Lombard leaves Starbucks: coffee company restructuring its entertainment unit in an effort to invigorate sagging sales

Black Enterprise, July, 2008 by Tamara E. Holmes

KEN LOMBARD, WHO JOINED STARBUCKS COFFEE CO. IN 2004 to head its entertainment division, stepped down from his position in April, as the company announced it would revise its entertainment strategy. Lombard, 53, who was senior vice president and president of Starbucks Entertainment, left to pursue other business interests.

In a statement, Starbucks Chairman Howard Schultz said, "Ken was instrumental in shaping Starbucks' entertainment strategy over the past several years, and we are grateful for his numerous contributions to the company."

Lombard could not be reached for comment.

When Lombard joined Starbucks, he was tasked with expanding the company's entertainment interests, which included endeavors such as offering music downloads and letting customers burn CDs at some Starbucks locations.

The Seattle-based company shifted its strategy, and the restructuring is part of an effort to reduce costs, the company said. In April, Starbucks stated that second-quarter earnings were below expectations, citing economic pressures as well as costs associated with plans to transform the company into a more consumer-driven environment.

Analysts and investors are taking a wait-and-see attitude. In the first quarter of 2008, earnings per share were down 21% from the same period last year, from $0.19 per share to $0.15 per share. Likewise, net earnings were $108.7 million in the first quarter of 2008 compared with $150.8 million last year, down 28%.

"Investors continually grapple with whether the recent slowdown in U.S. sales trends is a fundamental concept-specific issue or symptomatic of a broader consumer slowdown," says Sharon Zackfia, an analyst who covers Starbucks for Chicago-based investment firm William Blair & Co. "Concerns surrounding competition and oversaturation have been voiced repeatedly over recent quarters."

Prior to working at Starbucks, Lombard was president of Johnson Development Corp./Magic Johnson Theatres and served as president of the City of Los Angeles Board of Water and Power Commissioners. Lombard also was previously a consultant to former New York State Comptroller H. Carl McCall and vice chairman of the board of OneUnited Bank (No. 2 on the BE BANKS list with $653.7 million in assets).