By Dhirendra Tripathi
Investing.com – Starbucks Corporation (NASDAQ:SBUX) stock traded 5% higher in premarket Wednesday. The company said Kevin Johnson will step down as chief executive and former long-time CEO Howard Schultz will replace him, albeit on an interim basis as the coffee chain searches for a successor.
The stock also got a boost from J.P. Morgan’s upgrade to ‘overweight’ with a target of $101, up over 21% from its previous close. It cited attractive valuation as a reason for its optimism on the stock.
Johnson will vacate his position and that of board director, with effect from April 4, and will continue in an advisory role to the company through September.
The top-level change comes in at a time when the company is being accused of thwarting attempts to form unions at its various stores in the U.S while it undergoes pandemic-induced upheavals.
Workers United, an affiliate of the Service Employees International Union, has prevailed in six out of the seven unionization votes held at corporate-run Starbucks sites in recent months, establishing a labor foothold at the company. The group has petitioned to represent workers at over a hundred more Starbucks locations, Bloomberg said.
The company is facing soaring costs of raw materials, wages and logistics. Last month, it said its annual earnings per share will fall 4-6% compared to its previous estimate of no more than 4%. The cut in guidance followed after first quarter results fell short of estimates.
The company is raising its wages this year across the U.S. to $17 an hour, one among many retailers to be doing so in their struggle to retain staff.
It also faced a public outcry last month in China for raising coffee prices, the first time in over three years.
As of January 2, Starbucks had 34,317 stores worldwide. China accounted for more than one in seven of those.