Billionaire investor Nelson Peltz has stepped up to the counter at Starbucks, taking a stake in the company.
Peltz’s Trian Fund Management LP disclosed last week that it had purchased 842,070 shares of Starbucks.
The news added a shot of caffeine to Starbucks stock, sending it up 6.1 percent or 98 cents to $17.05 Friday.
Any rise in the stock price is good news for stockholders, who have seen the share price drop 57 percent from a high of $39.63 in May 2006.
But Trian’s relatively small investment in Starbucks - its holdings represent less than 1 percent of the company’s outstanding shares - could represent more worries, at least more pressure, on Howard Schultz, Starbucks CEO and chairman.
Peltz has a history of pushing companies to cut costs and increase profits.
As a major shareholder, he leaned on Wendy’s International Inc. to spin off its Tim Hortons operation.
Then Arby’s, which is owned by Peltz’s Triarc Companies Inc., bought Wendy’s last month.
Peltz companies also have holdings in Kraft Foods Inc., H.J. Heinz Co. and Cadbury Schweppes PLC.
In a sense, Peltz might ask Schultz to do more of what he has already been doing since his return to the CEO post in January of this year.
Schultz, the driving force behind making Starbucks an international brand, stepped back in as CEO at a time when the company’s amazing growth had sputtered.
While revenues remained high, the number of same-store visits by customers in the U.S. had dropped.
In addition, the company, while still doing very well, has seen a drop in average transactions per customer in the U.S.
A variety of factors may explain the downturn, Starbucks watchers say.
The economy has been bad, one reason for customers to give up their lattes for a regular cup of coffee.
Starbucks has also seen stiff competition from Dunkin’ Donuts and McDonalds. In addition, its older stores may be losing customers to the newer Starbucks outlets.
Schultz has initiated a kind of back-to-the-bean program aimed at making Starbucks outlets more like the aroma-rich and cozy places of old.
He’s slowing down the company’s expansion plans in the U.S., and he has said that he’ll close some underperforming shops.
In addition, Starbucks has introduced a milder coffee as its main brew, and it’s downplaying some of its entertainment ventures.
John Glass, a Morgan Stanley analyst, told The Wall Street Journal that Peltz might want to see more changes at the coffee giant, including the introduction of franchises.
Starbucks now owns most of its stores. Schultz has argued that quality and consistency might suffer if the company offered franchises.
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