Investors are so unhappy with Starbucks‘s earnings and stock performance this year, that they have filed a lawsuit against the company and its executives because of their “overly rosy” projections, especially as it relates to their aggressive expansion in China. Industry website Restaurant Business reports on what the litigants claim was misleading guidance in executives’ earnings presentation in November:
… it was marked by aggressive projections for sales and earnings, the result of changes the company was making in operations and a return to sales growth in China, Starbucks’ second-biggest and most important growth market.
But those projections ran into problems almost immediately. By January, Starbucks warned about U.S. sales, after those sales started falling in November and remained there. But executives were still touting improvement in China, the lawsuit says.
“Starbucks’ plan was ill-equipped to handle the existing macro uncertainty and competition, particularly in the Chinese market,” the lawsuit says. Starbucks “misled investors by providing the public with materially flawed statements of confidence and growth projections” between November of last year and April of this year.
At its annual meeting in March, NLPC’s Paul Chesser presented a shareholder proposal that sought a report that would explain the incongruencies between the coffee giant’s aggressive expansion under China’s tyrannical regime, and its stated “respect for human rights.” Last year NLPC sponsored a “Communist China risk audit” proposal at the Starbucks annual meeting.
Both proposals received weak vote support from investors. Had a majority of shareholders supported them, and had Starbucks implemented the proposals’ requests as written, there would have been a lot more transparency about the state of its business, especially in China.
Stockholders would be so much better off if they listened to us and voted in support of our proposals, rather than having to litigate.
