It was a shocking announcement this morning from Starbucks early Tuesday after the ailing coffee chain announced Chipotle (CMG) chairman and CEO Brian Niccol will become its next CEO, effective Sept. 9.
Niccol will assume the position from Lax Narasimhan, who was on the job for less than 18 months.
Yahoo Finance Executive Editor Brian Sozzi has the inside scoop:
Starbucks is currently an icon in crisis. Don’t believe me? Let’s review the facts.
First, the company’s financial results and share price have been dreadful.
Its most recent quarter showed a 6% drop in North America transactions as consumers shunned the chain’s ever-pricier coffees and long wait times.
International sales tanked 7%. Chinese comparable sales plunged 14%, spurring execs to say on the earnings call it’s exploring strategic options for the business. Non-GAAP operating profits declined to 16.7% from 17.4%.
The company’s prior quarter wasn’t too hot, either.
Starbucks shares were down 20% over the past five years before the pop today. The S&P 500 is up 85%. Chipotle is up 201%.
“Fixable, but it will take time,” a Starbucks insider with knowledge of the company’s many troubles recently told me.
Then there is bumbling, chaotic leadership in the C-suite.
Howard Schultz — the meddling billionaire founder of Starbucks turned failed presidential candidate — not so covertly ripped his hand-picked successor Narasimhan in a LinkedIn post a couple of months ago, all but undermining his authority.
Narasimhan then got embarrassed on live TV in an expert interview by my former boss at TheStreet, Jim Cramer.
Restaurant CEOs I have talked to privately since still can’t believe how terrible and ill-prepared Narasimhan appeared to be in the interview — a few quipped he may not be around deep into 2025. They were proven right!
One Wall Street analyst told me the TV performance should have been expected, given Narasimhan is basically a consultant masquerading as a food retailer CEO (he spent 19 years at McKinsey).
And last but not least, Starbucks is still dealing with eroding trust among its stores’ rank and file, which has led to moves to unionize.
In Niccol, Starbucks is getting someone who could stomp out all of these crises over time. Chipotle shares have skyrocketed 671% since Niccol started as CEO, per Yahoo Finance data, compared to 100% for the S&P 500 and 81% for McDonald’s (MCD).
The crisis at Starbucks begins to end today. It won’t be easy for Niccol, but at least he will enter with the resume and mindset “Lax” never had. That’s a win and then some.