Starbucks Tuesday’s announcement was Replaces CEO Laxman Narasimhan and Chipotle The coffee chain’s shares soared more than 20% as CEO Brian Niccol attempted to reverse declining sales.
Chipotle shares fell more than 10% following news that Nicole was leaving after the burrito chain’s success.
Narasimhan’s departure is effective immediately. Starbucks Chief Financial Officer Rachel Ruggeri will serve as interim CEO until Sept. 9, when Niccol officially assumes the top job.
Narasimhan will take over as CEO in March 2023. Starbucks’ same-store sales fell 3% in its most recent quarter.
The company is under increasing pressure as it struggles to increase store traffic. Former CEO Howard Schultz, who handpicked Narasimhan as his successor, wrote an open letter in May weighing in on the company’s problems and offering advice but never mentioned Narasimhan’s name. Activist investor Elliott Management acquired a stake in the company in recent weeks.
Elliott managing partner Jesse Cohn and partner Marc Steinberg said in a statement: “Elliott has been working with the Starbucks board over the past two months on our “We welcome Brian Nicoll’s appointment and we look forward to continuing to work with the Board of Directors as we strive to realize the full potential of Starbucks.” potential. “
Schultz, the current company’s honorary chairman, also supports Nicol as the new CEO.
“I believe he is the leader Starbucks needs at this critical moment in its history,” Schultz said in a statement. “He has my respect and full support.”
Activist Starboard Value also recently bought shares in Starbucks; “Wall Street Journal” reports Friday.
Starbucks stock has fallen 21% during Narasimhan’s tenure (excluding Tuesday’s move).
Before joining Starbucks, Narasimhan was CEO of Reckitt, which owns brands such as Lysol and Mucinex. After being named the incoming CEO, he spent several months learning about Starbucks’ business, including barista training.
Nicol has served as CEO of Chipotle since 2018 and previously led Yum Brands Taco Bell. During his tenure at Chipotle, the company’s stock price soared 773%. As CEO of Chipotle, he helped the chain recover from a foodborne illness scandal and led its restaurants through the pandemic. While other restaurants have reported sharp contractions in consumer spending in recent quarters, Chipotle has bucked the trend in traffic and sales.
As part of a leadership shakeup on Tuesday, Mellody Hobson resigned as Starbucks chairman and became lead independent director. Narasimhan).
“A few months ago, our board started discussing leadership at the company, and I made a pitch to Brian through someone, and he answered the phone,” Hobson told CNBC’s “Squawk Box” on Tuesday. We thought we had an opportunity to partner with one of the biggest names in the industry, whose track record has just been clearly demonstrated, not only through his amazing results at Chipotle, but also through previous results at Pizza Hut and Taco Bell. He understands the industry. , we believe he is the right leader at this time.
Hobson acknowledged that Narasimhan faced some challenges entering Starbucks with no restaurant experience, but added that he helped reduce sales and resolve supply chain issues. However, the board appears more confident that Nicol can turn around the business quickly.
“But what we saw with Brian is, honestly, he’s been through every market environment, he’s been through every cycle. When I talked to him, I remember him saying, ‘I know what to do,'” said Hobson.
One of Chipotle’s strengths under Niccol is its app, which has helped drive strong results in recent quarters. Starbucks’ app has been one of the scapegoats for its weak performance. Schultz and other Starbucks critics say the glut of mobile orders has slowed service and hurt the customer experience.
Chipotle, on the other hand, added a second assembly line in its restaurants dedicated to mobile orders to keep up with digital demand. The taco chain has been opening “Chipotlanes” stores specifically for digital order pickup.
Narasimhan’s unexpected ouster also showed that Starbucks’ board was not interested in striking a deal with activist investors. When news of Elliott’s stake in Starbucks first broke in July, the hedge fund proposed a settlement to the Starbucks board to protect Narasimhan’s job, CNBC previously reported. Hobson said Tuesday that the board did not give Elliott advance notice of the leadership change.
The Starbucks board initially did not respond or engage with Elliott for some time, in part because of Schultz’s lingering influence. Elliott has amassed stakes worth as much as $2 billion.
However, according to previous reports by CNBC, the two sides met as recently as last week to discuss a settlement plan.
—CNBC’s Robert Hum reported on this article.
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