Can new CEO reach 'peak Starbucks' following Schultz's path?

Newly minted Starbucks CEO Brian Niccol wasted no time getting started. Starbucks' chief is going old school, and the thrust of his changes are very much a return to three-time CEO Howard Schultz's vision. And while he's set the tone for remote work and Starbucks stores, he's also had to deal with the executive ranks. His leadership team was shaken by an abrupt retirement less than two weeks into the role. The company announced on Monday that North America CEO Michael Conway was retiring about six months after taking the job. He'll stay on as an executive adviser until November. Conway was part of a leadership shuffle in March under former CEO Laxman Narasimhan, who left the company in August with Niccol named as his successor the same day. Conway has been with Starbucks for 12 years, according to his LinkedIn profile. Niccol won't fill the spot. Instead, the former Chipotle CEO is creating a global chief brand officer position to handle marketing, digital, customer insights and store concepts, the company announced. The newly created position signals Niccol's focus on reviving the Starbucks brand across the globe amid flagging sales and a decreased stock price. The company's share price has jumped roughly $20 since Niccol's hire was announced Aug. 13. The rise in the company's stock price shouldn't have been a shock. Niccol was a Wall Street darling, responsible for leading Chipotle as its share price grew by nearly 800 percent between 2018 and 2024. It's a stark difference to Narasimhan, who Morningstar analyst Sean Dunlop said in an analyst note had "a forgettable run" during his 17-month tenure as CEO. "Narasimhan's lack of domain experience and standoffish mien likely contributed to his removal, though we note that his biggest mistake was unfortunate timing, stepping into the brand as a widening inflation gap between grocery stores and restaurants, pressure in the firm's large Chinese market and souring labor relations finally spilled over into results," Dunlop said. A return to tradition Wall Street's optimism for Niccol has stayed consistent since he started. Niccol made it clear on day two of the job that he'd be focused on Starbucks' brand in the U.S. In an open letter on Sept. 10, Niccol laid out his vision for Starbucks to be a faster, more efficient and more welcoming company for customers. Not all of the calls to action were specific, but Niccol is leaning back into comfier, welcoming stores reminiscent of former Starbucks CEO Howard Schultz's strategy for stores to be "third places." "Our stores will be inviting places to linger, with comfortable seating, thoughtful design and a clear distinction between 'to-go' and 'for-here' service," Niccol said in his letter. Starbucks has recently strayed from the laid-back coffee shop model as urban cafe-style stores have been less profitable than their drive-thru counterparts. In 2021, the company shifted a downtown Seattle store at First Avenue and University Street from a coffee bar-inspired location to one exclusively for pickup orders. Starbucks has also collaborated with Amazon to make coffee buying automated and frictionless. The two companies paired in 2021 to launch locations in New York City with Amazon's Just Walk Out technology, which allows customers to order, receive their items and head out the door without pulling out their wallets. The company hasn't said where it will start reworking stores, but it has recently temporarily closed two popular Seattle cafes for renovations. In early August, Starbucks said it closed the First Avenue and Pike Street location in front of Pike Place Market on July 31. Starbucks hasn't given a timeframe on reopening the store but said the store closed while the company could figure out "how best to offer a warm and welcoming environment for customers and [employees] at this store," according to Starbucks spokesperson Sam Jefferies. The Starbucks store in the middle of the University Village shopping complex near the University of Washington campus quietly closed at the end of August. University Village's website said the store is slated for a February 2025 reopening. Corporate expectations Niccol's letter also spells out a big job for whoever fills the brand chief position. He said the company will be looking to expand in China and the Middle East, and, in the case of the latter, "dispel misconceptions" about Starbucks, referring to boycotts companies like Starbucks have faced from pro-Palestinian activists. China is the company's second-largest market, but its sales have struggled to rebound since the COVID-19 pandemic. On the corporate side, Niccol, who is expected to split his time between California and Seattle, has echoed Schultz again. Niccol told employees on Sept. 10 that he prefers they work in-person but wouldn't create a new mandate beyond the three days per week policy that Schultz implemented on his way out the door in January 2023, Bloomberg reported Thursday. Tucked into Niccol's offer letter from Starbucks was a stipulation that he wouldn't be forced to relocate from his home in Newport Beach, Calif., for the company's Sodo headquarters. Instead, the company would supply him with a remote office, an executive assistant and the use of a corporate jet for his trips to Seattle when he'd be needed there. Niccol's embrace of the Schultz-era Starbucks could back up Schultz's praise for the hire. When Niccol was named, Schultz said in a news release he believed Niccol was the "leader Starbucks needs at a pivotal moment in its history." That came after Schultz blasted Starbucks' leadership in May when the company reported a poor performance in its quarterly earnings. But Morningstar's Dunlop mentioned in his Aug. 13 note that Niccol will need more than Schultz's support and Wall Street's initial excitement for something to new to reach "peak Starbucks," as Schultz had hand-picked Narasimhan and set up a multiyear plan for him to succeed. "The results will speak for themselves," he wrote, "but it certainly doesn't hurt the largest global coffee chain to have one of the industry's best-regarded executives at the steering wheel."