In one of the biggest developments in the past few days, Starbucks (NASDAQ: $SBUX) announced that Chipotle (CMG) ‘s CEO would join the company.
Why Starbucks Poached Chipotle CEO
Brian Niccol has been at Chipotle since 2018. He is replacing Laxman Narasimhan, who has been at the coffee chain for less than two years. Starbucks founder Schultz handpicked Narasimhan in 2023.
However, he has since come under fire for the way he and other executives were steering the coffee chain. After he took over the reins in March 2023, the stock dipped 22%. Since then, the coffee chain has faced declining sales and operating challenges.
Chipotle Soars Under Niccol
Since Brian Niccol joined Chipotle as CEO in March 2018, the stock has soared by over 700%, a sixfold increase compared to the performance of the S&P 500.
He has also proven himself a performer even in tough times. For instance, in 2020, when most restaurant chains experienced a 100% decline in revenue due to restrictions, Niccol managed 7% YoY growth. Once the pandemic measures were eased, Chipotle saw revenue grow by double digits.
In recent weeks, activist investor Eliott Management has focused on Starbucks. Amid economic headwinds, Starbucks has seen same-store sales in China and the US decline.
Besides the top line, Niccol has also proven capable of steering a company through a major crisis. Between 2015 and 2018, the company faced several outbreaks of salmonella. Under Niccol’s leadership, the outbreaks ended as he implemented a food safety program.
Starbuck’s Executive Changes
Following Narasimhan’s ouster, Starbucks VP and CFO Rachel Ruggeri will lead the coffee chain until September 9, 2024, when Niccol takes over. He will finish August with Chipotle, which he has helped achieve strong sales and profits.
SBUX Stock Performance
Following the announcement that Niccol was leaving, Chipotle (CMG) stock fell nearly 12%, while Starbucks stock rose nearly 21%. Despite the decline, CMG stock is still up 16.86% this year and 40.59% in the past 12 months. Starbucks (SBUX) stock is up 1.22% this year and down 1.71% in the past 12 months. SBUX closed Friday 0.53% higher at $94.81.
Is SBUX A Buy Now?
Chipotle has benefited greatly from Niccol’s leadership, and Starbucks investors hope he can do the same. However, it could be a bit more complex.
For one, Starbucks and Chipotle are at different stages. While Chipotle is still in its early growth phase, Starbucks is close to market saturation. As such, unlike Chipotle, Niccol’s focus will have to be on same-store sales and international expansion.
Despite this, while Niccol could face challenges in helping to grow a mature business, he has proven that his management technique works. He is likely to succeed at Starbucks, too, which could potentially send the stock soaring in the coming months.
Like Starbucks, Chipotle faced the challenge of finding success after the founder left. Niccol has proven he can do this, which should work in his favor. Since the Starbucks CEO left, the coffee chain has found the going tough. Brian Niccol could bring stability and focus back to the company.
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