It’s a shocking announcement from Starbucks early Tuesday morning after the struggling coffee chain announced that Chipotle (CMG) Chairman and CEO Brian Niccol will become its next CEO, effective September 9.
Niccol will take over from Lax Narasimhan, who has been in the post for less than 18 months.
Yahoo Finance Editor Brian Sozzi tells us more:
Starbucks is currently an icon in crisis. Don’t believe me? Let’s review the facts.
First, the company’s financial results and stock price have been disastrous.
Its latest quarter showed a 6% decline in transactions in North America as consumers avoided the chain’s increasingly expensive coffees and long wait times.
International sales fell 7%. Comparable Chinese sales fell 14%, prompting executives to say on the earnings call that they were exploring strategic options for the company. Non-GAAP operating profit fell to 16.7% from 17.4%.
THE previous quarter of the company It wasn’t too hot either.
Starbucks shares have fallen 20% over the past five years before today’s rally. The S&P 500 is up 85%. Chipotle is up 201%.
“It’s fixable, but it will take time,” a Starbucks insider familiar with the company’s many problems told me recently.
Then there is clumsy and chaotic leadership among senior management.
Howard Schultz, the billionaire founder of Starbucks who became an unsuccessful presidential candidate, has been outspoken in his criticism of his hand-picked successor Narasimhan. Post on LinkedIn a few months ago, which almost undermined his authority.
Narasimhan then found himself embarrassed on live television during a punditry interview with my former boss at TheStreet, Jim Cramer.
Restaurant CEOs I’ve spoken to privately since still can’t believe how terrible and unprepared Narasimhan sounded during the interview — some joked that he might not be around until 2025. They were right!
One Wall Street analyst told me the TV results were predictable, given that Narasimhan is actually a consultant posing as the CEO of a food retailer (he spent 19 years at McKinsey).
Finally, Starbucks continues to grapple with an erosion of trust among its employees, which has led to unionization movements.
In Niccol, Starbucks has found someone who could eradicate all of these crises over time. Chipotle shares have soared 671% since Niccol took over as CEO, according to Yahoo Finance data, compared with 100% for the S&P 500 and 81% for McDonald’s (MCD).
The Starbucks crisis begins to end today. It won’t be easy for Niccol, but at least he’ll arrive with the resume and mindset that “Lax” never had. That’s a victory and more.
Read more about Niccol and his leadership here.
Discover more from The Times Of Update
Subscribe to get the latest posts sent to your email.
