Starbucks (SBUX) on Tuesday tapped Chipotle Mexican Grill's (CMG) chief executive, Brian Niccol, to 澳洲幸运5官方开奖结果体彩网:lead the company as the world's largest coffeehouse chain seeks to regain its footing amid slumping global sales and fend off attacks from disgruntled inꦏvestors.

Niccol is no stranger to these circumstances. He took over Chipotle in March 2018 as the fast-casual chain sought to move past a 2016 E. coli outbreak that drew attention from regulators, as well as shook consumer and investor confidence in the restaurant that touted its commitment to freshness and health. Bill Ackman's Pershing Square, then Chipotle's largest shareholder, was pushing the company for change at the time of Niccol's appointment.

During his tenure at Chipotle, the restaurant has steadily expanded its footprint and 澳洲幸运5官方开奖结果体彩网:grown sales at a rate well ahead of most competitors.

Starbucks, meanwhile, has seen sales growth stall as it grapples with macroeconomic headwinds and shifting consumer preferences. Below, we look at some of the unique challenges facing Niccol as he takes the helm of one of the world's most iconic brands.

Competition in China

Starbucks has faced pressure in China, its second-largest market, in recent years. 澳洲幸运5官方开奖结果体彩网:Same-store sales there declined 14% in its fiscal 2024 third quarter after falling 11% in the preceding period.

The problem underlying contracting sales is twofold. Both comparable transactions, a proxy for foot traffic, and 澳洲幸运5官方开奖结果体彩网:average ticket, a measure of how much 💟the average customer spends on each visit, declined by 7% in the quart🌌er. 

Starbucks is, first of all, having trouble attracting and retaining customers. The company has said repeatedly over the last year that China's 澳洲幸运5官方开奖结果体彩网:slu🅠ggish post-Covid economic recovery has weighed on its business.

On top of that, it is struggling to keep up with fierce competition from local competitors, like Luckin Coffee (LKNCY), which has expanded rapidly in recent years and now has well over twice as many Chinese locations as Starbucks. The competition has sparked what outgoing CEO Laxman Narasimhan described in July as “a mass segment price war.”

Narasimhan, speaking on Starbucks's most recent earnings call, added that the company was “in the early stages of exploring strategic partnerships” to shore up its Chinese business. 

Slumping U.S. Sales

At the same time, Starbucks faces pressure at home in what is by far its largest, most lucrative market. U.S. same-store sales 澳洲幸运5官方开奖结果体彩网:declined 2% last quarter when a 4% increase in average ticket partially offset a 6% drop in traffic. 

Management has outlined a three-part action plan that emphasizes improving the customer experience, developing new products, and reaching new customers. 

More immediately, though, Starbucks has 澳洲幸运5官方开奖结果体彩网:leaned into discounts to lure back customers lost amid a steady uptick in fast food prices. The company in June launched a $5 value meal, following in the footsteps of other fast food giants like McDonald’s (MCD) and Wendy’s (WEN).

The company has reine൲d in spending to offset the cost of recent promotions, as evidenced൩ by a nearly 5% decline in general and administrative expenses in the third quarter.

Activist Investors Are Circling

The company’s struggles have recently made it a target for 澳洲幸运5官方开奖结果体彩网:activist investors, who may or may not let🅰 up after Niccol takes over.

The Wall Street Journal in mid-July reported that Elliott Investment Management had taken a sizable stake in the coffee chain and was in talks with management about ways to boost its stock price. And in early August CNBC reported that the firm had proposed expanding Starbucks’s board and other governance improvements as part of a settlement that would have allowed Narasimhan to keep his job.

And last week the Journal reported that Starboard Value, another activist investor, had 澳洲幸运5官方开奖结果体彩网:also amassed a stake and begun pushing for changes. 

Tuesday’s executive shake-up could relieve some of this pressure. Activist investors are often seeking changes they believe will benefit a comp♉any’s share price. With Starbucks stock gaining 25% on Tuesday’s announcement, they may have already got what they wanted. The stock is now in positive territory for 2024, though its still 24% below its July 2021 all-time high.

And Niccol’s track record should appeal to long-term shareholders. During his nearly six-and-a-half years leading Chipotle, the chain’s share price rose by 777%. It has been the 54th best-performing stock in the S&P 500 over the last 5 years.