Starbucks’ sales climbed to record levels in its fiscal second quarter, but its profits took a hit from climbing labor costs.
And those costs are set to grow even higher in the coming months as Starbucks introduces new pay raises and other benefits to improve its employee experience — and head off a growing unionization movement.The Seattle coffee company — which welcomed back former CEO Howard Schultz last month as its interim leader — said revenue rose 15% to a record $7.6 billion in its 13-week quarter, which ended April 3. That was in line with Wall Street’s estimates, according to analysts polled by FactSet.
But there’s a catch: Workers who have voted to unionize or stores that have petitioned to hold a union election won’t be eligible for the enhanced benefits announced Tuesday. Instead, Schultz said U.S. labor law requires stores to negotiate their own contracts with Starbucks. “These benefits, including ones we’ve demanded since the beginning of our campaign, are a response to our organizing efforts and we should celebrate the hard work that partners who stood up to Howard Schultz’s bullying put in to make this happen,” the group said Tuesday in a statement.
Schultz opposes unionization. But he noted that employees are under “tremendous strain” due to strong customer demand and pandemic-related changes in the business, including a surge in mobile and drive-thru orders. Stores are built to serve hot drinks, for example, but 80% of U.S. orders are now cold drinks.
“If we want to exceed the expectations of our customers, we have to exceed the expectations of our people,” Schultz said.Schultz bought the Starbucks chain in 1987, led it until 2000 and then led it again between 2008 and 2017. He returned as interim CEO and rejoined Starbucks’ board in April after former CEO Kevin Johnson announced his retirement.
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