Why Starbucks Stock Popped Tuesday Morning, While Chipotle Stock Slumped

Shares of Starbucks (NASDAQ: SBUX) roared out of the gate on Tuesday, surging as much as 23.7%. As of 11:19 a.m. ET, the stock was still up 22.7%. At the same time, Chipotle Mexican Grill (NYSE: CMG) stock sank as much as 14.1% but was recently down 11.8%.

The catalyst that sent these high-profile names in the restaurant industry in different directions was news that nobody saw coming -- that Starbucks had poached Chipotle's superstar leader to engineer its turnaround.

A notable track record of success

In a press release Tuesday, Starbucks announced that Brian Niccol, currently CEO of Chipotle, had been appointed chairman and CEO of the coffee chain. Laxman Narasimhan will step down from his role as CEO and depart the board of directors effective immediately. CFO Rachel Ruggeri will serve as interim CEO. Niccol will begin in his new position on Sept. 9.

Niccol is no stranger to turnarounds in the restaurant industry. He made a splash during his tenure at Yum Brands , the architect of some of the most successful limited-time menu innovations at Taco Bell. These included the Naked Chicken Chalupa, Quesarito, and Nacho Fries, as well as the Doritos Locos Taco, which was added to the menu full-time.

He was also credited with engineering a turnaround for the then-struggling Chipotle. Since assuming the role of CEO in March 2018, Chipotle's "revenue has nearly doubled, profits have increased nearly sevenfold, and the stock price has increased by nearly 800%," according to the press release.

Can Niccol do the same for Starbucks?

Over the past year or so, Starbucks stock has languished, down 24%, even as Chipotle stock gained 51%. The companies' recent results help illustrate the stark contrast.

During its fiscal 2024 third quarter (ended June 30), Starbucks' net revenue declined 1% year over year, while its adjusted earnings per share (EPS) tumbled 7%, driven by same-store sales that declined 3%. During the same period, Chipotle's revenue increased 18%, and EPS climbed 32%, driven by same-store sales that grew 11%.

Given Niccol's record of success , it isn't surprising that Starbucks investors are cheering while Chipotle shareholders are singing the blues.

Danny Vena has positions in Chipotle Mexican Grill and Starbucks. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Starbucks. The Motley Fool recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy .