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Key Takeaways
- Starbucks’ new CEO, Brian Niccol, officially started his tenure with the coffee giant Monday after announcing his departure from Chipotle last month.
- Niccol’s appointment sent Starbucks’ stock up roughly 25% in one day, with analysts largely optimistic about what Niccol can do for Starbucks.
- Starbucks’ recent struggles in the U.S. and China, and pressure from activist investors to improve sales and stock price, will be key issues that Niccol will face as chief executive.
Starbucks (SBUX) officially has a new chief executive officer (CEO) as of Monday, as Brian Niccol joins the coffeehouse giant after announcing his departure from the top job at Chipotle (CMG) last month, with Starbucks looking to turn around the performance of its recent disappointing quarters.
Niccol also will have to contend with pressure from activist investors who recently have taken stakes in Starbucks and engaged with the company on plans to improve its stock price and sales, which have struggled both in the U.S. and internationally in recent quarters. Analysts largely cheered the move for Starbucks, with several stating that they believe Niccol was a key piece of Chipotle’s success and significant growth during his tenure there as CEO.
Disappointing US Sales as Pumpkin Spice Season Begins
Same-store sales have declined in Starbucks’ two most recent quarters as Americans have cut discretionary spending while facing higher prices for essentials. Starbucks and a number of other fast-food giants have launched value promotions in recent months to win customers back.
Last month, Starbucks also announced the earliest-ever debut of its fall lineup—including the popular pumpkin spice latte—weeks ahead of the official start of fall to boost sales.
Activist Pressure Brewing
Activist investors Elliott Investment Management and Starboard Value have each reportedly bought stakes in Starbucks, helping boost the company’s stock. The firms haven’t publicly disclosed their plans for Starbucks, but Elliott issued a statement celebrating the hiring of Niccol and said it has “engaged with Starbucks’ board” over what it believes are the company’s “key issues.”
Previous reports indicated that Elliott had proposed measures before Niccol was hired, like expanding Starbucks’ board as part of a settlement package that would have kept Laxman Narasimhan in his role as CEO. Starbucks stock jumped roughly 25% the day Niccol’s appointment was announced, which could have allayed some of the activist investor concerns.
International Struggles
Starbucks’ same-store sales dropped by 14% year-over-year in China in its latest earnings report in July, with foot traffic and average ticket both declining in the quarter. China, together with the U.S. comprises 61% of Starbucks’ business.
The chain has faced increasing competition from domestic coffee operations, and also has been one of a number of companies that have said China’s post-pandemic economy is proving to be a challenging operating environment.
Starbucks shares were up nearly 0.9% recently on Niccol’s first day on the job at $91.94.