Starbucks Replaces Boss After Sales Slump

Starbucks CEO Laxman Narasimhan is leaving the company after less than two years in charge, as the coffee chain seeks a solution to its declining sales. The move comes amid a backlash to price increases and boycotts triggered by the Israel-Gaza war. Former executive Howard Schultz believes Brian Niccol is “the leader Starbucks needs at a pivotal moment in its history.” Shares in Starbucks jumped more than 20% following the announcement.

The change in leadership at Starbucks has been brewing for the last two months, with global sales falling 3% annually in the three months to the end of June amid weakness in the US and China. The company has faced criticism for long waits for drinks and a sharp rise in prices.

Activist investors such as Elliott Investment Management have also been piling on pressure. Mr. Schultz had selected Narasimhan, a former executive at PepsiCo and Reckitt, as his successor in 2022, who took up the reins full-time in March 2023. However, despite his choice, Mr. Schultz voiced concerns publicly about the direction of the company in the spring after it reported an unexpectedly severe sales fall.

Incoming boss Brian Niccol has led Chipotle since 2018, helping the brand recover from a crisis after food poisoning outbreaks. Sales doubled during his tenure, and the chain’s share price surged from less than $7 to more than $50. In recent months, it has been seen as a bright spot in the restaurant industry, where many businesses have reported customers cutting back.

Shares in Chipotle dropped more than 9% after his departure was announced. Sharon Zackfia, an analyst at investment bank William Blair, suggests that the new chief executive could be inheriting a tougher challenge at Starbucks than at Chipotle, as the company is both bigger and its problems more complex.

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