Sep. It was a shock announcement by Starbucks early Tuesday morning after the ailing coffee chain announced that Chipotle ( CMG ) chairman and CEO Brian Nicol would become its next CEO starting at 9 p.m.
Nicole will take over from Lux Narasimhan, who has been in the job for less than 18 months.
Yahoo Finance Executive Editor Brian Sozzi has the inside scoop:
Starbucks is currently an icon in crisis. Don’t believe me? Let’s review the facts.
First, the company’s financial results and stock price are terrible.
Its most recent quarter saw a 6% drop in North American transactions as consumers shunned the chain’s ever-more-expensive coffees and long wait times.
International sales fell 7%. Comparable sales in China fell 14%, prompting executives to say in earnings that they are exploring strategic options for the business. Non-GAAP operating margin decreased to 16.7% from 17.4%.
The Company’s previous quarter Not too hot either.
Starbucks shares were down 20% over the past five years before today’s pop. The S&P 500 is up 85%. Chipotle is up 201%.
“Fixable, but it will take time,” a Starbucks insider familiar with many of the company’s problems told me recently.
And then there’s the chaotic, chaotic leadership in the C-suite.
Howard Schultz — the meddling billionaire founder of Starbucks turned failed presidential candidate — not-so-secretly ripped into Narasimhan, his hand-picked successor. LinkedIn post Two months ago, everything undermined his authority.
Narasimhan was embarrassed on live TV in an expert interview by my former boss Jim Cramer on TheStreet.
Still in disbelief at how terrible and ill-prepared Narasimhan appeared in the interview, I spoke privately with restaurant CEOs — some quipped that he might not be around by 2025. They are right!
A Wall Street analyst told me that since Narasimhan is essentially a consultant masquerading as a food retailer CEO, the TV performance should have been expected (he was at McKinsey for 19 years).
Last but not least, Starbucks is still dealing with the erosion of trust among the rank and file of its stores, which has led to moves to consolidate.
In Nicole, Starbucks gets someone who can overcome all of these crises over time. Chipotle shares are up 671% since Nicole became CEO, according to Yahoo Finance data, compared with 100% for the S&P 500 and 81% for McDonald’s ( MCD ).
The Starbucks crisis ends today. It won’t be easy for Nicole, but at least she’ll go in with a “locks” mindset and mindset. That’s a hit, and then some.
Read more about Nicole and her leadership here.
