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. Niccol’s status 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 following 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. By the time Niccol’s fourth earnings call as CEO rolled around, shares 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. Starbucks is proving 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 about 14 percentage points. Shares 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. 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. It’s just not a layup,” he said in an interview. Charles has a hold rating and $90 price target on Starbucks. “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 proposed fixes aren’t cheap, either. Many of Niccol’s supporters, including Jim Cramer, understand change cannot happen overnight. Still, on Tuesday, investors want to see more signs of progress than they saw in April, when shares 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%. 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 alike. On Niccol’s first earnings call in April 2018, the CEO laid out a clear five-point strategy focused on sales growth, digital access, menu innovation, operational excellence and cultural revitalization. By that report, Chipotle had already changed its approach to advertising with some light-hearted ads focusing on the quality of its ingredients, CNBC reported at the time . 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 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. App and website usage was way up, and delivery sales quadrupled. That progress was accompanied by improvement in the guest experience inside the restaurants. Niccol said there was a meaningful decline in guest complaints and customer satisfaction scores rose — all while staffing levels improved and employee turnover dropped. 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. It 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. In response, Chipotle said it was retraining all employees nationwide on food safety and wellness policies. Still, the turnaround was not derailed. Niccol kept pushing forward on the initiatives intended to refurbish Chipotle’s brand. 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 program in three cities ahead of a national rollout in 2019. On Chipotle’s earnings call in October , Niccol shared some positive updates 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. Niccol also highlighted better throughput — the number of customers served in an hour —as a “big unlock” for improving operations. Niccol’s fourth earnings call at the helm of Chipotle came on Feb. 6, 2019; it also marked the third full quarter in which Niccol was fully in charge. In that report, Chipotle delivered 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. Shares surged 11% the next day. Niccol kept on rewarding investors throughout his time at Chipotle. Over Niccol’s full tenure ending Aug. 31, the stock soared 776%. The S & P 500 advanced about 110% during the same stretch. Where Starbucks stands It’s no wonder shares of Starbucks rallied 24.5% on Aug. 13, the day Niccol’s surprise hiring was announced. 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 like Niccol was about as good as Starbucks could do. And yet, no two turnarounds are exactly the same. One of the clear differences between Chipotle in 2018 and Starbucks now? The sheer scale of it all. Literally. 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. 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 problems. Consider mobile orders. Early on at Chipotle, Niccol was trying to grow its fledgling digital sales business from less than 9% of sales . At Starbucks, mobile orders, which account for 30% of U.S. 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.S., and Starbucks is facing competition from cheaper rivals like Luckin Coffee in China, a market long viewed as a critical growth driver. In 2022, Howard Schultz, then serving as Starbucks CEO for the third time, predicted China would overtake the U.S. as its largest market by 2025. That hasn’t happened. To tackle these problems, Niccol detailed a “Back to Starbucks” plan on his first earnings call as CEO in late October of last year. Echoing the approach they took at Chipotle, it focused on four pillars: empowering employees (called partners), improving the in-store experience, elevating customer service, and sharpening its marketing strategy. 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. 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.” Niccol also expressed confidence Starbucks’ ability to deliver drinks in under four minutes, backed by a simpler menu 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. 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 improving throughput and driving transaction growth,” Niccol said. 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. And yet, the company’s results missed Wall Street estimates on same-store sales and overall revenue. Plus, earnings per share and operating margin came in softer than expected, due partially to those same labor investments. Niccol also declined to provide any guidance. “I’m still learning and it would be premature for me to provide 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. Shares fell nearly 6% to around $80 apiece the next day, as investors worried that the revitalization is taking longer than expected — and could prove significantly more costly. Charles, the TD Securities analyst, is in that camp. SBUX .SPX YTD mountain Starbucks’ year-to-date stock performance versus the S & P 500. “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 share in the three years ending in 2028 coming in 12% below consensus. The lack of official forecasts from the company doesn’t help with forecasting either. One of Niccol’s central messages on the April earnings call was that, at this stage of the recovery, earnings per share should not be used as a measure of their success. Eventually, though, earnings will matter, Charles said. “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 1.6%. As for the Club, 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 share 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.S. 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 about two months. If those stores are outperforming other locations, the market should lend more support to Niccol’s plan. 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