Starbucks interim CEO Schultz likely to stick around 'longer than 6 or 7 months': Analyst

BTIG Managing Director and Restaurant Analyst Peter Saleh joins Yahoo Finance Live to discuss Starbucks CEO transition.

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JULIE HYMAN: Well, we learned yesterday that Starbucks is getting a new boss, same as the old boss. That is, Howard Schultz is returning, at least temporarily, to his post at the top of the company that he really drove to huge success, as Kevin Johnson would be stepping down. Let's bring in Peter Saleh of BTIG to talk more about this situation. Peter, a managing director and restaurant analyst there, of course. Peter, it's good to see you. You bring up an interesting idea in your note on this event, what happened, that Schultz might actually end up staying. What do you think the likelihood is of that?

PETER SALEH: Yeah, good morning, and thanks for having me on. Look, I think it's highly likely that he falls in love with the company again and decides to stay for a longer period of time. Look, this is his-- this is not the first time he's done this. Now this is the third time he's come back as CEO. He's also rejoining the board, taking Kevin's seat there. So I know the company's claiming at this point it's only temporary, and they're searching for another CEO.

But I think that CEO is going to have to have the blessing of Howard. And I think that's a pretty high bar, so I think it is possible that he continues on for a longer period of time than most people expect. And I do think that that would be really good for shareholders because he is the visionary, and he has turned around this company in the past. So I think this would be a really welcome news for shareholders.

BRIAN SOZZI: Peter, when Howard Schultz came back-- I believe it was in 2008, taking the reins back from Jim Donald-- he famously closed all of Starbucks's US stores to reset operations. Do you expect another bold move like that again? Just-- I don't know-- try to improve worker relations or anything along those lines.

PETER SALEH: Yeah, look, I don't expect-- I think back then, it was far different. They had a lot more issues back in 2008. We were in the middle of a recession. They had a lot of incoming competition. If you remember, McDonald's was launching McCafé, and there was a lot of concern that was going to eat up some of their lunch. Dunkin' was pushing harder on premium beverages. So they had a lot of different issues.

They also had-- investors had believed that they had overbuilt-- that their store growth needed to be scaled back. And it did. It was scaled back. But he found a lot of success with on growth. I mean, the stores today are double where they were in 2008, over 32,000 stores today versus 16,000 back in 2008. The stock price has gone from $5 to over $85. Earnings per share are up tenfold. So he's found a lot of success. He seems to have the magic touch with this brand. Anytime he comes back, he seems to figure out how to fix what's broken and really accelerate growth.

BRIAN SOZZI: What do you think is broken, Peter?

PETER SALEH: Well, I think, really, what broke was COVID broke it, right? So right now, we're in a process of just getting back to where you were pre-COVID. And that's really the biggest issue in terms of on the sales side, domestically. On the flip side, I think the other issue is labor and unions, right? So that's been discussed ad nauseam in the media.

Look, I think they have some work to do there. But in our view, they already pay substantially higher than most in the industry. They offer far better benefits. So I'm not sure what gap they need to close. But at this point, I think he may have a better answer on the labor side maybe than Kevin did. Yet to see.

JULIE HYMAN: So if Schultz doesn't end up sticking around, who are some of your other top contenders maybe to fill that position?

PETER SALEH: So look, I think they have a history of promoting from within. So I think if Schultz is not sticking around, you can probably look to some of their other senior leaders within management or maybe even within their board is a possibility. Aside from that, I think they're also interviewing external candidates. So that is a possibility.

I don't have-- I think at this point, I think the highest probability is that Schultz sticks around. You're going to have to find somebody that Schultz really agrees with and shares the same vision with to take over this company. So not saying it can't happen, but I think at this point, my bet would be on Schultz sticking around longer than six or seven months.

BRIAN SOZZI: Really, Peter, we're starting to see a changing of the guard in the restaurant industry. We have Kevin Johnson retiring. We had Wingstop CEO Charlie Morrison retire, or move to another company, I should say, after building that brand for many years. Why is this happening?

PETER SALEH: You know, it is a strange time. We've had Rich Alison also leaving Domino's. And this is all happening within the past several weeks. So look, I think a lot of this is-- sounds like lifestyle change likely brought on by COVID and folks just realizing they want to do something different.

So it's somewhat surprising to us. A lot of these announcements have come out surprising, but I think some of these companies do have deep benches that they can fill the roles, as you saw with Wingstop, as you're seeing at Domino's, and clearly at Starbucks with Howard stepping up. So not a lot of concern on that front, but I do think it's a lot of lifestyle changes going on at this point.

JULIE HYMAN: I find that so fascinating, Peter. We've talked a lot about that, about regular workers who have been switching jobs, switching locations, switching lifestyle, because of the pandemic-- sort of prompted to rethink things. It's interesting that it happens at the top of the heap, too. Peter, thanks for being here. Peter Saleh, BTIG managing director and restaurant analyst.