Starbucks shares soared on Tuesday after the coffee giant announced it had appointed Chipotle’s CEO to replace its own chief executive after less than two years on the job.
Chipotle CEO Brian Niccol will take over from Laxman Narasimhan, who the company brought in in March 2023 to lead a “reinvention” as it struggled against competition and weakening demand in the US and China.
However, Starbucks stock kept dropping and the company lost nearly one-quarter of its value, per Reuters.
When executives announced the shakeup on Tuesday, shares rose 24 percent ending the day at $95.90. After Niccol started at Chipotle in 2018, the company’s annual sales skyrocketed and its stock has more than tripled within the last five years.
Elliott Investment Management, an activist investor which holds a $2bn stake in Starbucks, had been putting pressure on the company to make its chief executive a director, something former Starbucks CEO Howard Schultz cautioned against, the outlet reported.
The fund manager called the change in leadership “a transformational step forward” for Starbucks. “We look forward to continuing our engagement with the Board as it works toward the realization of Starbucks’ full potential.”
The fund manager had not been consulted on the CEO switch.
According to Reuters, Starbucks had switched its focus from offering cafes set up for long visits to mobile pickup and delivery orders.
Trian Fund Management, another activist investment firm that also owned Starbucks shares sold its position after the appointment.
Meanwhile, Chipotle closed down 7.5 percent on Tuesday.
Schultz wrote on his LinkedIn account in May that US stores were the reason for the decline in sales and suggested senior leaders spend more time with workers.
Starbucks suffered a 6 percent decline in sales in July in US comparable transactions for its most recent quarter.
Niccol is due to start on 9 September. CFO Rachel Ruggeri will serve as interim CEO.