Starbucks' stock shot up more than 22% on Tuesday, Aug. 13, when the company announced it is swapping out CEOs. Laxman Narasimhan is out effective immediately, while the coffee giant poached Chipotle CEO Brian Niccol to turn things around like he did for the burrito business .
Niccol has been CEO of Chipotle since 2018. He will take over at Starbucks on Sept. 9.
Less than two years ago, Starbucks thought it had the right person for the job in Narasimhan, who took over for longtime CEO and Chairman Howard Schultz in March 2023.
"It’s a great day for Starbucks ," Schultz said when they announced Narasimhan in 2022, several months before he was set to take the reins. "I feel like we have a No. 1 draft choice."
But sometimes first-rounders do not pan out. In the 17 months Narasimhan led Starbucks , the stock dropped nearly 23%.
By comparison, over the same time, Niccol and Chipotle saw the company share price rise more than 73%. Under Niccol's tutelage, Chipotle's stock soared more than 700% since 2018.
On news it was losing its CEO, Chipotle was down more than 12% Tuesday morning. COO Scott Boatwright was named interim CEO.
What’s souring Starbucks?
Starbucks has been struggling with store sales in and out of the U.S. Traffic and sales are huge disappointments in the U.S. and China. For both countries, customers seem to be gravitating toward cheaper options .
After a big earnings miss, Schultz, who is no longer officially affiliated with the company, wrote in an open letter .
"I have emphasized that the company’s fix needs to begin at home: U.S. operations are the primary reason for the company’s fall from grace," Schultz wrote. "The stores require a maniacal focus on the customer experience, through the eyes of a merchant. The answer does not lie in data, but in the stores. "
Just a couple of weeks ago, Brian Niccol spoke with CNBC about how Chipotle was increasing growth while other companies lost customers to the value-meal route .
"And that’s really a testament to our operators executing great throughout, our restaurants being staffed correctly, being deployed correctly," Niccol said. "And then our marketing really hit with some terrific menu news around chicken al pastor. The value proposition of Chipotle really hinges on great culinary: Providing great customization with terrific speed. And one of our key equities is these generous portions we provide. And I think our teams have done a fabulous job of doing that."
Can Niccol right the ship?
Niccol is no stranger to turning a ship around. He is credited with Chipotle’s rise from disgrace.
After years of bad press over foodborne illness, former Taco Bell CEO Niccol took charge of Chipotle in 2018. The stock has far outperformed the market during that time as Niccol steered the company past E. coli, the pandemic and inflation .
If there is a question mark in the Niccol hire for Starbucks, it is his lack of recent experience in China. Chipotle is barely an international player and not present in China, while China is Starbucks’ second-biggest market.
But if Starbucks' board is taking Schultz’s advice to heart that domestic operations is where the problem starts, his resume is as stuffed as a Chipotle burrito on a good day.
The post Starbucks snags Chipotle’s CEO, giving stock much-needed caffeine boost appeared first on Straight Arrow News .
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