Starbucks CEO Laxman Narasimhan is stepping down immediately after just a year in the role, the company announced Tuesday.
The struggling coffee chain has tapped Chipotle CEO Brian Niccol to be its new chairman and CEO, effective September 9. Starbucks’ stock soared more than 13% in premarket trading, while Chipotle’s dipped 8%.
Niccol has been leading the Mexican-inspired food chain since 2018, with Starbucks saying he has set “new standards in the industry and driven significant growth and value creation,” pointing to its revenue growing nearly 800% during his tenure.
“Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth,” said Mellody Hobson, Starbucks’ new lead independent director, in a release. “Our board believes he will be a transformative leader for our company, our people, and everyone we serve around the world.”
Narasimhan, who is also leaving the board, took over Starbucks in March 2023 and has seen the coffee chain largely struggle under his purview. Most recently, the chain’s sales dropped 3% globally at stores open for at least a year, including a 2% drop in its home North America market.
Starbucks’ struggles reflect consumer fatigue with high prices at food chains, restaurants and stores after years of price hikes. They also reveal cracks in Starbucks’ business model, which has changed in response to customer demand from a predominantly sit-down coffee shop to a mostly drive-thru and mobile takeout chain.
“In the face of some challenging headwinds, Laxman has been laser focused on improving the business to meet the needs of our customers and partners. We all wish him the very best and know he will do great things in the future,” Hobson said.
The abrupt change at the top comes amid a sliding stock, which is down 17% for the year, and ongoing negotiations with activist investor Elliott Investment Management.
“While some of the slowdown can be attributed to a more sluggish consumer cutting back, much is also the result of a worsening store experience and a lack of innovation in areas like food,” said Neil Saunders, retail analyst and managing director at GlobalData Retail, said in a note.
“Because of this Starbucks has been losing share to smaller, independent coffee shops and other rivals for a while, and the failure of Narasimhan to address this convincingly has irked investors,” Saunders said.
Saunders said that Niccol’s “deep foodservice experience will be useful as Starbucks navigates a cocktail of challenges including increased costs, labor issues, operational inefficiency, and a growing dissatisfaction among customers.”
Another factor that likely led to Narasimhan’s ouster was unhappiness from former Starbucks CEO Howard Schultz. He all but blasted his successor’s leadership in a viral LinkedIn letter in May, writing that the chain’s US operations are the “primary reason for the company’s fall from grace.”
Schultz said in a statement to the Wall Street Journal that Niccol has his “respect and full support.”
This is a developing story. It will be updated.
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