Why did Starbucks fire Lakshman Narasimhan a year after he was appointed CEO?

New York, USA:

Starbucks said Tuesday that Brian Niccol, the CEO of Chipotle, will be the coffee chain’s new chief executive officer — just one year after current president Lakshman Narasimhan took over the role.

Narasimhan is resigning as CEO and member of Starbucks’ board of directors “effective immediately,” the company said in a statement.

Starbucks shares rose about 21 percent in early afternoon trading, while Chipotle Mexican Grill shares fell about 8 percent.

The leadership shifts come as Starbucks seeks to transform its business, while facing widespread sales declines in its latest financial results.

The company also saw a shock earnings report in April, which weighed on its shares and prompted Narasimhan to promise to turn things around.

Starbucks had previously cited weak consumer confidence and tough market conditions in China as factors behind its problems.

The company is also facing pressure from activist fund Elliott Investment Management, which has taken a stake in the chain and has been looking for ways to boost the stock price.

The coffee giant is also working to finalize contracts with union stores.

“We look forward to continuing to work with Starbucks to resolve the massive pending lawsuits and reach fair collective bargaining agreements in the months ahead,” Lynn Fox, president of the United Workers Union, said in a statement Tuesday.

“The replacement of Lakshman Narasimhan as Starbucks CEO is a result of growing dissatisfaction, particularly from activist investors, with the way the chain is run,” Neil Saunders, managing director of GlobalData, said in a statement.

“While some of the slowdown can be attributed to consumers slowing down their purchases, much of it is also due to a deterioration in the in-store shopping experience and a lack of innovation in areas such as food,” he added.

Investors can hope to improve day-to-day operations by bringing Nicole into the company.

“Brian is a culture champion who brings a wealth of experience and a proven track record of driving innovation and growth,” Starbucks Chairman Mellody Hobson said in a statement when the company announced the leadership changes.

Nicole has served as CEO of Chipotle since 2018.

In naming him as Starbucks’ new CEO, the company noted that his work at Chipotle “has driven significant growth and value creation,” noting that revenues have nearly doubled and profits are higher.

Narasimhan, a veteran of PepsiCo and other consumer brands, took over the top job in 2023 after a stint working with Starbucks CEO and interim president Howard Schultz.

The statement indicated that during his tenure, Narasimhan led innovation in the brand’s supply chains and enhanced its store operations.

Nichol is scheduled to assume his new role on September 9, with Rachel Ruggieri, Starbucks’ chief financial officer, serving as interim CEO until then.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)