Commentary

As Sales And Profits Surge, Starbucks Names A Techie COO

As it rolls out ambitious plans for Mobile Order & Pay and ramps ups plans for mobile delivery, Starbucks yesterday named technology industry veteran Kevin Johnson, who has been a director of the company for six years, to be its president and COO starting March 1. Profits were up 82% on a global comparable store sales rise of 5% for the quarter ending Dec. 28. 

“Our re-imagined in-store holiday experience that included a vastly expanded assortment of Starbucks Cards, new holiday food, beverage and merchandise offerings and the opportunity to win ‘Starbucks for Life’ resonated powerfully with our customers and drove both increased traffic and tremendous excitement in our stores and around the Starbucks brand,” Starbucks’ CEO Howard Schultz said in a statement announcing the results.

Johnson will assume the duties of COO Troy Alstead, as well as the president title currently held by Schultz. The company announced earlier this month that Alstead — a 23-year veteran of Starbucks who also served for many years as its CFO — was taking an indefinite leave of absence, effective March 1, “to spend more time with his family.”

“Having Troy leave the company is no doubt a significant loss,” Schultz said in response to an analyst’s question during a conference call yesterday, reports GeekWire’s Todd Bishop. “But we are so fortunate to have, in a sense, a No. 1 draft choice in Kevin Johnson.” A transcript of the entire call is available here on Seeking Alpha.

Schultz tells Reuters’ Lisa Baertlein that he would be “wide open” to Alstead’s return and that Johnson's appointment was “about adding depth to the company's management bench,” not finding someone to succeed him. “I've never been more committed,” Schultz says. “I'm all in.”

“Schultz said he had been speaking with Johnson, who had offered the company particularly helpful advice on its digital and mobile efforts, about taking a job with Starbucks for about a year. He called the timing of Alstead's request for a sabbatical in December ‘coincidental,’” Baertlein writes.

“Starbucks executives have said that the company must adapt to the shift to online purchasing for everything from food to clothing by finding new digital strategies to help consumers engage with the Starbucks brand and buy its products,” report Ilan Brat and Tess Stynes in the Wall Street Journal.

“The choice speaks to Schultz’s conviction that mobile and digital platforms will drive the company’s future growth,” Asit Sharma, an analyst at the Motley Fool, tells Bloomberg’s Craig Giammona. “Johnson brings deep technology and supply-chain expertise to Starbucks’ C-level.”

Johnson served as CEO of Juniper Networks from September 2008 through December 2013. Previously, he was president of the Platforms Division at Microsoft after having held a number of senior executive positions during his 16 years at the company. 

“Johnson will lead the company’s global operating businesses across its three regions, as well as the supply chain, information technology, and mobile and digital platforms,” writes Lisa Jennings for Nation’s Restaurant News, with Cliff Burrows, group president, U.S., Americas and Teavana, and John Culver, group president, China/Asia Pacific, Channel Development and Emerging Brands reporting to him.

The company “showed some promise from its early push into mobile payments,” observes John Kell on Fortune.com, with shoppers “[loading] a record $1.6 billion on Starbucks cards during the quarter, a huge 17% jump from last year. That indicates that the company’s investments in mobile have paid off, and it is showing up in sales.” 

But Starbucks’ designs are hardly limited to getting its geek on. 

“The company has an ambitious goal to nearly double sales and operating income over the next five years, and to that end, has begun acting on several strategies to make its stores more productive in the afternoons and evenings and increase their convenience to consumers,” Stephanie Strom points out in the New York Times.

“Last fall, it announced it would begin wine and beer sales, previously tested in the Chicago area, in about a quarter of its 12,000 stores, and more of the food being made through its purchase of La Boulange in 2012 is geared toward light lunch and dinner meals,” Strom continues.

There were nearly 12 million more customer transactions at Starbucks outlets globally last year over the previous one. And “one in seven Americans received a Starbucks gift card this holiday season, up from one in eight a year earlier,” Forbes’ Samantha Sharf reports.

“Starbucks performance in Q1 was exceptional by any standard or metric,” Schultz told analysts in his opening remarks yesterday. With the numbers backing him up, the company’s shares rose more than 4% in after-hours trading.

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