Starbucks has announced a significant executive restructure, naming Brian Niccol, the CEO of Chipotle, as its new chairman and CEO, effective September 9. Following this news, Starbucks shares surged to a record 24.5% increase on Tuesday, while Chipotle’s stock experienced a 7.5% decline.
Currently in Seattle, Starbucks revealed that its outgoing CEO, Laxman Narasimhan, is stepping down from both his leadership position and his role on the board of directors immediately. In the interim, Rachel Ruggeri, the company’s CFO, will take on the CEO responsibilities until Niccol’s official start date. Mellody Hobson, who currently chairs the board, will transition to lead independent director.
Niccol, who has led Chipotle since 2018, significantly boosted the company’s performance, with revenue nearly doubling, profits soaring close to sevenfold, and an 800% increase in stock price during his tenure. His previous experience includes various executive roles at Taco Bell and Pizza Hut, part of Yum Brands.
The timing of the announcement coincides with New York-based hedge fund Starboard Value acquiring a stake in Starbucks last week, aiming to enhance its stock performance. Meanwhile, Starbucks is in negotiations with Elliott Investment Management, another activist investor, which has also acquired shares in the company and is seeking changes at the management level.
Elliott Investment is pursuing representation on Starbucks’ board and may initiate a proxy battle for a seat. The intentions of Starboard Value regarding board participation remain unclear.
Howard Schultz, the former CEO, is still the largest shareholder in Starbucks, having been succeeded by Narasimhan in March 2023.
On the stock performance front, following the executive announcements, Starbucks shares increased significantly, while Chipotle’s stock fell below its 200-day moving average. After a stock split on June 26, which was the first in Chipotle’s history, its stock gains for the year have been reduced to 13% after previously hitting highs in late June.