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 Sept. 9.
Nicole will succeed Lax Narasimhan, who has been in the role for less than 18 months.
Yahoo Finance Executive Editor Brian Suzzi has the inside scoop:
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 were down 20% over the past five years before today’s pop. The S&P 500 was up 85%. Chipotle was up 201%.
“It’s fixable, but it’s going to take time,” a Starbucks insider who knows about the company’s many problems recently told me.
Then there is the bumbling, chaotic leadership in the executive management.
Howard Schultz—the billionaire meddler and Starbucks founder turned failed presidential candidate—has not been secretly tearing apart his handpicked successor, Narasimhan, in Share on LinkedIn A few months ago, all of this undermined his authority.
Then Narasimhan got embarrassed on air during an expert interview conducted by my former boss at TheStreet, Jim Cramer.
I’ve spoken to restaurant CEOs privately since and they still can’t believe how poorly prepared Narasimhan was in the interview – with some quipping that he might not be around until 2025. And they’ve been proven right!
A Wall Street analyst told me that the TV performance should have been expected, given that Narasimhan is essentially a consultant masquerading as a grocery retailer CEO (he spent 19 years at McKinsey).
Last but not least, Starbucks is still dealing with eroding trust among its store workers, leading to moves toward unionization.
In Nicole, Starbucks gets someone who can weather all of these crises over time. Chipotle shares have risen 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 begins to end today. It won’t be easy for Nicole, but at least he’ll walk in with a resume and a mindset that Lax never had. That’s a win and then some.
Read more about Nicole and his leadership here.
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