Starbucks CEO defends wage hikes as inventory falls 7% on its weak outlook

Starbucks CEO Kevin Johnson defended the espresso chain’s plans to hike wages for baristas at the very least twice subsequent yr, saying that the transfer will assist the corporate achieve market share.

Buyers are much less assured within the plan, sending shares down 7% in Friday morning buying and selling. Thursday afternoon, the corporate reported its fiscal fourth-quarter earnings and shared its fiscal 2022 outlook, which included a weaker-than-expected forecast for its full-year earnings. Starbucks is anticipating its GAAP earnings per share to shrink by 4% and adjusted earnings per share to rise by at the very least 10%, beneath Wall Avenue’s expectations of 15% development.

Stifel downgraded the inventory Friday, citing inflationary pressures and investments, just like the pay hikes. Starbucks introduced the plan to boost wages on Wednesday. By summer season 2022, its pay flooring can be $15 an hour, with a mean hourly wage of $17 an hour, up from the present common of $14.

“It is higher to do that funding now as buyer mobility is rising, and we consider it is the suitable strategic guess to take,” Johnson mentioned on CNBC’s “Squawk on the Avenue.”

He mentioned that the espresso chain needs to be sure that it is gaining market share as customers go away their properties for his or her every day espresso. Different restaurant firms like Domino’s Pizza and McDonald’s have needed to shorten hours or shutter eating rooms to deal with understaffing, placing stress on gross sales and probably dropping some clients.

Johnson additionally mentioned gaining market share will permit the corporate to extend its working earnings.

Together with Friday’s losses, shares of Starbucks have fallen roughly 2% this yr, giving it a market worth of $124 billion.