Starbucks dumps CEO, shares blast off

Coffee chain replaces CEO Jim Donald with Chairman Howard Schultz; plans to close underperforming stores. Shares rise 9 percent in after-hours trade.


SEATTLE (AP) -- Starbucks Corp. said Monday it is returning its chairman, Howard Schultz, to the chief executive's job to lead a major restructuring initiative, replacing CEO Jim Donald.

The move, coupled with plans to open new U.S. stores at a slower pace, comes as the world's largest chain of coffee houses has seen its stock plummet 50 percent over the last year amid declining traffic in its domestic stores.

Starbucks' announcement after regular markets closed sent the company's shares up $1.67, or 9 percent, in after-hours trading. The shares had gained 27 cents to $18.38 in the regular session.



Starbucks (SBUX, Fortune 500) said the leadership shuffle is part of a series of other initiatives include closing U.S. stores that aren't performing well, introducing new products and store designs, and improving training for baristas.

The company said it plans to take some of the capital originally intended for U.S. store growth and use it to accelerate its international expansion.

Schultz said he is returning to the CEO role "for the long term" and that his agenda will also include streamlining the company's management.

Schultz previously served as CEO from 1987 to 2000.

Donald had been CEO since March 2005, when he was promoted from president of the company's North American division to replace Orin Smith, who retired.

The world's largest chain of coffee houses has struggled in recent months as consumers have cut back on spending amid declining home values and higher fuel prices. Meanwhile, competitors like Dunkin' Donuts and McDonald's Corp (MCD, Fortune 500). have cut into Starbucks' customer base by launching their own lines of gourmet coffee.

"We must address the challenges we face and know what has to be done," Schultz said in a written statement.

Some analysts have questioned whether the company has saturated certain markets as it opens an average of six stores a day.

Starbucks has more than 15,000 stores worldwide and has stuck to an ambitious long-term goal of having 40,000, but in November it announced a slight scaling back of U.S. store openings, among other moves aimed at improving operations.

The company said then that it plans to open 2,500 stores this fiscal year, 1,600 of them in the United States.