There was a notable stir on Wall Street when the news went public that Brian Niccol would be taking over as CEO of Starbucks. Indeed, many feel he is the right person for the job.
In addition, Niccol’s emergence as CEO would, it is believed, dampen Howard Schultz’s decade-long influence on the US chain.
Why Did Starbucks Change Its CEO
Niccols will take over leadership from Laxman Narasimhan, who came on board as CEO in March 2023. The past 16 months have been referred to as a Schultz era because Schultz literally handpicked Narasimhan as CEO just before vacating the office.
Unfortunately, in the last two quarters, Starbucks has experienced a significant sales decline under Narasimhan’s leadership. This is one of the many reasons why the decision to hire Brian Niccol has been applauded on Wall Street.
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Drop in Brian Niccol and Pray for Revival
Naturally, Niccol’s marching order as CEO would be to revive demand for the brand’s coffee to previous highs. A Wall Street and TD Cowen analyst, Andrew Charles, suggests in a note to clients that Niccol is a big catch for Starbucks.
Investors are confident that Howard Niccol is capable of bringing the company back to its winning ways. This confidence in the new CEO is confirmed by the 20% climb of SBUX a few hours after the news broke, the company’s best stock performance since 1992.
How the Leadership Change Stirred Investors’ Sentiment
On the contrary, Chipotle’s shares bucked by 9% as investors bemoaned Brian Niccol’s departure. Following this movement of chess pieces, Bird, TD Cowen, and Piper Sandler instituted varying upgrades to SBUX.
An Oppenheimer analyst, Brian Bittner, wrote a glowing review of Starbucks’ leadership change. He said, “We view this as a dream hire for SBUX and could not think of a more equipped leader to take a fresh look at SBUX’s operations, competitive positioning, and overall strategy.”
What did Howard Schultz do to Starbucks?
There is no denying that Howard Schultz played a tremendous role in transforming Starbucks into a global coffee giant during his tenure as the company’s CEO. Indeed, after Schultz’s 1986 – 2000 stint, he had to return on two different occasions to save the company from floundering sales.
Schultz stepped in between 2008 and 2017 and 2022 and 2023. Subsequently, he stepped aside as CEO and promised not to return.
Starbucks Still Reeks of Schultz’s Influence
Naturally, Starbucks is accustomed to the Schultz style of administration. It may take a CEO like Niccol, who already has his teeth cut from years of experience as a restaurant CEO, to shake things up a bit.
David Palmer, an Evercore ISI analyst, reaffirmed this by saying, “Importantly, Brian is likely the one restaurant executive that has the gravitas to address the Howard Schultz Founder ‘overhang.’”
Howard Schultz’s Rein On Starbucks
Despite his promise not to return to actively managing affairs, Howard Schultz continues to be a sideline influencer of decisions. For example, after observing the company’s woeful performance in Q1 2024, Schultz wrote an open letter on LinkedIn advising Starbucks leadership on how to scale the hurdle.
In addition, despite no longer having a formal portfolio in Starbucks, Schultz was kept in the loop of talks that brought on Niccol as the new CEO.
Howard Schultz Welcomes Brian Niccol
Starbucks’ chairman emeritus, Howard Schultz, endorsed the Niccol appointment in a press release, declaring that the new CEO is precisely what the coffee chain needs at this pivotal time.
In addition to being the new CEO, Brian Niccol will simultaneously be the board chair at Starbucks after former chair Mellody Hobson stepped aside. This structural reshuffle will give Niccol enough shoulder room to make the necessary revitalization changes in the company.
SBUX Investors Have a New Leading Light
Over the years, Howard Schultz’s opinions about Starbucks management and policies had a reputation for swaying investor decisions, being the company’s founding chair. However, that might change going forward as Brian Niccol is also a respected voice on Wall Street.
Indeed, a similar scenario played out when Niccol took over the leadership of Chipotle in 2018. The immediate past CEO of Chipotle was founder Steve Ells, who had been in the role since 1993. So, it took a lot of charisma for Niccol to establish himself and win investors’ trust, which explains why Chipotle’s stock fell after he left. Niccol is on track to do the same at Starbucks.
Leave Celebrations for Later, Says Analysts
However, not all Wall Street analysts are overly optimistic about Brian Niccol’s famed Midas Touch. This school of thought feels SBUX is a much bigger conglomerate than Chipotle and might be more challenging for the new CEO to improve.
Wedbush analyst Nick Seytan shared this sentiment when he said of Niccol, “His challenge is to connect with a new customer. Aside from the power to change the direction of macro headwinds, we view the shareholder euphoria as premature.”
How Much is the Starbucks CEO Paid?
According to Kayleena Makortoff, a reporter for The Guardian, Brian Niccol is lined up to receive up to $113 million during his first year at Starbucks. His annual salary is pegged at $1.6 million, while the rest would come from attractive incentives hinged on the company’s performance.
Ousted CEO Laxman Narasimhan may likely receive a severance of about $10 million, which is due largely to his contractual entitlements.
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How Much Did Schultz Pay for Starbucks?
Howard Schultz paid about $3.8 million, mostly from investors’ funds, to buy out the original founders of Starbucks in 1987. He had once managed the company for the founders and knew its potential, but he did not have the liberty to make the revolutionary changes he wanted.
The buyout deal included the six existing coffee stores at the time, a roasting plant, and the company’s brand name.
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