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Starbucks’ (SBUX) investors have been rewarded with an annual rate of return in the upper teens if shares were acquired at the end of August 1995 and never sold. It is a very different story if shares were acquired at the end of August.

• 2005 – annual rate of return drops to the low teens.
• 2015 – annual rate of return drops to the high single digits.
• 2020 – annual rate of return drops to the low single digits.
• 2023 – annual rate of return is a negative low single digits.

These returns are AFTER, in an act of desperation, SBUX’s August 13, 2024 announcement of the appointment of a new Chairman and CEO effective September 9; SBUX’s share price surged ~$20 with investors thinking SBUX had found its Savior.

Before I go any further, please keep in mind that SBUX has had five CEOs, with founder Howard Schultz taking the reins three times, since going public in 1992! It doesn’t instill a lot of confidence when the top of the pyramid (former-CEO Laxman Narasimhan) lasted only 17 months.

The new Chairman and CEO’s compensation package includes an annual salary of $1.6 million, the opportunity to earn up to $23 million worth of share-based bonuses each year, as well as a cash bonus worth nearly $3.6 million depending on the company’s performance. The contract, if paid out in full, is ~$113.2 million.

Oh! And that’s not all.

This individual does not need to relocate. He will have a ‘small remote office’ at his home in Newport Beach, California, and will not be required to permanently relocate to SBUX’s Seattle offices more than 1,000 miles away. How is he going to commute from California to Seattle you wonder? Fear not. SBUX is giving him a corporate jet to use to commute back and forth.

SBUX’s new Chairman and CEO may have been successful at Chipotle (CMG) but even if he does not experience the same success at SBUX, he should still make out just fine financially.

I like to invest in companies where the majority shareholders and Board members’ interests align with mine. In my opinion, this compensation package does not align with that of retail investors.

I suspect SBUX has insisted that its Head Office rank and file employees return to the office several days a week…none of this work from home 100% of the time. I don’t know anyone who works at SBUX’s Head Office but I suspect the new CEO’s work arrangements have ruffled a few feathers.

Even if SBUX’s Head Office employees have no qualms about the new CEO’s work from home arrangements, you can bet your bottom dollar that the store employees who are looking to unionize have an opinion about this arrangement and compensation package. I think it will be really difficult for SBUX management to push back on the rank and file employees’ wage increase demands when they bring on a new CEO who could earn ~$113.2 million over the term of his contract.

Now, let’s talk about SBUX’s coffee and food products.

Prior to retirement I would go to a SBUX store on the very rare occasion not by choice but because a coworker insisted on going there. I never liked their coffee and found myself having to add extra sugar and cream just to make the coffee tolerable.

In a segment of the late great comedian John Pinette’s stand up routine, he talks about having to go to Dunkin Donuts to get a coffee so he can drink coffee while standing in line to get a SBUX coffee. How times have changed! Before retirement (pre-COVID) I remember lines at various SBUX locations. Some of those SBUX locations are now closed and those that still exist do not have the same long line ups.

Following my retirement in 2016, I have not purchased anything from SBUX. I can’t imagine I am the only consumer who has wondered how this company can charge so much for their products.

This is a company that charges a fortune for consumable products many people can ill afford. Who in their right mind spends $8.20 on one customized grande latte? The stuff doesn’t even stay in you for long.

God knows. I try. I really, really try to keep an open mind before analyzing a company. Within minutes of analyzing SBUX, however, I concluded I would have to be a fool to invest in this company. In the universe of companies in which to invest, what would remotely possess me to invest in it (new CEO or not)?

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