Starbucks (NASDAQ:SBUX) shares surged more than 18% at the open on Tuesday after the company announced that Brian Niccol, the current Chairman and CEO of Chipotle Mexican Grill (NYSE:CMG), will take over as its new Chief Executive Officer.
The news, however, sent Chipotle's stock down by over 9%.
Niccol, who has led Chipotle since 2018, will officially assume his new role at Starbucks on September 9, 2024, leaving Starbucks, effective August 31. During his tenure at Chipotle, Niccol transformed the company by focusing on people, culture, and digital innovation, leading to a near doubling of revenue and an 800% increase in the stock price.
Starbucks praised Niccol's ability to drive innovation and growth, with Mellody Hobson, Starbucks Board Chair, stating, "His phenomenal career speaks for itself."
"Our board believes he will be a transformative leader for our company."
Laxman Narasimhan, the current Starbucks CEO, is stepping down effective immediately, with CFO Rachel Ruggeri serving as interim CEO until Niccol's arrival.
Starbucks founder Howard Schultz also voiced his support for Niccol, noting his "leadership impact" and calling him "the leader Starbucks needs at a pivotal moment in its history."
At Chipotle, Scott Boatwright, the current Chief Operating Officer, has been appointed interim CEO following Niccol's departure. Boatwright, a seven-year Chipotle veteran, was instrumental in the company's turnaround strategy and will continue to execute its strategic plan without interruption.
Chipotle's Board of Directors expressed confidence in their deep bench of leadership talent, ensuring a smooth transition and continued growth under Boatwright's leadership.
Following the news, analysts at Quo Vadis Capital added Starbucks as a long idea, although they stated, "This will be a big challenge for Brian Niccol."
"When he arrived at CMG, the company was just emerging from a damaging bout with e.coli, and the brand needed a boost to recover from this incident and operations required rebuilding. The results have been dramatically better than we ever anticipated," wrote the firm. "As we think about SBUX, the range of issues to address is larger, and more of it is macro-related. However, based on the track record, we believe it makes sense to bet on his success in this new domain."
Meanwhile, analysts at Baird upgraded SBUX to Outperform, raising their price target for the stock to $110 a share, citing a more favorable risk-reward following the hiring of Niccol as Chairman and CEO.
"While we acknowledge continued near-term risks related to the external operating environment, we believe Niccol brings a skill set that will prove valuable in strengthening internal operating fundamentals for the company," said analysts at Baird. They believe the appointment sets the stage for "healthier growth in the years ahead.
"Based on this outlook, we now expect sentiment on the shares to remain positive even if operating results are lackluster for the next few quarters," they added.