Starbucks Corp. said it would boost pay for U.S. baristas who have been with the company for at least two years, but the company is only guaranteeing the wage bump for cafes that haven’t unionized.
The coffee giant also said Tuesday that it would invest roughly $200 million in stores and employees, including fixing cafe equipment, increasing worker training, perks for highly-skilled baristas and creating an app for better workplace communication.
Starbucks’s additional pay announcement came as the company reported higher quarterly sales and profits, in its first financial results since Howard Schultz’s return as chief executive in early April.
The additional spending includes Aug. 1 pay increases of at least 5% for baristas who have worked at Starbucks for two years or more, the company said. Baristas newer to the company will get pay bumps of least 3%, the company said. Starbucks will also give one-time bonuses in August for store managers and other leaders.
Mr. Schultz said the investments would help the company handle increased demand at stores and boost profitability, while improving customer experience and reducing strain on baristas.
Starbucks is expanding pay and benefits as a battle between the company and unionized employees is escalating. The Starbucks Workers United union—formed in late 2021 following votes in Buffalo, N.Y., cafes—is pushing for better benefits, more training and a bigger voice in company affairs. Starbucks is pushing back, accusing the union of bullying other workers and driving a wedge between Starbucks and its workforce. The company and union have filed unfair labor practice complaints against each other with the National Labor Relations Board.
Around 240 of Starbucks’s 9,000 U.S. corporate stores have petitioned to unionize. The Starbucks Workers United union had won 46 elections, lost five and had undetermined results in three others as of earlier Tuesday, the NLRB said. The federal agency had scheduled another 118 elections in coming weeks.
Starbucks said the new wage, benefit and store improvement spending outlined Tuesday will occur in all U.S. company stores where Starbucks can unilaterally make changes, which don’t include those that have unionized. Under federal law, new wages, benefits and working conditions for unionized workers must be agreed upon through collective bargaining, the company said.
Shortly after retaking the helm at Starbucks last month, Mr. Schultz told U.S. store leaders that he intended to increase benefits for workers, but that any new employee spending would only be guaranteed at locations that haven’t unionized, citing the company’s interpretation of federal labor law, The Wall Street Journal reported.
Starbucks said Tuesday that the additional benefits planned for workers could be separately negotiated for unionized stores through the collective bargaining process. The company and the union have both said they have held bargaining meetings.
Workers United, the union supporting organizing Starbucks workers, said in a letter to the National Labor Relations Board last week that the company’s stance on new benefits violated the National Labor Relations Act. Union lawyers asked the NLRB to intervene, writing that Mr. Schultz’s statements threatened to chill union-organizing activities.
The NLRB didn’t immediately comment on the letter. CNBC earlier reported on the union’s written allegations.
A Starbucks spokesman said Mr. Schultz’s statements were backed up by law pertaining to collective bargaining, and that the CEO was focused on building the company’s future.
The Seattle-based coffee giant said global same-store sales for the three months ended April 3 were up 7% from the same period last year. U.S. comparable sales rose 12% during the quarter compared with last year’s period, while same-store sales in China fell 23%.
Net income of $674.5 million was 2.3% higher than the previous year’s period.
Starbucks reported quarterly earnings of 59 cents a share, after adjusting for one-time expenses. Analysts surveyed by FactSet had anticipated 60 cents a share. The chain’s $7.64 billion in sales for the period slightly outpaced analysts’ expectations of $7.62 billion.
The company said Tuesday that inflation and spending on employee wages, training and new hiring depressed cafe profit margins in North America. More orders and higher prices provided some boost to store-level profit, the company said.
Starbucks shares rose 1.6% to $75.50 in aftermarket trading.
Mr. Schultz canceled billions of dollars in share buybacks on his first day back as interim CEO on April 4, saying the money needed to be used to reinvest in company stores and workers. The company’s shares are down 37% this year.
Investors are watching how much more Starbucks may spend on its stores and workers, and how that will impact its profits. Motley Fool Asset Management investment analyst Ben Wong said his firm thought that investing earnings into baristas will benefit long-term shareholders through higher store returns.
“There are still a lot of positives,” said Mr. Wong, whose fund owned more than 143,000 Starbucks shares as of Tuesday.
Starbucks said last year that it would boost U.S. employee pay to at least $15 an hour by the summer of 2022. Pay will rise to an average of $17 an hour for U.S. workers by Aug. 1, the company said Tuesday. That pay raise will go to all workers at both unionized and nonunion stores regardless of collective bargaining, Starbucks said.
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