Starbucks plans wages increases following earnings boost as union effort gathers pace

Updated at 8:49 am EST

Starbucks SBUX unveiled the first round of pay increases for its U.S. baristas as the world's biggest coffee chain looks to double their hourly income over the next two years while ramping up store expansion plans in key markets. 

Starbucks, which published better-than-expected fourth quarter earnings last week, said Monday that eligible U.S. store employees would see a 3% pay bump, starting in January, with longer-term workers getting increases of as much as 5%. Starbucks said the moves have lifted barista pay by around 50% from 2020 levels, adding it aims to have wages more than double that pace over the next two years. 

“Investing in our partners is what drives our success,” said Sara Trilling, executive vice president and president of Starbucks North America. “It’s what makes us all partners. And an important way we do this is by investing in our partners’ journey, to bridge to a better future at Starbucks and beyond."

"This entails engaging with, and listening to, their ideas and feedback while continuing to raise the bar by offering competitive pay and the best benefits package in the industry," she added. 

Starbucks shares were marked 0.58% higher in pre-market trading to indicate an opening bell price of $103.25 each. 

Employee costs remain a key plank in the group's recently-improved profit targets, which calls for earnings growth of between 15% and 20% from 2022 to 2025, even as its faces an accelerated effort by workers to unionize.

Around 360 of the group's 16,000 U.S. stores have voted to form union membership over the past two years, and the company has faced several allegations of anti-union practices, culminating in a ruling from a National Labor Relations Board judge last month that former CEO Howard Schultz violated federal labor law when he told a barista in California in "go work somewhere else" during a debate on employee rights. 

Last week, posted better-than-expected fiscal-fourth-quarter earnings as north America sales rose 8% from last year, and comparable sales in China surprised with a 5% boost in the post-covid era.

Looking into the group's new fiscal year, Starbucks said it saw revenue growth at the lower end of its prior 10% to 12% estimated range, with earnings growth of between 15% and 20%. 

The group also said it plans to boost the number of global stores by 45%, to 55,000, by the year 2030.

"I think if you just look at what we've been able to achieve with the investments that we've made in our partners with wages and other benefits that have been provided to them, if you take a look at the take-home income, on average, for our partners on a year-over-year basis, it's up 20% on average," CEO Laxman Narasimhan told investors on a conference call last week. 

"Now, there's still more to come. If you go back to 2020 and you look at where we are right now, the number is about close to 50% higher, but we still have further opportunities," he added.

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