Brian Niccol’s quick success at Chipotle has not made fixing Starbucks any easier
Wall Street, Brian Niccol’s triple problem withdrawal: Downbeat sales, operational bottlenecks and Solak coffee house did not doubt that he was the right manager to correct the identity. This did not facilitate Niccol’s task. Niccol’s extraordinary status is right. After playing the Taco Bell brand, Niccol was respected after a multi -year food safety crisis that removes customers and reduces the stock price more than half. After taking over in March 2018, Niccol did not waste any time to make corrections at Chipotle, including more working training and new marketing campaigns. When Niccol’s fourth earning CEO returned, Chipotle shares have been released since the first day of the first day and since 2014. Starbucks proved at least a more difficult drink in the eyes of investors. Niccol’s fourth gains, Starbucks’ boss, as the approach of Tuesday night, the coffee giant’s shares in September in September, followed by about 14 points followed by the S&P 500. Both Chipotle and Starbucks shares had great conditions in many weekly periods between Niccol’s appointment and the real first day-but these gains were not included in these calculations. According to TD Securities Analyst Andrew Charles, the stock in Starbucks underlines the size and complexity of price low performance. “This is a big return. It’s not just an order,” he said in an interview. Charles has a keeping note on Starbucks and a price of $ 90. “Chipotle was an important issue of food safety,” he said. Starbucks, on the contrary, has a “medium -sized problem” literal to reversed its collapse. These include mobile order waiting times, labor unrest and harsh competition, especially in China’s important growth market. Niccol’s recommended corrections are not cheap. Most of Niccol’s supporters, including Jim Cramer, understand that change cannot take place overnight. Nevertheless, on Tuesday, investors want to see more signs of progress than they saw in April when their stocks were rolled in response to worse numbers than expected. While Niccol calls for the fourth earnings, the results will cover the third full quarter to which it is responsible. When Niccol became the CEO of Chipotle in March 2018, Chipotle’s recovery was hanging from a series of food safety epidemics that started in the summer of 2015 and ultimately illness more than 1,100 people for the next three years. Financially, the worst year of Chipotle during the crisis was 2016, the same store sales decreased by 20% and its operating income decreased by almost 93%. In 2017, a sales rebound began to take place, the stock has still decreased by 23% that year and reduced cumulative losses since July 2015 to 61%. Chipotle’s reputation was decided among both Diners and investors. In Niccol’s first earnings call in April 2018, CEO revealed an open five -point strategy focusing on sales growth, digital access, menu innovation, operational excellence and cultural revitalization. With this report, CNBC has already changed the advertising approach with some light -hearted ads focusing on the quality of the materials. Niccol pointed out the first acceleration signs in the company’s next earning call, which covers the first quarter of leadership. During the April-June period of that year, digital sales increased by 33% on an annual basis compared to 20% growth rate in the previous quarter. Application and website use has increased and delivery sales four. This progress was accompanied by improvement in the guest experience in the restaurants. Niccol said that there was a significant decrease in guest complaints and that customer satisfaction points increased – all personnel levels improved and the working turnover fell. Niccol, “Great food, feeling and the winning combination of the winning combination with every guest experience” for employees in the new hospitality training has invested in great investment. It wasn’t all for Niccol. In July 2018, there was a decline in which hundreds of customers in a Chipotle in Ohio were sick by a kind of bacteria formed when food was left at unsafe temperatures. In response, Chipotle said that he trained all employees about food safety and healthy living policies throughout the country. Nevertheless, the return did not come out of the rail. Niccol continued to propose attempts to renew Chipotle’s brand. In late September 2018, Chipotle launched a “real” marketing campaign, which emphasizes the “commitment to prepare real foods with real materials.” Likewise, in 2019, in front of a national presentation, he began to test a loyalty program in three cities. Niccol shared some positive updates about Chipotle’s call for earnings in October. Digital sales increased by 48% in this quarter. “We continue to hear that the number one reason why consumers eat elsewhere does not have access to Chipotle.” Niccol said. He said. Niccol also emphasized the number of customers served in one hour – better yield as a “opening a big lock” to improve operations. Niccol’s fourth call for the chipotle rudder came on February 6, 2019; He also pointed out the third full quarter that Niccol was completely responsible. In this report, Chipotle provided rhythm with a healthy upper and lower line, a solid appearance and a series of new restaurants and confirmed that their return strategies are fruitful. “This quarter growth acceleration gives us confidence that our strategy is useful to win and create the future today.” He said. Stocks increased by 11% the next day. Niccol continued to reward investors during his time in Chipotle. Niccol’s full term of office ended on August 31st increased by 776%. S&P 500 progressed about 110% during the same stretching. It is not surprising that Starbucks stood, increasing 24.5% of Starbucks shares on August 13, the day Niccol’s surprise recruitment was announced. Many investors, including Jim, had lost their belief in the leadership of the CEO Laxman Narasimhan and his “triple shot again” plan in recent months. Activist investors were returning. The legend of a restaurant industry like Niccol was good enough for Starbucks to do. And still, the two returns are not exactly the same. Is it one of the open differences between Chipotle and Starbucks in 2018? The pure scale of everything. Really. Starbucks has a worldwide about 40,000 stores – more than about 2,500 in Chipotle, which Niccol has taken over. It replaces a boat direction very quickly from an ocean primer. Another difference is that Starbucks’s collapse-same store sales, which are the same store sales, fall for five flat quarters-up to several big problems. Think of mobile orders. In Chipotle, Niccol was trying to enlarge the new digital sales business less than 9% of sales. In Starbucks, mobile orders, which make up 30% of the US transactions, cause in -store blockage and long waiting times and annoy their customers. The rise of the mobile order also contributed to the fading of the brand’s strong coffeehouse. In the meantime, more than 600 stores in the USA unionized and Starbucks compete from cheaper competitors such as Luckkin Coffee in China, a market that has long been seen as a critical growth driver. In 2022, Howard Schultz worked as the CEO of Starbucks for the third time and estimated that China would pass the US as the largest market until 2025. This did not happen. In order to deal with these problems, Niccol detained the “Starbucks Back” plan on the first call for CEO at the end of October last year. Repeating their approach in Chipotle, focusing on four columns: strengthening employees (called partners), developing in -store experience, raising customer service and sharpening the marketing strategy. In Niccol’s second call for Starbucks’s Mali 2025 for the first quarter, the company progressed slightly in its initiatives, even if it is still a drag, even if its financial performance is expected. In order to restore the brand as a company that sells premium coffee, Niccol said, while reducing the number of discounts offered through its application, “TECLIZ brought back Starbucks Rewards members.” Niccol also expressed the ability of Starbucks to give a drink in less than four minutes supported by a simpler menu and big personnel investments. When Starbucks reported the January-March results on April 29, Niccol emphasized additional healing indicators such as decrease in transaction both in the morning and afternoon. He also said that barists stayed for a longer time and that Ciro fell below 50%. “In our studies, we find that it is more effective in improving the efficiency of labor investments and increasing transaction growth instead of equipment.” He said. Accordingly, he said that he paused the presentation of new “Siren” equipment to make cold drinks and food, a basic part of his predecessor Narasimhan’s strategy. Nevertheless, the company’s results missed Wall Street’s same store sales and total income estimates. In addition, earnings per share and business margin were partly softer than expected due to the same labor force investments. Niccol also refused to provide any guidance. “I’m still learning, and it would be early for me to provide such an insight,” he added: “Starbucks strategies will be fully implemented in more than 17,000 stores in our stores.” The share fell approximately 6% the next day, as investors are worried that revitalizing lasting longer than expected and may be significantly more costly. TD Securities Analyst Charles in that camp. SBUX .SPX YTD Mountain Starbucks’ stock performance against S&P 500 since the year. “I think it will be much more expensive than investors give credit.” He said. As a result, in the three years that ended in 2028, Starbucks’ earnings per share makes it below 12% of the consensus. The lack of official estimates from the company does not help. One of Niccol’s central messages on April earnings was that at this stage of recovery, the achievements of earnings per share should not be used as a measure of the achievements. Finally, he said that your gains would be important. “In the meantime, I think investors pay attention to the same store sales to really help to trust the return.” He said. Charles believes that Starbucks can reach 4% of the same store growth in 2026 and 2027 in line with consensus estimates. For the Tuesday night report, Charles modeled that the same store sales will increase by 1% and will increase by 1.6%. As for the club, we continue to believe in Niccol, and we understand that it could be a more challenging improvement than Chipotle’s return. So we sold a lot of shares over $ 110 per share in February, and when we broke down in April, we got it back. We have 1 rating and $ 100 price target on the stock. As long as the train continues to progress, we are ready to stay for the journey. In particular, we focused on the results of the Starbucks locations that apply new service changes in the United States – the aim is to reach one third of the cafes at the end of the financial year, which resulted in about two months. If these stores perform better than other places, the market should support Niccol’s plan more. (Jim Cramer’s philanthropist trust is long Sbox. Look here for the full list of stocks. Jim is waiting for 45 minutes after sending a trade warning before buying or selling a share in the portfolio of charitable confidence. If Jim talked about a stock on CNBC TV, he’s waiting for 72 hours after trading warning before trading. The above investment club information is subject to our conditions and conditions and our Privacy Policy with the waiver. There is no confidence or duty or not, as you receive any information provided in connection with the Investment Club. A specific result or profit is not guaranteed.
