Dive Brief:
- Starbucks CEO and chairman Laxman Narasimhan will be stepping down from his role effective immediately, with Chipotle alum Brian Niccol tapped to take on the role for the coffee chain, the company announced in a Tuesday press release.
- CFO Rachel Ruggeri will act as interim CEO before Niccol steps into the seat effective Sept. 9, according to the press release. The leadership swap comes as Starbucks has struggled to bolster slumping sales and store traffic under Narasimhan, who succeeded former CEO and current chairman Howard Schultz in March 2023.
- The decision to appoint a new CEO is “a change designed for the long-term future of the Company at a time where we will also be focused on navigating near-term headwinds,” a company spokesperson told CFO Dive via email.
Dive Insight:
Shares of the national coffee chain soared by as much as 20% Tuesday upon the news of Niccol’s appointment. The Chipotle and Yum Brands alum has “a strong reputation with investors given his track record, and we believe his appointment will be welcomed by all our shareholders,” a company spokesperson said via email. The company’s board is “confident that Brian will be a transformational leader for us,” they said.
While Niccol’s September start date is relatively quick, the CEO swap leaves long-time Starbucks executive Ruggeri stepping in as interim as the coffee chain looks to break its streak of slumping sales and store traffic — coming as the business continues to have high-profile conflicts with labor activists and political protesters which have hurt its brand among consumers.
Same-store sales were down by 3% year-over-year for the company’s most recent quarter ended June 30, partially offset by a 2% jump in average ticket price despite a 5% decline in comparable transactions, according to the company’s earnings report. Revenues declined 1% to $9.1 billion, meanwhile.
Sales in certain markets have fallen due to political friction related to the Israel-Hamas war, while lengthy legal battles with union leadership and former employees has put the company’s operations under a spotlight during a swell of labor activism.
In June, the U.S. Supreme Court sided with Starbucks in a key ruling, overturning an order by the National Labor Relations Board to rehire the so-called “Memphis Seven”— a group of seven workers who were fired from a Starbucks Memphis location following efforts to unionize, according to an Associated Press report at the time. The ruling led to an outcry from labor activists, who argued it weakens the NLRB’s ability to protect workers in labor disputes.
Ruggeri’s primary challenge, therefore, will be to help maintain stability during her short tenure in the company’s CEO seat, Shawn Cole, president of boutique executive search firm Cowen Partners said.
She will “also play a pivotal role in crisis management, ensuring strategic continuity, and making key decisions that cannot be postponed,” Cole said in an emailed response to questions. Ruggeri’s deep experience with Starbucks will help her to succeed in this role, with the CFO also working to reassure shareholders and help facilitate a seamless leadership transition, he said.
Ruggeri has “a deep understanding” of the company and is deeply trusted by chairman Schultz, Cole said, having logged most of her career at Starbucks. She has served as EVP and CFO since February 2021, according to her LinkedIn profile, with past roles including stints as the company’s SVP of finance, global retail and VP of finance, US Business.
However, her appointment to the interim position does raise the question of when or if Ruggeri will get her own permanent shot at the CEO seat, Cole said.
“Given the trend of CFOs increasingly being named interim CEOs, particularly in consumer service industries, it raises an important question: If CFOs are trusted to lead companies temporarily and often succeed in doing so, why aren't they more frequently considered for the long-term CEO role?” Cole said. “Rachel's deep roots at Starbucks and the broader industry trend make her potential ascension even more plausible.”
