Starbucks Abruptly Dumps CEO, Poaches Chipotle Boss

For Laxman Narasimhan, the daily grind is over. The Starbucks chief unexpectedly stepped down Tuesday.

The embattled coffee chain named Chipotle CEO Brian Niccol his successor. Markets signaled they think the burrito boss, who starts Sept. 9, can get things wrapped and under control.

A Tall Order

The bottom line is that Starbucks’ performance as of latte has been depresso, with grande problems turning into trenta ones. In April, the world’s largest coffee chain cut its full-year revenue growth forecast to low single digits; previously, it had been estimated at 7% to 10%. Sputtering sales are to blame, especially in the Chinese market, where same-store sales dropped a whopping 14% in the quarter that ended June 30. US same-store sales fell 2%.

Narasimhan said budget-conscious customers are spending less. It should also be noted they’re being asked to pay more after price hikes that executives have blamed on inflation and unionization. From the time Narasimhan started in March 2023 to Monday’s close, Starbucks shares fell 21%. But markets seem sold on Niccol (Starbucks surged over 20% following the announcement, while Chipotle fell 7%), and with good reason:

• As other restaurants have reported atrophying sales, Niccol’s Chipotle has served up increased sales and traffic: Second-quarter income, reported last month, rose to $456 million this year from $342 million in 2023. Even with the dip after Niccol’s departure was announced, Chipotle shares are up 15% this year, and last year’s $10 billion in sales were more than double when he started.
• Niccol ably steered Chipotle through adversity, restoring credibility after he took over in 2018 in the wake of a tainted-food scandal. He was also an early adopter of to-go and delivery operations, which made the firm one of the strongest pandemic performers.

Backseat Baristas: Narasimhan was the handpicked successor of three-time Starbucks CEO Howard Schultz, who roasted the company’s performance in a LinkedIn post earlier this year. Schultz endorsed Niccol Tuesday. He’s not the only power player the new chief will have to keep happy: Activist investors Elliott Management and Starboard Value both have stakes and, as of last week, Elliott was in negotiations for a board seat.