Starbucks Corporation (SBUX) has made headlines with a major management shake-up, replacing CEO Laxman Narasimhan with Brian Niccol, the former CEO of Chipotle Mexican Grill (CMG). This appointment has sparked optimism about Starbucks’ potential turnaround, as Niccol’s experience in the fast-food industry is seen as a valuable asset.
Jim Cramer, host of Mad Money, emphasized the significance of Niccol’s leadership, stating that he will be crucial in reviving the coffee giant. Starbucks has been facing difficulties in its major markets, particularly the U.S. and China, with consecutive quarters of declining same-store sales. Cramer believes that Niccol’s successful tenure at Chipotle, where he improved food quality, store efficiency, and customer satisfaction, makes him well-suited to address Starbucks’ challenges.
Niccol’s appointment has been met with enthusiasm by investors, as evident in the 24.5% surge in Starbucks’ stock following the announcement. This move signifies a departure from the previous leadership and a renewed focus on revitalizing the brand. Cramer highlighted the rarity of such a decisive change, stating, “Today we got something very rare: A CEO was straight up fired, and in his place, we didn’t just get some stuffed shirt we didn’t care about. No, Starbucks brought in Brian Niccol, the man who almost singlehandedly turned around Chipotle, to run the business. They could not have picked a better guy.”
This appointment comes at a pivotal time for Starbucks, which has experienced a period of turbulence and underperformance compared to the market. The company’s recent third-quarter earnings report revealed that while earnings met estimates, revenues fell short of expectations.
Niccol’s move from Chipotle has had a notable impact on the company’s stock price. Chipotle’s shares plummeted by approximately 10%, resulting in a loss of nearly $7 billion in market value. This reflects the market’s recognition of Niccol’s significant contributions to Chipotle’s success and the potential impact of his absence.
The appointment follows a series of strategic moves by activist investors, including Elliott Management and Starboard Value, who acquired stakes in Starbucks to advocate for a turnaround. Additionally, Trian Fund Management, led by billionaire activist Nelson Peltz, recently acquired and then sold a substantial stake in Starbucks.
Analysts have varied opinions on Niccol’s appointment. Some, like Wedbush analyst Nick Setyan, maintain a neutral stance, while others, such as Baird analyst David Tarantino, have upgraded their ratings, citing Niccol’s successful track record at Chipotle, where he led the stock to a 650% increase over six years.
Starbucks’ stock closed at $95.90 on Tuesday, marking a significant 24.50% increase for the day. In after-hours trading, the stock rose 0.021%. Year-to-date, Starbucks shares have gained 2.38%, according to data from Benzinga Pro.
