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An excerpt from Howard Schultz’s book “Onward”

From the September 2011 issue.

Starbucks CEO Howard Schultz describes his sentiments in facing a financial downturn.

At the end of April 2008, we faced Starbucks’ second-quarter earnings. The numbers told a dispiriting story.

Compared to a year earlier, global operating income for the quarter had sunk an unbelievable 26 per cent, to US$178 million. Earnings were down 28 per cent, to US$109 million, as our operating margins shrank from 10.7 per cent to 7.1 per cent of net revenues. Most frightening of all, the company’s total comps were negative for the first time in Starbucks history. In the United States alone, customer transactions were down 5 per cent and ticket sales – how much each customer spent per visit – had gone up a mere 1 per cent! It’s hard to overstate just how much these numbers shocked many of us at Starbucks. After almost 16 years of 5 per cent or higher comps, such poor performance was so unfamiliar, even unthinkable, that it quite literally took our breath away. Although Wall Street no longer knew our comps because we’d stopped reporting them, the numbers, which were printed in red on our financial spreadsheets, were branded on my brain.

Faced with these results, it was requiring more and more faith for Starbucks’ senior leaders to believe that we could actually transform the company. I had complete confidence that Michelle, who had worked closely with me to finalise the Transformation Agenda, and Cliff shared my vision, but not all of the people on the team believed in or had the discipline to execute the strategy I was putting in place. I recalled what another second-time CEO had told me when I regained control of the company: “Most of your top leaders will be gone or new within a year.”

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