Starbucks’ CEO Succession Hits the Right Notes

Starbucks’ CEO Succession Hits the Right Notes

Starbucks CEO Howard Schultz, whom the New York Times describes as “the Steve Jobs of coffee,” announced on Thursday that he would step down as chief executive next spring, handing the reins to Kevin Johnson, currently the company’s president and a member of its board, as well as a good friend of Schultz’s:

Mr. Schultz, one of the most visible chief executives in the country, has made Starbucks a vocal part of the national conversation on issues like gun violence, gay rights, race relations, veterans rights and student debt. The succession will take place on April 3, and he will remain at the company as executive chairman, focusing on the company’s involvement in social causes and on growing Starbucks Reserve, the company’s new superpremium brand and chain of high-end stores.

News of the departure of a successful CEO, especially a visionary like Schultz, can have a significant impact on a company’s market value—indeed, when Schultz left the company for the first time in 2000, shares of Starbucks declined precipitously. The stock price dipped after this announcement, too, but quickly began to rebound, and several analysts told Reuters on Friday that they weren’t too concerned about Schultz’s departure having too many ill effects this time around:

“Howard can’t be in that position forever,” Morningstar analyst R.J. Hottovy told Reuters. Hottovy said the timing of the handoff made sense because the company had a strong management team and Johnson had more retail experience than the market was giving him credit for. …

“Johnson appears to have been an important behind-the-scenes contributor to Starbucks’ post-recession turnaround, and his background in technology should position him well,” Bernstein analyst Sara Senatore said in a research note. …

“Unlike the period surrounding Mr. Schultz’s previous departure, we believe the company is transitioning to a new CEO during a period of strength, with a solid macro-economic backdrop, a strong leadership team, and a robust pipeline of innovation in technology, food, beverages,” RBC Capital Markets analyst David Palmer wrote in a note.

A major factor in these analysts’ confidence is Schultz’s confidence in his successor, which he made a point of communicating clearly in his announcement, and which Johnson’s previous experience indicates is well deserved, as CNBC’s Sarah Whitten observes:

Schultz and Johnson have a solid working relationship, forged over the last decade, and the two co-authored an “ambitious five-year plan” that will drive sales throughout the company. As part of that plan, Johnson said the company will continue to develop its in-store and digital customer experiences globally and with its licensed partners as well as work to “crack the code on lunch,” a notoriously difficult venture for the company.

Schultz was quick to remind investors on Friday that he will still be part of the company, just in a different capacity, and that Johnson is the ideal candidate for CEO.

“He is managing the business. He’s managing the team. He’s setting the strategy. I’m here to help and support,” Schultz said. “There should be no misunderstanding whatsoever. And Kevin Johnson is well-equipped to take the company to the next level. And that’s going to be a wonderful opportunity for our shareholders.”