(Bloomberg) -- Starbucks Corp. has named Chipotle Mexican Grill Inc. Chief Executive Officer Brian Niccol as the coffee chain’s new CEO and chairman, replacing Laxman Narasimhan after just over a year in the role.
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Niccol starts his new role on Sept. 9, the company said in a statement. The current chief financial officer will lead the company until then. Starbucks shares jumped 15% on the news in premarket trading, while Chipotle shares fell 8.3%.
The abrupt leadership shakeup comes after activist investors Elliott Investment Management and Starboard Value reportedly amassed stakes in the company. Shares in the coffee chain had plunged 20% this year following two straight quarters of comparable sales declines.
Board chair Mellody Hobson on Monday said the company initiated discussions about the leadership of the company several months ago, downplaying Elliott’s influence in an interview Monday with CNBC.
“Sometimes you have to make tough decisions and those tough decisions are the right thing to do,” Hobson said in the interview. “It isn’t necessarily because of outside forces.”
Hobson said the board took full responsibility for the weakness at Starbucks and that it wanted to move fast to fix the business. “We own the outcomes,” she said. “We’re not passing any buck and we understand we have a job to do and we’re dong it.”
Although former CEO Howard Schultz doesn’t have a board seat or hold a formal role within the company, Starbucks’ sixth largest shareholder provided a statement of support for the new CEO. Hobson said that she told Schultz a week ago about the decision and “he said, ‘Mellody, that’s a home run.’”
Hobson said the board hasn’t laid out a specific turnaround plan yet, urging patience. “He’s not in the seat yet, let him get there and then come out with the plans,” she said. “He will be the one who will drive the strategy and the board will govern, I would imagine that he will look at everything as he should.”
Niccol joined Chipotle as CEO in 2018 and became chair of the company’s board in 2020. The company has outperformed competitors in recent quarters, managing to bring in diners even as others reel from a drop in demand. Chipotle’s shares rose more than 20% this year through Monday’s close. Before joining Chipotle, Niccol was the CEO of Taco Bell.
Chipotle said that Chief Operating Officer Scott Boatwright will take over as interim. CFO Jack Hartung, who recently said he would retire in 2025, has also changed course and agreed to remain with the company indefinitely as president of strategy, finance and supply chain to ensure a smooth transition, according to a statement.
(Updates with details throughout and board chair comments.)
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