Why Starbucks Fired Laxman Narasimhan A Year After His Appointment As CEO

Starbucks said Tuesday that Brian Niccol, chief executive at Chipotle, would be the coffee chain's new CEO -- just over a year after current boss Laxman Narasimhan took over the role.

Narasimhan steps down as chief executive and as a member of the Starbucks board "with immediate effect," said the company in a statement.

Starbucks shares were around 21 percent higher in early afternoon trading, while Chipotle Mexican Grill shares fell by about eight percent.

The leadership shifts come as Starbucks pushes to turn around its business, while contending with broad-based sales declines in its most recent financial results.

The company also saw a bruising April earnings report, battering its shares and prompting Narasimhan to promise a reset.

Starbucks previously cited weakening consumer sentiment and tough market conditions in China as factors in its troubles.

The company has also been contending with pressure from activist fund Elliott Investment Management, which took a stake in the chain and had been seeking ways to boost the share price.

The coffee giant is working meanwhile to finalize contracts with unionized stores.

Lynne Fox, president of the Workers United union, said in a statement Tuesday: "We look forward to continuing to work with Starbucks to resolve massive outstanding litigation and reach fair collective bargaining agreements in the coming months."

"The replacement of Laxman Narasimhan as Starbucks CEO is the result of growing dissatisfaction, particularly from activist investors, over the way the chain has been run," said Neil Saunders, managing director at GlobalData, in a statement.

"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," he added.

Investors could be hoping for improvements in day-to-day operations by bringing Niccol on board.

"Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth," said Starbucks board chair Mellody Hobson in a statement as the company announced the leadership changes.

Niccol has served as Chipotle's CEO since 2018.

In naming him Starbucks' new CEO, the company noted that his work at Chipotle had "driven significant growth and value creation," citing revenue that has nearly doubled and higher profit.

Narasimhan, a veteran of PepsiCo and other consumer brands, had taken over the top spot in 2023 after a period working with longtime Starbucks CEO and interim boss Howard Schultz.

The statement noted that Narasimhan, during his tenure, drove innovation in the brand's supply chains and boosted its store operations.

Niccol will start in his new role on September 9, with Starbucks chief financial officer Rachel Ruggeri serving as interim CEO until then.

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