It was a shock announcement this morning from Starbucks early Tuesday after the struggling coffee chain announced that Chipotle (CMG) Chairman and CEO Brian Niccol would become its next CEO, effective September 9.
Nicol will succeed Alex Narasimhan, who has held the post for less than 18 months.
Yahoo Finance Editor-in-Chief Brian Sozzi provides exclusive insights:
Starbucks is currently a symbol of crisis. Don’t believe me? Let’s review the facts.
First, the company’s financial results and stock price were terrible.
The last quarter showed a 6% decline in North American transactions as consumers avoided the chain’s expensive coffee and long wait times.
International sales fell 7%. Chinese comparable sales fell 14%, prompting executives to say on the earnings call that they are exploring strategic options for the business. Non-GAAP operating profit fell to 16.7% from 17.4%.
the Company’s previous quarter It wasn’t too hot either.
Starbucks shares had fallen 20% over the past five years before today’s big rally. The S&P 500 was up 85%. Chipotle shares were up 201%.
“It can be fixed, but it will take time,” a Starbucks insider familiar with the company’s many problems recently told me.
There is also the faltering and chaotic leadership at the executive level.
Howard Schultz — the billionaire Starbucks founder turned failed presidential candidate — has not been subtle in attacking his handpicked successor, Narasimhan, in Posted on LinkedIn A few months ago, which almost undermined his authority.
Then, Narasimhan was embarrassed on air in an interview with an expert from my former boss at TheStreet, Jim Cramer.
I’ve spoken to restaurant CEOs privately since then and I still can’t believe how poorly and unprepared Narasimhan was in the interview – some even joked that he might not be around in 2025. They’ve been proven right!
One Wall Street analyst told me that the TV performance should have been expected, given that Narasimhan is essentially a consultant posing as the CEO of a food retailer (he spent 19 years at McKinsey).
Last but not least, Starbucks continues to suffer from eroding trust among its employees, leading to moves toward unionization.
In Nicole, Starbucks gets someone who can eliminate all of these crises over time. Chipotle shares are up 671% since Nicole took over as CEO, according to Yahoo Finance data, compared with 100% for the S&P 500 and 81% for McDonald’s (MCD).
The crisis at Starbucks is finally over today. It won’t be easy for Nicole, but at least he’ll come into the company with a resume and a mindset that Lux never had. That’s a win, and then some.
Read more about Nicole and his leadership here.
Comments are closed, but trackbacks and pingbacks are open.