Starbucks CEO transition plan gets muted reaction from Wall Street
Laxman Narasimhan, April 13, 2018.
Guillermo Gutierrez | Bloomberg | Getty Images
Wall Street’s reaction to Starbucks’ new CEO was muted Friday morning, with shares down nearly 1% after the coffee company named outside restaurant maker Laxman Narasimhan as its next leader.
Starbucks announced late Thursday that Narasimhan will join the company in October before taking the top position in April. He will succeed interim CEO Howard Schultz, who returned to the coffee giant for his third assignment earlier this year. Schultz will remain as an advisor and remain on the board. BTIG analyst Peter Salih compared the structure to the model of a co-CEO in a customer note.
Now, all eyes are on Starbucks Investor Day in Seattle on September 13th.
“Most importantly, this appointment removes a significant burden from [Starbucks] Barclays analyst Jeffrey Bernstein wrote, with focus now shifting to 22 Day Investor.
The company is expected to unveil a reinvention plan that will bring bold changes to the chain and its cafes. Schultz formulated the strategy and will remain highly involved in its implementation.
Schultz’s previous trips led to double-digit declines in Starbucks stock. When the company announced in late 2016 that then-CEO Kevin Johnson would replace Schultz, shares plunged as much as 10% in extended trading. Johnson was a relative newcomer in the restaurant industry, joining Starbucks as COO after decades of working in technology.
But Wall Street doesn’t seem too concerned about Starbucks’ latest move plan. When the company announced its new CEO Thursday night, the stock fell less than 1% in extended trading. In a sign of investor confidence in Narasimhan, shares of Reckitt, the current employer of Lysol and Durex, fell 5.7% on Thursday after the surprise announcement of his departure later this month.
“Narasimhan joins from Reckitt where he oversaw a successful restructuring, and it will likely be an invaluable experience for the reinvention that Schultz so clearly envisions. [Starbucks]Edward Lewis, an analyst at Atlantic Equities, said in a note on Friday.
Analysts focused on Narasimhan’s global experience, which could boost Starbucks sales in emerging markets. His previous roles have included serving as President of PepsiCo’s operations in Latin America, Europe and Sub-Saharan Africa.
Andy Parrish, analyst at Jefferies, wrote that Narasimhan “brings the right kind of fresh perspective, leadership capabilities and energy” to take Starbucks to the next level.