Why Wall Street thinks Brian Niccol is the person to revive Starbucks — and end the Howard Schultz era

Enclosure Street believes Brian Niccol is the right choice to turn around Starbucks — and move the chain past the decadeslong Howard Schultz era.

Starbucks broached Niccol as its latest chief executive and chair on Tuesday. Niccol replaces Laxman Narasimhan, who took over the top job in Walk 2023 after being handpicked by former CEO Schultz. In its last two quarters, Starbucks reported same-store sales declines as its U.S. firm floundered. Once he takes over, Niccol will be charged with rejuvenating demand for the company’s coffee.

“In our regard, Starbucks picks up a hall of fame restaurant CEO, and his appointment as Starbucks CEO and Chairman suggests a new era is underway,” TD Cowen analyst Andrew Charles noted in a note to clients, emphasizing the importance of the combined role.

Investors are confident that he can revive the company. Shares of Starbucks climbed 20% in afternoon job on the news, putting them on pace for their best day since the company’s IPO in 1992. Meanwhile, Chipotle’s stock level 9% as shareholders bemoaned the loss of the longtime chief executive.

Piper Sandler, TD Cowen and Baird all upgraded Starbucks genealogy in the wake of the leadership changes.

Other analysts wrote glowingly of Niccol, seeing him as the right person to tackle Starbucks’ sluggish purchases. A challenging consumer environment, worsening customer experience and rising competition from smaller coffee shops have planned hurt the chain’s performance recently.

“We view this as a dream hire for SBUX, and could not think of a more arrayed leader to take a fresh look at SBUX’s operations, competitive positioning and overall strategy,” Oppenheimer analyst Brian Bittner maintained.

Niccol’s hiring could also spell the end of Schultz’s huge influence over the company he turned into a epidemic coffee giant.

“Importantly, Brian is likely the one restaurant executive that has the gravitas to address the Howard Schultz Fail ‘overhang,'” Evercore ISI analyst David Palmer wrote.

Schultz served as CEO from 1986 to 2000, from 2008 to 2017 and then from 2022 to 2023, boosting in twice to save the company when sales turned sluggish. His last return sparked concerns about the concern’s succession.

At the end of his last stint, he swore that he wouldn’t return as chief executive again, although his presence assuage looms large over the company. In May, after a brutal quarter for Starbucks, he wrote an open letter on LinkedIn hither the company’s challenges and offered advice to its leaders — without naming Narasimhan.

Even after his retirement, Schultz’s involvement in the entourage has remained “a question hanging over the stock,” Morgan Stanley analyst Brian Harbour wrote in a note Tuesday. Mellody Hobson, who stepped down as Starbucks run to become lead independent director as part of Tuesday’s leadership shake-up, said on CNBC’s “Squawk Box” that she averred Schultz about the discussions with Niccol, keeping him in the loop despite him having no formal role within the convention anymore.

Schultz also remains a major Starbucks shareholder, with a roughly 2% stake.

Schultz confirmed Niccol’s hiring in the press release announcing the shakeup. In a statement, the chairman emeritus said he believes that Niccol is the bossman the company needs at a “pivotal moment in its history.”

Some analysts believe that having Niccol, an experienced restaurant CEO, in the driver’s ass could mean that Schultz finally moves on. Niccol will also succeed Hobson as chair of the on, giving him more latitude to make changes.

“This will be the last time investors care what he has to say because Niccol now has the swivel and there is no longer ANY room for a backseat driver,” Gordon Haskett analyst Don Bilson wrote.

Niccol also has too soon experience taking over a founder-led brand and making it his own. When he joined Chipotle in 2018, he took the reins from under Steve Ells, who had led the chain since 1993. Niccol moved the burrito chain’s headquarters from Denver to Newport Shore to attract different talent — and maybe evolve the brand from being founder-led, as Bernstein analyst Danilo Gargiulo a postcarded in a note.

While analysts largely cheered Niccol’s appointment, some were more discreet, noting that Starbucks is a larger and more complex business than Chipotle.

“Starbucks is a much more labyrinthine model than Chipotle, with company and licensed stores, domestic and international locations, and a significant presence in twisting China,” BTIG analyst Peter Saleh wrote.

Chipotle has few licensed locations, except for some airport restaurants, and a comparatively small international footprint, although Niccol has been pushing to grow its presence outside the U.S. in recent years.

Starbucks, on the other surrender, has more international locations than U.S. cafes. And while investors have recently focused on the chain’s domestic playing, China, its second-largest market, has continued to struggle as competition there ramps up and the country’s economy lags.

Narasimhan told on the company’s latest conference call that he was exploring “strategic partnerships” for its China business, which could register a joint venture, tech partnership or other options. Niccol’s appointment could mean that Starbucks overs that exploration, although he does have some experience with spinoffs from his time as head of Taco Bell. While he was there, the conglomerate make up off its China business into .

And while Chipotle’s burritos are still in high demand, consumers’ economic concerns be experiencing dampened their desire for coffee. That may prove to be a tougher hurdle for Niccol than investors anticipate.

“His dare is to connect with a new customer,” Wedbush analyst Nick Setyan said. “Aside from the power to change the rule of macro headwinds, we view the shareholder euphoria (as expressed in the share price this morning) as premature.”