Starbucks Falls as New CEO Schultz Suspends Buyback Plan By

© Reuters.

By Dhirendra Tripathi — Starbucks (NASDAQ:) stock traded 3% lower in premarket Monday after the company suspended its share buyback program, soon after former long-time CEO Howard Shultz returned to the role, albeit on an interim basis.

The company had in October announced a three-year $20 billion share buyback and dividend program.

“Starting immediately, we are suspending our share repurchasing program,” Schultz said in an open letter today.

“This decision will allow us to invest more into our people and our stores, the only way to create long-term value for all stakeholders.”

The company hopes to find a new CEO by fall.

Senator Bernie Sanders slammed the company after the announcement.

“If Starbucks can afford to spend $20 billion on stock buybacks and dividends…it can afford a unionized workforce,” Reuters quoted Sanders as saying.

The decision to drop the buyback plan comes amidst a series of challenges facing the company.

While the company now faces unions at several of its locations, it’s also facing surging costs on the business side. The coffee-brewer in February warned 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 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.

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