Starbucks suddenly replaces CEO after falling sales | Business News

Starbucks suddenly replaced its chief executive after the company suffered a larger-than-expected drop in sales.

The coffee chain’s board announced on Tuesday that Laxman Narasimhan had left the company “with immediate effect.”

They said Brian Niccol – the head of burrito chain Chipotle – would soon take his place.

This comes after mounting pressure and speculation over the future of Narasimhan, who had been in office for just a year and a half.

Last month, the company reported that global sales fell 3% during the third quarter – more than analysts had predicted and the latest in a series of disappointing financial results.

Along with declines in regions such as the US and the Middle East, sales fell 14% in China during the period.

The declines were attributed to a combination of weaker demand in a context of price increases and boycotts related to the war in Gaza.

Narasimhan, previously chief executive of multinational consumer goods company Reckitt, was under scrutiny due to his lack of experience in the restaurant sector.

Despite spending months studying Starbucksof business – including training as a barista – he came under further pressure in May when his predecessor Howard Schultz published an open letter urging the chain to make improvements.

There was also pressure from activist investor Elliott Investment Management after it built a $2bn (£1.55bn) stake and demanded changes to the company.

Mellody Hobson, who stepped down as chairman to lead the company’s board as part of the change, admitted to CNBC that she began pushing for Narasimhan to be replaced “a few months ago.”

Niccol, who has also held senior roles at major US food brands including Taco Bell and Pizza Hut, will become chief executive on September 9.

Ms Hobson said she was “thrilled”, adding: “His phenomenal career speaks for itself.”

Niccol has been credited with transforming Chipotle’s fortunes — including helping its stock price rise nearly 800% under his leadership.

Schultz welcomed the appointment – ​​warning that the company was now at a “pivotal moment in its history”.

Starbucks shares rose more than 20% in early trading after the announcement — while Chipotle shares fell more than 10%.

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Meanwhile, Starbucks Chief Financial Officer Rachel Ruggeri will serve as interim CEO.

Niccol said in a statement that he was “excited” to take on the role and said he believed there was “huge potential” for the company to grow.

It comes after Starbucks was subjected to boycotts during the war in Gaza, after it took legal action last year against the US union Workers United for using its name and a similar logo.

The move came shortly after the union’s social media account published a post expressing solidarity with the Palestinian people.

Other major US companies hit by the Gaza boycotts, including McDonald’s, also suffered from the drop in sales.

Starbucks said its “official position” is that it “condemns violence in the region.”