Another Major Head Rolls at Starbucks… CEO Brian Niccol’s Vision Is Getting Serious

Since Brian Niccol left Chipotle for Starbucks (where he made a historic $96 million his first four months), things have really started to turn around (maybe slowly, but hey every rebuild takes time… just ask my Tennessee Titans, they've been rebuilding for 4 years). The stock is up 23%, and it’s clear that Niccol isn’t here to make friends. Starbucks just axed 1,100 corporate employees, and this morning, he made yet another big change at the top.

This morning, Niccol made another big move by replacing CFO Rachel Ruggeri with retail veteran Cathy Smith (Nordstrom’s former CFO). The shake-up comes right after Starbucks laid off 1,100 corporate employees in an ongoing effort to streamline operations. Adding to the chaos, Niccol has been aggressively reshuffling his executive team like a manager making last-minute trades before a fantasy football deadline.

On the outside it might look like Niccol is firing people for fun… but there’s a strategy behind this corporate Hunger Games. His “Back to Starbucks” plan is all about getting the company back to its core… you know… coffee first, efficiency second, and, hopefully, profit somewhere in the mix. To do that, Starbucks is making some serious changes. It’s cutting about 30% of its menu, which means fewer overly complicated frappuccinos slowing down the line. The company is also looking to reduce its number of discounted transactions by 40% year over year, so no more buying one pumpkin spice latte and getting three for free. 

(Source: CNBC)

On top of that, layoffs and leadership shake-ups are part of Niccol’s plan to run a leaner, more focused company. Investors are eating it up, even if every Starbucks corporate employee has already updated their LinkedIn to “open to work” just in case they’re next.

On paper, Starbucks’ latest earnings report was a some good… some sh*t. Revenue stayed flat at $9.4 billion, but at least it beat expectations. EPS dropped 23% year over year, but still came in slightly above estimates. The not-so-great news was that global same-store sales were down 4%, foot traffic declined 6%, and North American traffic was even worse at -8%. People are still hesitant to fork over cash for overpriced lattes, and higher coffee prices aren’t helping. But Starbucks is banking on its loyalty program and operational improvements to lure customers back in.

Brian Niccol turned Chipotle around from a food poisoning meme to a $2,000-per-share beast, so it’s no surprise that Starbucks’ board tapped him to clean up their mess. He’s already brought in some of his old Taco Bell team, revamped the leadership ranks, and is trying to make Starbucks run like an actual business again instead of a confused corporate entity that just happens to sell coffee. 

Investors seem to like what they’re seeing, and while customers are still skeptical, Starbucks is at least giving them reasons to come back.

Niccol is making the hard decisions, and while layoffs and price hikes aren’t fun, they might be necessary for Starbucks to change the culture. Am I screaming to load the truck up with Starbucks stock? Not yet. But for a company that’s had four CEOs in five years, at least it finally looks like someone has a plan. Now, let’s just hope Niccol doesn’t get bored and leave for another gig before the job is done.

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Stock.News has positions in Starbucks.