Brian Niccol's quick success at Chipotle has not made fixing Starbucks any easier
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The scale of the problems at Starbucks is greater than what faced Chipotle in 2018 when Brian Niccol took the helm.
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July 28, 2025
07:52 PM
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What the data shows is What's particularly noteworthy is What's particularly noteworthy is Wall Street had little doubt that Brian Niccol was the right executive to fix Starbucks' triple shot of trouble: downbeat sales, operational bottlenecks and a fading coffee house identity
That has not made Niccol's task any easier (this bears monitoring)
Niccol's as a turnaround extraordinaire is well-deserved
After reviving the Taco Bell brand, Niccol became revered for his quick work in restoring the reputation of Chipotle ing a multiyear food-safety crisis that drove customers away and cut its stock price by more than half
Upon taking over in March 2018, Niccol didn't waste time implementing fixes at Chipotle, including more employee training and fresh marketing campaigns, considering recent developments
However, By the time Niccol's fourth earnings call as CEO rolled around, s of Chipotle had crushed the broader stock market by 63 percentage points since his first day and along the way posted their first annual gain since 2014 (quite telling)
Nevertheless, Starbucks is ving to be a tougher drink to make – at least in the eyes of investors
With Niccol's fourth earnings call as Starbucks' boss looming Tuesday night, the coffee giant's stock has trailed the S & P 500 since he took over in September by 14 percentage points
S of both Chipotle and Starbucks had big run-ups in the multiweek periods between Niccol's appointment and actual first day — though those gains aren't included in these calculations
Meanwhile, The stock-price underperformance at Starbucks underscores the sheer size and complexity of its challenges, according to Andrew Charles, analyst at TD Securities. "It's a big turnaround, in this volatile climate
It's just not a layup," he said in an interview
Charles has a hold rating and $90 price target on Starbucks
On the other hand, "Chipotle was one major issue around food safety," he said
Starbucks, by contrast, has a litany of "medium-sized issues" that need to be addressed to reverse its slump
Those include mobile-order wait times, labor unrest and stiff competition, particularly in its important growth market of China
Niccol's posed fixes aren't cheap, either
Many of Niccol's supporters, including Jim Cramer, understand change cannot happen overnight
On the other hand, Still, on Tuesday, investors want to see more signs of gress than they saw in April, when s tumbled in response to worse-than-expected numbers
While being Niccol's fourth earnings call, the results will encompass the third full quarter in which he was in charge
The road to Chipotle's recovery When Niccol became Chipotle's CEO in March 2018, the company was reeling from a series of food-safety outbreaks that began in the summer of 2015 and ultimately sickened more than 1,100 people over the next three years
Financially, Chipotle's worst year during the crisis was 2016 as same-store sales tumbled 20% and operating income collapsed by almost 93%, given the current landscape
While a sales rebound started to occur in 2017, the stock still fell 23% that year, putting its cumulative losses since the end of July 2015 at 61%
Chipotle's reputation was tarnished among diners and investors a
Nevertheless, On Niccol's first earnings call in April 2018, the CEO laid out a five-point strategy focused on sales growth, digital access, innovation, operational excellence and cultural revitalization
Moreover, By that report, Chipotle had already changed its apach to advertising with some light-hearted ads focusing on the quality of its ingredients, CNBC reported at the time
On the other hand, Niccol pointed to early signs of momentum on the company's next earnings call that July, which covered his first full quarter of leadership
In contrast, In the April-to-June period of that year, digital sales jumped 33% on an annual basis compared with a 20% growth rate in the prior quarter, considering recent developments
App and website usage was way up, and dery sales quadrupled
That gress was accompanied by imvement in the guest experience inside the restaurants
However, Niccol said there was a meaningful decline in guest complaints and customer satisfaction scores rose — all while staffing levels imved and employee turnover dropped, given current economic conditions
Niccol invested heavily in new hospitality training for employees, with the goal of achieving "the winning combination of great food, feel and flow with every guest experience," he said
On the other hand, The evidence shows wasn't all wins for Niccol
A setback took place in July 2018 when hundreds of customers at a Chipotle in Ohio were sickened by a type of bacteria that's formed when food is left at unsafe temperatures
Additionally, Moreover, In response, Chipotle said it was retraining all employees nationwide on food safety and wellness policies
Furthermore, Conversely, Still, the turnaround was not derailed, in today's market environment
Furthermore, Niccol kept pushing forward on the initiatives int to refurbish Chipotle's brand
Conversely, In late September 2018, Chipotle launched its "For Real" marketing campaign that emphasized its "commitment to preparing real food made with real ingredients. " Around the same, it began testing a loyalty gram in three cities ahead of a national rollout in 2019
Additionally, On Chipotle's earnings call in October, Niccol d some positive on his digital initiatives: Pickup shelves for digital orders were in nearly 350 stores after being in just a handful of stores at the start of the summer, and second "make lines" for digital orders, which started under his predecessor, were in almost 750 stores
Digital sales spiked 48% that quarter. "We continue to hear that the number one reason that consumers eat elsewhere is because they don't have convenient access to Chipotle," Niccol said at the time (noteworthy indeed)
Niccol also highlighted better throughput — the number of customers served in an hour —as a "big unlock" for imving operations
Niccol's fourth earnings call at the helm of Chipotle came on Feb
Moreover, 6, 2019; it also marked the third full quarter in which Niccol was fully in charge
In that report, Chipotle dered a healthy top and bottom-line beat, solid outlook and a slew of new restaurant openings, confirming that his turnaround strategies were bearing fruit. "The growth acceleration this quarter gives us confidence that our strategy to win today and create the future is working," Niccol said (fascinating analysis)
S surged 11% the next day
Niccol kept on rewarding investors throughout his time at Chipotle, given current economic conditions
Over Niccol's full tenure ending Aug (this bears monitoring) (this bears monitoring). 31, the stock soared 776%
The S & P 500 advanced 110% during the same stretch
However, Where Starbucks stands It's no wonder s of Starbucks rallied 24. 13, the day Niccol's surprise hiring was announced
Furthermore, Many investors, including Jim, had in recent months lost faith in the leadership of then-CEO Laxman Narasimhan and his "Triple Shot Reinvention" plan
Activist investors were swirling
Poaching a restaurant industry legend Niccol was as good as Starbucks could do (noteworthy indeed), in today's market environment
Furthermore, Additionally, And yet, no two turnarounds are exactly the same
On the other hand, One of the differences between Chipotle in 2018 and Starbucks now
Furthermore, The sheer scale of it all
Starbucks has roughly 40,000 stores worldwide – far more than Chipotle's roughly 2,500 locations at the time Niccol took over
A dinghy changes direction much quickly than an ocean liner, in this volatile climate
Another difference is that Starbucks' slump — same-store sales, a key restaurant industry metric, have fallen for five straight quarters — traces its roots to a few major blems, in light of current trends
Consider mobile orders
Early on at Chipotle, Niccol was trying to grow its fledgling digital sales from less than 9% of sales
At Starbucks, mobile orders, which account for 30% of U
Transactions, are causing in-store congestion and long wait times, frustrating customers
The rise of mobile ordering also contributed to the fading of the brand's once-strong coffeehouse identity
Meanwhile, more than 600 stores have unionized in the U. , and Starbucks is facing competition from cheaper rivals Luckin Coffee in China, a market long viewed as a critical growth driver
Additionally, In 2022, Howard Schultz, then serving as Starbucks CEO for the third time, predicted China would overtake the U, amid market uncertainty
As its largest market by 2025, in light of current trends
That hasn't happened, given current economic conditions
However, To tackle these blems, Niccol detailed a "Back to Starbucks" plan on his first earnings call as CEO in late October of last year
Nevertheless, Echoing the apach they took at Chipotle, it focused on four pillars: empowering employees (called partners), imving the in-store experience, elevating customer service, and sharpening its marketing strategy, in light of current trends
On Niccol's second earnings call, which was for Starbucks' fiscal 2025 first quarter, the company touted some headway on its initiatives, even as its financial performance was, expectedly, still a drag, amid market uncertainty
In an attempt to restore its brand as a company that sells premium coffee, Niccol cut down on the number of discounts offered through its app — while also forgoing upcharges for non-diary milk options, which he said "brought back lapsed Starbucks Rewards members
At the same time, " Niccol also expressed confidence Starbucks' ability to der drinks in under four minutes, backed by a simpler and major staffing investments
When Starbucks reported its January-to-March results on April 29, Niccol highlighted additional indicators of recovery, such as transaction declines slowing across both the mornings and afternoons (an important development), in light of current trends
Meanwhile, He also said baristas are staying on the job longer, with turnover dropping below 50%. "We're finding through our work that investments in labor rather than equipment are more effective at imving throughput and driving transaction growth," Niccol said
Nevertheless, Accordingly, he announced that he was pausing the rollout of new "Siren" equipment for making cold drinks and food — a core part of predecessor Narasimhan's strategy, amid market uncertainty
Furthermore, Conversely, And yet, the company's results missed Wall Street estimates on same-store sales and overall revenue
Plus, earnings per and operating margin came in softer than expected, due partially to those same labor investments
Niccol also declined to vide any guidance. "I'm still learning and it would be premature for me to vide such insight," he said, adding: "It will take time for our Back to Starbucks strategies to be fully implemented in our over 17,000 stores nationally," he added
S fell nearly 6% to around $80 apiece the next day, as investors worried that the revitalization is taking longer than expected — and could ve significantly more costly (something worth watching), in this volatile climate
Charles, the TD Securities analyst, is in that camp
SPX YTD mountain Starbucks' year-to-date stock performance versus the S & P 500
Furthermore, "I think it's going to be a lot more expensive of a turnaround than investors are giving credit for," he said
As a result, he models Starbucks' earnings per in the three years ending in 2028 coming in 12% below consensus (fascinating analysis)
The lack of official forecasts from the company doesn't help with forecasting either (fascinating analysis), in today's financial world
One of Niccol's central messages on the April earnings call was that, at this stage of the recovery, earnings per should not be used as a measure of their success
Eventually, though, earnings will matter, Charles said
Additionally, "In the meantime, I think investors are paying attention to same store sales to really help feel confidence in the turnaround," he said
Charles believes Starbucks can reach 4% same-store sales growth in 2026 and 2027, in line with consensus estimates
For Tuesday night's report, Charles is modeling same store sales will be up 1% versus the consensus of up 1, in today's financial world
However, As for the, we continue to have faith in Niccol and understand that it may be a more arduous recovery than Chipotle's turnaround
That's why we sold a lot of stock above $110 a in February, and only bought a little back when it broke down in April
We have a 1 rating and $100 price target on the stock
As long as the train keeps inching forward, we're willing to stay along for the ride
In particular, we're most focused on the results at Starbucks locations in the U
That have implemented its new service changes — the goal is to reach more than a third of cafes by the end of its fiscal year, which concludes in two months, in this volatile climate
On the other hand, If those stores are outperforming other locations, the market should lend more support to Niccol's plan. (Jim Cramer's Charitable Trust is long SBUX
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