Starbucks interim CEO Howard Schultz needs to do a better job by embracing a union movement that is infiltrating his stores, even if it hurts him, U.S. Labor Secretary Marty Walsh suggests.
“I think they’re going to have to invest in all of their workforce – they can’t just not invest in a dozen stores that are organized, it’s not a good business model,” Walsh said on Yahoo Finance Live (video above). “By investing in employees, I commend him for that and for investing in their salaries. I would recommend that the stores they organize sit down and talk to them. Ignoring or not talking doesn’t solve problems. There could be a real partnership to help make Starbucks very successful. company. “
Schultz, who has taken over for the third time as Starbucks CEO as the company seeks a new CEO, said this week that Starbucks will invest more than $ 200 million in improving working conditions in its stores – and warned that Starbucks-backed stores can do not receive the same benefits.
“Compare any union contract in our sector with a list of salaries and benefits that we’ve been constantly expanding for decades, and a union contract won’t even come close to what Starbucks offers,” Schultz said in a call for earnings. “We do not have equal freedom to make these improvements in locations that have a union or where a union organization is underway. Partners in these stores will receive salary increases announced on October 21, but federal law prohibits us from promising new salaries and benefits in stores that are And according to the law, we can’t make one-sided changes in union-owned stores. Where Starbucks has to get involved in collective bargaining, we will negotiate in good faith. Starbucks will not favor or discriminate against any partner based on union issues. “
The company’s final quarter highlights the pressure it is under on several fronts – from troubled workers to food inflation to weak sales in China.
Operating profit margins fell in all Starbucks business segments, led by a decline of 520 basis points internationally on an annual basis. Overseas sales were under severe pressure from a 23% drop in same-store sales in China amid increased quarantine related to COVID-19.
Earnings are in line with analysts ’forecasts, and the company has withdrawn its guidelines for year-round profit.
Wall Street has generally taken a cautious stance on Starbucks shares after earnings.
“Stocks require a little patience, but the reward could be there,” Jefferies analyst Andy Barish said. “As Starbucks’ partner and customer experience is being redesigned, we believe the next few quarters will be challenging, but we are setting the stage for re-growth in F23 when the new CEO joins after Schultz’s six-month interim status.”
Brian Sozzi is the editor – in – chief and leader at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and so on LinkedIn.
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