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Starbucks Taps Chipotle's Brian Niccol as New CEO, Sparking Stock Surge

AInvestTuesday, Aug 13, 2024 8:59 pm ET
2min read

Starbucks, the world's largest coffee chain, announced that Brian Niccol, who was the CEO of the fast-food brand Chipotle, will be appointed as the company's CEO.

Following this news, Starbucks' stock price surged by more than 23% after the US stock market opened on Tuesday, setting a record for the largest single-day increase, while Chipotle's stock price plummeted by nearly 14%.

Niccol will take office as Starbucks' CEO and Executive Chairman of the Board on September 9th. The current Starbucks CEO, Laxman Narasimhan, will immediately resign from his position, and the company's CFO, Rachel Ruggeri, will serve as the interim CEO until Niccol officially takes over.

The former Chipotle CEO has been praised by several analysts as one of the best CEOs in the American public restaurant industry, including Michael Halen from Bloomberg Intelligence, who said that hiring Niccol was a no-brainer decision.

Brian Bittner from Oppenheimer stated that Niccol is the ideal candidate for Starbucks. Within just a few hours after the announcement, the stock received at least four upgrades in ratings. Niccol has gained accolades for his successful tenure as CEO of Chipotle and Taco Bell, a subsidiary of Yum! Brands.

In our view, Starbucks picks up a hall of fame restaurant CEO, and his appointment as Starbucks CEO and Chairman suggests a new era is underway, Andrew Charles, an analyst at TD Cowen, said. Charles upgraded Starbucks' rating from hold to buy. He also noted that he saw similarities between the transformation of Chipotle and the improvements Starbucks needs to make in customer traffic, including in marketing, product innovation, and operations.

Meanwhile, Narasimhan, whom Niccol will replace, was personally chosen by former Starbucks CEO Howard Schultz as his successor and joined Starbucks as the designated CEO in September 2022, officially succeeding Schultz in March 2023.

During Narasimhan's tenure, Starbucks' stock price fell by 21%. The company's performance has been poor this year, affected by weak sales in the United States and China, its two largest markets.

Starbucks has long faced pressure from activist investors and the well-known hedge fund Elliott Investment Management, which has a significant stake in Starbucks and has been pressuring it to improve performance and stock prices.

Niccol will become the sixth person in Starbucks' history to serve as CEO and the second CEO from outside the company.

Niccol has been the CEO of Chipotle since 2018 and previously led Taco Bell, a subsidiary of Yum! Brands.

As the CEO of Chipotle, he helped the chain recover from a foodborne illness scandal and led it through the COVID-19 pandemic. In recent quarters, while other restaurants reported a sharp decline in consumer spending, Chipotle's customer traffic and sales have risen against the trend.

Chipotle stated that the board has appointed COO Scott Boatwright as the interim CEO. Jack Hartung, the CFO of Chipotle who was originally scheduled to retire next year, will continue to serve as the President of Strategy, Finance, and Supply Chain.

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