Starbucks shares surge on CEO replacement

Starbucks shares surged by nearly 25% today following the announcement that Chief Executive Laxman Narasimhan would be replaced by Chipotle's CEO, Brian Niccol, after pressure from activist investors.

This significant gain in premarket trading boosted Starbucks' valuation by almost $20 billion, marking the stock's best single-day performance in its 32-year history as a publicly traded company. In contrast, Chipotle's shares fell by more than 7% in response to the news.

Prior to hitting a high of $95.90, Starbucks' stock had been trading below $80, having plummeted over 40% from its July 2024 peak.

The company has been struggling with a lack of growth, with sales declining about 3% year-over-year. Factors like long wait times, overpriced drinks, and supply chain disruptions have exacerbated the company's challenges.

Starbucks, which has seen three CEOs since 2022, is clearly seeking stability. Investors are optimistic about Niccol’s ability to bring about positive change at Starbucks, given his impressive track record of leading Chipotle through a major crisis and significantly rebuilding its brand reputation. Under Niccol's leadership, Chipotle’s market cap nearly increased tenfold, a remarkable achievement considering consumer cutbacks amid rising inflation.

Niccol is scheduled to take over on September 9th with a compensation package worth $113 million.