Elliott Management, one of the largest hedge funds in the world, has taken a significant stake in Starbucks and is working with the company’s management to enhance its share price, according to sources cited by the Wall Street Journal. While the size of Elliott’s position and its specific demands remain unknown, it is believed that a settlement could potentially be reached.
This move by Elliott comes at a time when Starbucks has been grappling with various challenges. The coffee chain reported disappointing quarterly results in April, with a 3% decline in U.S. same-store sales and a 7% drop in traffic. Starbucks also lowered its 2024 outlook. These struggles have prompted CEO Laxman Narasimhan to emphasize the need for improvements to stores.
Starbucks has undergone a series of leadership changes in recent years. Narasimhan was chosen by Starbucks’ returnee CEO Howard Schultz to lead the company after Kevin Johnson stepped down. Schultz himself has weighed in on Starbucks’ challenges but has stated that he does not plan to return as CEO for a fourth time.
It is worth noting that this is not the first activist effort Starbucks has faced this year. The company had to contend with an organization effort initiated in 2021 by its own workers unions, which ultimately led to the withdrawal of candidates from the Strategic Organizing Center. Conversations between management and labor are still ongoing.
Elliott Management’s involvement in Starbucks follows its acquisition of significant stakes in other companies such as Southwest, SoftBank, Johnson Controls, and Texas Instruments. As one of the most prolific activist investors globally, Elliott has a track record of pushing for changes that it believes will benefit shareholders.
The news of Elliott’s stake in Starbucks has already had a positive impact on the company’s share price, which surged over 6% on Friday. However, it remains to be seen how this collaboration between Elliott and Starbucks’ management will unfold and what specific actions will be taken to address the challenges the coffee chain is facing.
In conclusion, Elliott Management’s entry into Starbucks signifies a potentially significant turning point for the struggling coffee chain. With their extensive experience and influence as an activist investor, Elliott could bring about the changes needed to improve Starbucks’ performance. The collaboration between Elliott and Starbucks’ management will be closely watched by investors and industry observers alike.
