Starbucks' New Chief Chipotle CEO... Stock Price Surges Over 24%

Narrishman CEO Steps Down After 17 Months Amid Poor Performance
Nicole CEO Who Boosted Chipotle Stock by 800% Takes the Helm

The 'coffee empire' Starbucks has chosen Brian Niccol, CEO of the American fast-food chain Chipotle Mexican Grill, as its new leader. Laxman Narasimhan, who had been leading Starbucks since March last year, stepped down after 17 months in office, taking responsibility for poor performance. Following the surprise CEO replacement news, Starbucks' stock price surged more than 24%.

On the 13th (local time), Starbucks announced Narasimhan's resignation and appointed Niccol, CEO of Chipotle, as the next Starbucks CEO and Executive Chairman of the Board. His inauguration date is September 9, and until then, Rachel Ruggeri, Starbucks' Chief Financial Officer (CFO), will serve as interim CEO.

[Image source=Reuters Yonhap News]

The background behind Starbucks changing its leadership after 17 months is sluggish sales due to high inflation and the impact of boycott campaigns. In particular, Starbucks was hit hard by boycott movements after allegations spread that it supported Israel and funded the Israeli military and government during the Gaza Strip war that broke out in October last year. In the second quarter, global same-store sales at Starbucks fell 3% year-on-year, and sales in its home market, North America, also declined by 2%. The Wall Street Journal (WSJ) reported that Starbucks' stock price had dropped more than 20% since Narasimhan took office until the day before.

On the other hand, the newly appointed CEO Niccol, who has been leading Chipotle since 2018, is regarded as having achieved successful management innovation. Starbucks explained that during his leadership at Chipotle, corporate profits increased about sevenfold, and the stock price rose approximately 800%. Melody Hobson, current Chair of Starbucks' Board, said, "Brian's remarkable track record speaks for itself," and described him as "a cultural messenger with rich experience and a proven track record of driving innovation and growth."

Howard Schultz, the former Starbucks CEO known as the 'coffee emperor,' also said, "I have admired Brian's leadership for a long time," emphasizing, "I believe he is the leader Starbucks needs at this crossroads. I respect and fully support him." The activist hedge fund Elliott Management (hereafter Elliott) also welcomed the CEO change news. Elliott issued a statement saying, "We have discussed major company issues with Starbucks' board over the past two months, and we believe today's announcement is the first step toward innovation," adding, "We welcome Niccol's appointment and look forward to continued cooperation with the board."

Earlier, WSJ reported that activist investors, including Elliott, had recently acquired Starbucks shares and pressured the company for management innovation to boost the stock price. However, Chair Hobson dismissed the notion that Niccol's appointment reflected discussions with activist investors.

The market cheered the Starbucks CEO replacement news. On that day, Starbucks' stock price on the New York Stock Exchange closed at $95.90, up 24.50% from the previous close. This is the largest single-day gain since the company entered the market in 1992. WSJ highlighted that the increase in market capitalization alone exceeded $20 billion. Meanwhile, Chipotle's stock price, suddenly facing the loss of its capable leader, fell 7.5%.