Starbucks CEO Laxman Narasimhan Ousted
On Tuesday, Starbucks announced a major leadership change that sent its shares soaring over 20%. The coffee chain revealed that current CEO Laxman Narasimhan will be replaced by Chipotle CEO Brian Niccol. This move comes as Starbucks grapples with activist investors, declining sales, and a plummeting stock price.
Major Jump in Starbucks Shares
Following the announcement, Starbucks shares surged by 21% to $92.96 in early afternoon trading. This significant increase marks a positive turn for the company, which had seen its shares fall by 18% since January. The appointment of Brian Niccol as the new CEO is set to take effect on September 9, with Narasimhan stepping down immediately.
Challenges Faced by Starbucks
Starbucks has been contending with a decline in consumer support, leading to its first quarterly revenue drop since 2020. The company experienced a 3% decrease in store traffic between January and March, with some customers expressing dissatisfaction with the high prices of their drinks amidst economic challenges like inflation.
Neil Saunders, managing director at GlobalData, highlighted Starbucks’ performance issues, attributing them to a lack of innovation and a deteriorating store experience. The decline in sales is not solely due to reduced consumer spending but also stems from internal shortcomings within the company.
As Starbucks faced mounting challenges, including competition in China and controversies related to the Israel-Hamas conflict, activist investor Elliott Management initiated discussions with the company’s board regarding leadership changes. The appointment of Brian Niccol is seen as a transformative step forward to address these issues and steer Starbucks towards realizing its full potential.
Since taking on the role of Chipotle CEO in 2018, Brian Niccol has overseen a remarkable growth in revenue and profits for the taco chain. However, news of his departure caused Chipotle’s stock price to decline by 9%.
Overall, the leadership shakeup at Starbucks signifies a new chapter for the coffee chain as it aims to navigate through turbulent waters and regain its competitive edge in the market.