💰 Starbucks' big quit

🏠 Plus: Total inventory "collapse" | Tuesday, April 05, 2022

Open in app View in browser   Presented By Ramp   Axios Markets By Matt Phillips and Emily Peck ·Apr 05, 2022 🌅 ☕️ Good morning, Emily here! Matt's talking Starbucks today. Have you had your coffee yet? Let's go! Today is Axios' inaugural What's Next Summit! Register to attend virtual sessions featuring the CEOs of GM, Accenture, TIAA and more.  Today's newsletter is 1,145 words, 4.5 minutes.     1 big thing: Saying bye to buybacks Illustration: Annelise Capossela/Axios   Corporate leaders have increasingly leaned on stock buybacks to keep their equity prices aloft. But Starbucks yesterday halted a plan to spend billions buying back its own stock this year, Matt writes. The big question now facing CEO Howard Schultz: Will Wall Street allow him to quit buybacks cold turkey? Why it matters: Critics of buybacks have said that the boom in share repurchases has eaten into corporate spending on wages and the kind of business investment that drives economic growth, a view Schultz tacitly acknowledged in making the announcement. What he's saying: "This decision will allow us to invest more into our people and our stores — the only way to create long-term value for all stakeholders," said Schultz, who just reclaimed the reins of the coffee giant, in a statement. Starbucks shares fell 3.7% on the announcement. The company has already drastically underperformed the market this year. State of play: The decision comes as Starbucks — heavily reliant on its 235,000 workers in American stores — faces a historically tight labor market. Climbing wages, one of the company's largest costs, have eaten into profit margins. The company's high-end Reserve Roastery in New York's Chelsea neighborhood voted to unionize on Friday — the 10th location to do so over the past several months. The big picture: Starbucks' move to freeze buybacks also comes amid increased regulatory and political scrutiny of a practice that has become a cornerstone of the way the American stock market functions. The SEC has proposed new rules that would require faster disclosure of corporate stock purchases and more info on their justification. Companies themselves are the largest buyers of stock in the U.S. markets, according to Goldman Sachs analysts. Goldman estimates that companies will purchase $700 billion worth of stock this year — even after netting out stock issuances — making them by far the largest purchaser of equities. So far, Starbucks' move doesn't seem to have won it much breathing room from SBWorkersUnited, the union attempting to organize the company's shops. "If Howard Schultz wants to lift us up, protect shareholder interests, and design our shared future, he should start by ending the ruthless anti-union campaign costing shareholders millions," the union said in a statement to Axios. The bottom line: Schultz is asking for patience from shareholders as it attempts to sort out its labor issues and reinvigorate its stock price. We'll see how it goes.     2. Catch up quick ❌ EU to propose more sanctions on Russia, including a ban on its coal. (WSJ) 💵 The Treasury Dept. put new restrictions on Russia's ability to make sovereign bond payments. (Bloomberg) 📈 Exxon's Q1 profit may top a seven-year record. (Reuters)     3. Board diversity efforts hit roadblock Illustration: Sarah Grillo/Axios   The push to get more women and minority members into the ranks of the corporate elite, which has accelerated in recent years, hit a stumbling block on Friday when a judge in California knocked down one of the state's landmark board diversity laws, Emily writes. Why it matters: The ruling could slow — but not completely stall — progress in getting more women and minority members into boardrooms around the country, observers told Axios. "This is a setback that will come at the cost of better board governance," said Stefanie K. Johnson, a professor at the University of Colorado Boulder, Leeds School of Business who studies board diversity. Still, guidelines from the Nasdaq exchange — which set targets around gender and racial diversity for boards and require disclosures — and public and shareholder pressure still mean many U.S. companies have to pay attention to board composition. But Nasdaq's guidelines aren't as strict as the California law, which imposed financial penalties on companies. What's happening: Judge Terry Green in Los Angeles ruled that a 2020 law requiring public companies based in California have at least one board member from an underrepresented community — including racial and ethnic groups, as well as those who identify as LGBTQ — violated the California constitution. A similar law passed in 2018, requiring women on boards, is also being challenged. It's unclear if the state will appeal the ruling. "We continue to support efforts supporting diversity," said Joe Kocurek, a spokesman for the Secretary of State's office. "We are considering our options moving forward." Between the lines: Advocates and activist shareholders were pressuring companies on board diversity years before these laws were passed — with limited success. The California policies helped change the game, moving the needle in increasing the ranks of nonwhite directors in Corporate America. Last year 47% of the new directors placed on S&P 500 boards were nonwhite, according to data from Spencer Stuart. That's up from 15% in 2016. Still, about 80% of board directors are white. The bottom line: "I feel like we are in a 'two steps forward, one step back' mode ... where there are a lot of people who feel threatened by the benefits that greater diversity can achieve," said Johnson.     A message from Ramp Finance leaders: This is the key to finance-led growth     91% of finance leaders say real-time visibility is critical, according to a new report from the finance automation platform Ramp. Okay, but: Only half of them have it. Dig into Ramp's report for insights from more than 500 finance leaders to learn how to stay ahead of the competition.     4. Turkey's inflation crisis Data: FactSet; TurkStat; Chart: Axios Visuals Russia's war on Ukraine continues to reverberate throughout the global economy, with food and energy costs taking a toll on countries all over the world. One of the worst-hit: Turkey, Matt writes. The big picture: Prices in Turkey surged 61.1% in March from a year ago — the country's highest inflation level in 20 years. Energy was a key driver of the March surge, with transportation costs nearly doubling. Food costs were up 70%. Yes, but: Although the war in Ukraine is playing a role in the collapse of Turkish purchasing power, the country has been dealing with a serious inflation problem since last year — worsened by the country's strongman leader Tayyip Erdogan's rejection of basic economics. State of play: "If you open a macroeconomics textbook and make a list of the factors that cause inflation, you will see the traces of almost all of these factors in recent Turkish CPI data," wrote JPMorgan analyst Yarkin Cebeci yesterday in a research note. Just to name a few: Unorthodox policy decisions, easy monetary policy, administrative price hikes, elevated commodity prices, and poor weather conditions, Cebeci wrote.   Share Axios and earn rewards If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. Be a good friend and share   5. 🏡 Still no houses to buy MLS listings compiled by Miller Samuel/Douglas Elliman Last year, the inventory of houses for sale in the U.S. was low. But now, we're looking at a total "collapse," said Jonathan Miller, CEO of Miller Samuel real estate appraisers, who tracks data on about 40 real estate markets nationwide, Emily writes. The chart above shows how few homes there are for sale in the New York City suburb of Westchester, but you could gin up a chart like this for most areas of the country, he said. "Even if inventory doubled or tripled it would still be low," he said. Between the lines: The crazed pandemic-driven demand for houses, plus super-low rates on mortgages, got us to this place of scarcity. What's next: Now rates are climbing again, and at some point, that should cool demand. Still, with inventory this low, it's not quite clear how cool the situation can get.     A message from Ramp Financial automation = increased productivity     Six in 10 leaders believe increased productivity from automation will give their organization a competitive advantage this year. One strategy is to use Ramp, a financial automation platform that's saved companies millions of employee hours — and dollars. Learn more.   Like this email style and format? It's called Smart Brevity®. 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