Starbucks Takes Major Step Toward Diversity

Starbucks is making changes to its hiring policies, linking executive compensation to improvements in inclusion efforts. It's also vowing that by 2025, 30% of all corporate positions and 40% of retail and manufacturing jobs will be held by Black, indigenous or people of color.

Getting there is going to take a significant push: As part of its new commitment to transparency, the company also revealed its current makeup, with only 18.5% of senior-vice-president-or-above positions filled by BIPOC execs.

The company's announcement comes at a difficult time for diversity efforts throughout the corporate world. It's been a few months since American businesses piled on the Black Lives Matter movement, and many have been struggling to demonstrate anything more than lip service.

Starbucks describes the inclusivity push as the next step in turning each store into "the Third Place" -- not home, not work, but a spot where people can mingle and be part of a community. "The very concept of the Third Place embodies inclusion -- creating a place of warmth and belonging, where everyone is welcome," says CEO Kevin Johnson, in a letter to employees announcing the new program.

The efforts also include a mentorship program that connects BIPOC employees to senior leaders and $1.5 million Starbucks Foundation grants that focus on local impact. A $5 million grant will support a new two-year youth-focused initiative.

Meanwhile, the Seattle-based company is gradually shaking off the COVID-19 doldrums. Wall Street analysts expect its same-store sales in the U.S. to continue to get better. In August, they were down 11%, an improvement from the 14% decline in July.

"Starbucks near-term sales trends are significantly disrupted by the virus, similar to most restaurant companies," writes Brian Bittner, an analyst who covers the company for Oppenheimer. "However, the recovery is well underway with sales improving from their lows as economies reopen, and Starbucks installs a plethora of self-help drivers. As sales improve, margins should also regain health."

Others aren't so sure, as the chain's morning sales continue to suffer. And with the loss of those coffee-before-work morning crowds, predictions about when the chain will fully recover are tough.

"Given our expectation for Starbucks' habitual AM daypart to remain the most impaired in the near-term, somewhat offset by a shift in growth at other dayparts," writes Nick Setyan, an analyst who follows the chain for Wedbush Securities, "we await further visibility around incremental volumes as units reopen and capacity restrictions ease."

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