Food & Beverage

Howard Schultz stepping down as Starbucks CEO; current COO to replace him

Howard Schultz stepping down as Starbucks CEO
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Howard Schultz stepping down as Starbucks CEO

Starbucks Chairman and CEO Howard Schultz said Thursday that he would be stepping down from the CEO post and handing the keys over to Kevin Johnson, the current president and COO of Starbucks.

The announcement surprised investors and caused the stock to tumble more than 10 percent. Starbucks shares have since recovered and are trading down 3.6 percent after-hours.

The transition will occur on April 3, 2017, and it will allow Schultz to focus on turning Starbucks' Reserve-branded coffee bars into destination restaurants.

Schultz was quick to remind analysts on a conference call Thursday that he is not leaving the company, but instead transitioning into this new role.

"As I focus on Starbucks next wave of retail innovation, I am delighted that Kevin Johnson — our current president, COO, a seven-year board member and my partner in running every facet of Starbucks business over the last two years — has agreed to assume the duties of Starbucks chief executive officer. This move ideally positions Starbucks to continue profitably growing our core business around the world into the future," Schultz said in a news release.

The company's flagship Reserve Roastery and Tasting Room opened in its home market of Seattle in 2014. These "megastores" are designed to be much larger than a traditional Starbucks cafe and allow the company to do small-batch roastings of "rare and exotic" Reserve coffees.

"This is an opportunity for us to elevate food," Schultz told reporters back in July. "This will once again reaffirm Starbucks' leadership in all things coffee."

"Howard Schultz has been phenomenally successful in building up the Starbucks business into the global powerhouse it is today," Neil Saunders, CEO of Conlumino, told CNBC. "However, the business is now at a different stage and as a more mature entity the future opportunities are less about expansion and more about careful operational management to generate incremental growth and drive efficiencies. Schultz has the capability to do this, but it is probably not what excites him: he's a business builder and an innovator. By comparison, Kevin Johnson is a good operational head who knows the business and has the full trust of Schultz."

Schultz first joined Starbucks in 1982 as director of operations and marketing when the company only had four stores, according to Starbucks. Over time he grew it into a iconic brand.

This will not be the first time Schultz has vacated the CEO role: He had previously served as the company's chief executive from 1987 to 2000, but he returned to the position in 2008.

Some see his planned departure as a good sign for Starbucks' outlook.

"It is obvious that he thinks Starbucks is in a good place," Bonnie Riggs, restaurant industry analyst for the NPD Group, told CNBC. "He stepped back in when they were struggling and most definitely turned the concept around. He can now move on to other areas of interest, but I have no doubt should they falter, he would jump back in."

The company noted during the call that there are no other planned leadership changes in the near term.

Johnson, who has been the company's president and chief operating officer, joined Starbucks in 2015, according to his company biography. He has served on the company's board of directors since 2009.

Johnson previously served as CEO of Juniper Networks and was the president of the platforms division at Microsoft.

"Kevin has been a wise and supportive resource for me," Schultz said during a conference call Thursday.

Schultz praised Johnson, noting that the last two fiscal years have been the best in the company's history in part because of the COO.

The leadership transition also sparked speculation about Schultz's potential political plans: He has been a supporter of President Barack Obama and Democratic presidential nominee Hillary Clinton, and some have already questioned whether he would pursue his own presidential run.

—CNBC's Andrew Ross Sorkin contributed to this report.