Starbucks on Tuesday named Chipotle Mexican Grill (CMG.N) head Brian Niccol as its new CEO, poaching a successful fast-food executive known for reviving the burrito chain to lead a turnaround, in a shock move that sent the coffee chain's shares up over 20%.
Niccol replaces Laxman Narasimhan, whose tenure only lasted a year-and-a-half after he was originally brought in as CEO in March 2023 to engineer a "reinvention" of the world's biggest coffee chain. Since then, the stock has continued to falter, losing nearly one-quarter of its value.
He inherits several challenges at the coffee giant, which has been under pressure from activist investor Elliott Investment Management to improve its business, and has suffered from increased competition and weakening demand in the United States and China.
Niccol's appointment is a coup for Starbucks, as Chipotle's annual sales have surged since he joined in 2018, and the stock has more than tripled over the last five years.
"This is a significant victory for Starbucks. Niccol has earned the respect and confidence of the investment community and will be given the much-needed leeway to make investments and time to turn around Starbucks," BTIG analyst Peter Saleh said.
Starbucks had been under pressure from Elliott, which had built a $2 billion stake. The hedge fund had suggested Starbucks expand the size of its board and make Elliott executive Jesse Cohn a director, though it was not demanding a CEO change.
Elliott on Tuesday said that Niccol's appointment was "a transformational step forward" for the company. "We look forward to continuing our engagement with the Board as it works toward the realization of Starbucks' full potential," Elliott said in statement.
Starbucks recently tweaked its model to focus on mobile pickup and delivery orders rather than cafes set up for long visits.
When asked on CNBC if activist Elliott was consulted about the shakeup, Starbucks Board Chair Mellody Hobson said it had not been.
THE SIXTH CEO
If the gains hold, Starbucks stock was set for a record one-day percentage jump, reaching a more than five-month high. Chipotle stock fell 11%.
In May, days after Starbucks cut its annual sales forecast, former CEO Howard Schultz wrote on his LinkedIn account that its U.S. operations were the "primary reason for its fall from grace," and that senior leaders need to spend more time with workers.
Niccol, who will start on Sept. 9, will become only the sixth CEO at Starbucks over its 50-plus-year history, with founder Schultz leading the company for 23 years in three separate stints.
CFO Rachel Ruggeri will serve as Starbucks' interim CEO until Niccol starts.
Chipotle said its board had appointed Scott Boatwright, chief operating officer, as interim CEO. Its shares were down 9%.
Niccol joined Chipotle in 2018 from Taco Bell and helped the company overcome salmonella and E.coli outbreaks at several outlets.
"(Niccol) is a fixer and a doer and an executor," said Thomas Hayes, chairman at Great Hill Capital.
