looking for a quality investment.
Investors would do well to consider it, particularly now that chairman Howard Schultz is stepping away from the company to pursue other interests (many expect a run for president), and there is uncertainty swirling around the coffeehouse because of it.
Image source: Starbucks.
Gone for good
Schultz left the company once before, and the business cratered because of overexpansion at a time when it was reeling from the recession. After stepping back in, he righted the ship and created a global force for premium coffee.
Shares of Starbucks, which had tumbled 50% in the year before his return, have soared over 450% in the years since.
Whether you're a Starbucks fan or not (I'm in the latter camp), you can't ignore Schultz' genius in creating the modern coffeehouse concept. His departure may be the reason for investor concern over whether Starbucks can continue to effectively grow. But having both Kevin Johnson as CEO -- a position he took over last year -- and Mike Ullman succeeding Schultz as chairman should put investors' minds at ease.
Steady hands on the tiller
It was Johnson who became the face of Starbucks' response to the public relations nightmare that followed the controversial arrest of two black men at a Philadelphia branch. Johnson took responsibility for the incident, apologized, and made good on his promise to help ensure there wouldn't be a recurrence by closing all his stores for an afternoon of racial bias training.
That seems indicative of good leadership and not simply trying to pass the blame onto someone else.
Ullman is a giant in the retail industry, and his prowess in having pulled J.C. Penney (NYSE: JCP) back from the brink of bankruptcy is impressive. He is not adverse to completely undoing set policy if he doesn't see it being right for the company. Once he took control of the failing department store chain, he reversed nearly every action prior CEO Ron Johnson had put in place, which set the retailer on a path to recovery.
Image source: Starbucks.
Taking premium to a new level
Starbucks isn't in nearly as sad a state as J.C. Penney had been. But U.S. comparable-store sales growth at the coffee chain has been lackluster, with just 2% growth in the last two quarters following only 3% growth across all of 2017. Starbucks also lowered its long-term earnings growth target from a range of 15% to 20%, down to 12%.