Why Starbucks Shares Are Up 21% Last Month

Actions of Starbucks (SBUX -0.91%) grew 21.3% more in August 2024, according to data from S&P Global Market Intelligence. The coffee giant only had one game-changing piece of news last month, but it was a big one. After 17 months on the job, CEO Laxman Narasimhan was pushed out to make way for a food service superstar. As of September 9, the former Chipotle Mexican Grill (CMG -0.34%) CEO Brian Niccol will take the reins as Starbucks CEO and Chairman of the Board.

Brian Niccol’s impressive record

Niccol comes with an impeccable record. He led a return of Huh! trademarks‘ (YUM 1.00%) Taco Bell division in the 2010s before moving to Chipotle in 2018. There, he lifted the upscale Mexican food chain’s annual sales from $4.48 billion to $10.66 billion in six years. Free cash flow increased from $251 million to $1.3 billion over the same period. Chipotle’s stock has returned 733% under Niccol’s tenure.

At the same time, Starbucks has underperformed the market with Narasimhan at the helm, with sales falling in the past two quarters. Analysts and investors have been quick to embrace Niccol as a potential savior of a struggling brand, hoping to see a revival of the company’s culture similar to the ones he sparked in his last two stints as CEO.

Challenges facing Starbucks in 2024

Starbucks is in dire need of a change, and Niccol seems like the best name for the job. That said, some of the headwinds against Narasimhan have come from heated discussions by unions and movements by activist investors. The new boss must deal with these issues while installing a new business plan, likely modeled after the experience-based operating plans he established at Chipotle and Taco Bell. Niccol has a history of resisting labor unions, may set the stage for a difficult Starbucks tenure.

So Niccol may face a tougher challenge than he expected. That said, his touch has certainly worked wonders at Chipotle and Taco Bell. The same focus on customer experience and efficient operations should be an upgrade for Starbucks as well. And it manages to do so from a surprisingly low starting point — Starbucks stock has outperformed S&P 500 index recently, showing a 7% drop in prices over the past year, while the market index is up 22%.