How come the "savior" brought in with 100 million US dollars couldn't work at Starbucks Corporation (SBUX.US)?

When Starbucks Corporation (SBUX.US) successfully recruited Brian Niccol - the star CEO who once turned the tide and saved Chipotle Mexican Grill (CMG.US) and Taco Bell - in hopes of reversing the company's decline, Wall Street erupted in excitement. Within minutes of the news breaking, Starbucks Corporation's stock price soared by 20%, marking the largest single-day increase since going public. Investors and analysts praised the appointment as a "dream appointment," "extraordinary choice," and "hall-of-fame level leader." However, a year and a half later, the excitement has dissipated. With a multi-million dollar compensation package in hand, Niccol's innovation plan for Starbucks Corporation has shown only modest results; unlike the turnaround during his time at Chipotle Mexican Grill, Starbucks Corporation's stock price quickly stagnated; even the most bullish investors are starting to worry. This concern does not stem from a lack of confidence in Niccol - most people still praise him - but rather from the fact that the operational challenges at Starbucks Corporation that he inherited are much deeper and more difficult than expected. Some investors even worry that even if Niccol is exceptionally talented, if he cannot turn things around quickly, he may struggle to prevent investors from continuing to withdraw. During his tenure, the stock price has been flatlining, dropping by 4% since he was appointed CEO. "What really surprised me is that completely overhauling Starbucks Corporation's operational system requires such a long time, such immense effort and resources," admitted Danilo Gargiulo, a restaurant stock analyst at Bernstein in New York. At the beginning of Niccol's tenure, Gargiulo, like many other analysts, quickly raised Starbucks Corporation's stock rating and target price, praising him as the "perfect CEO" for orchestrating a counterattack. Data compiled showed that the number of "buy" ratings on the stock increased by over 60% in just a few days. Even Elliott Investment Management, a proactive investment firm that had built a large position in Starbucks Corporation, quickly offered praise, calling the appointment a "key step towards transformation." At that time, Gargiulo acknowledged that the strategy would take time to show results and expressed his unwavering support for the stock. However, he admitted that the progress at this point should have been more significant. He has since lowered his target price for the stock from $115 to $100 - in line with the general trend of analysts' lowered forecasts over the past year - but still maintains an "outperform" rating. "What I didn't anticipate was the immense amount of work needed behind the scenes," Gargiulo said. Starbucks Corporation and Niccol's spokesperson declined to comment, stating that the company's position had been outlined in a presentation released by the management in January. On that day, Niccol assured investors that the transformation plan was ahead of schedule. "The progress we have made, the pace of change, and the opportunities ahead fill me with unwavering confidence," he claimed. The "Return to Starbucks Corporation" Strategy The core of Niccol's plan is the "Return to Starbucks Corporation" strategy - this initiative aims to reshape the brand image, bring it back to its roots as a comfortable and relaxed social space, rather than just a fast-food coffee stop. The previous focus on takeout business had led to years of lackluster growth for the company. This strategy touches almost every aspect of the customer experience: from streamlining the menu to store renovations costing about $150,000 per store, aiming to recreate the cozy coffee shop atmosphere that laid the foundation for Starbucks Corporation's brand. The goal is to encourage customers to linger and increase their spending. Consistent with his statements in January, Niccol expressed overall satisfaction with the current progress. However, last week, he admitted on a podcast that some aspects of the strategy were not progressing as quickly as expected, showing a similar sense of surprise as observed by Wall Street observers. He noted that while franchisees and store employees quickly embraced the concept, there was some resistance at the headquarters in Seattle. After focusing on takeout business for so long, the sudden shift undoubtedly impacted their existing work routines. "It has overturned many of their past efforts," Niccol said. He is urging the management team to pick up the pace, demanding more decisive decision-making and faster execution. "Speed is crucial," he emphasized, "we still have a lot of room for improvement." There are signs of improvement in the company's performance in recent months: global sales at mature stores increased by 4% last quarter, marking the fastest growth in two years and even surpassing the expectations of the most optimistic analysts. Niccol's team also provided a stronger outlook for the company's performance in 2026. For Niccol's staunch supporters, these achievements are just the prelude. The stock had been rising for several months during the winter, with gains of over 16%, until it fell again in March. Jamie Meyers, a senior analyst at Laffer Tengler Investments, praised Niccol's operational improvements to date as "quite impressive" and expects profit growth to accelerate. "Transformation takes time, and investors are bound to feel impatient," Meyers said, noting that her firm increased its stake in Starbucks Corporation after Niccol's appointment. "Although it is taking longer than we would hope, it is still within expectations." The overall operating environment in the restaurant industry is currently challenging. With stagnant wage growth for the working class, the budget for dining out is becoming tighter. While Starbucks Corporation's stock has underperformed the overall market, it has performed roughly in line with its peers, slightly outperforming the S&P Restaurant Index over the past 18 months. However, the stock is still down 27% from its historical high in 2021. Sell ratings, which Wall Street has been sparing with, are starting to accumulate. Data compiled shows that there are currently six firms offering sell ratings, while there were none on the day Niccol was appointed. More concerning is that the 12-month average target price given by analysts is about $99, only 8% higher than the current stock price. This has caught the attention of Kevin McCarthy, a senior research analyst and managing director at Neuberger Berman. He believes that in some ways, overhauling Starbucks Corporation is much more challenging than solving the problems of Chipotle Mexican Grill - the latter being a more agile, emerging company. "This is undoubtedly a huge challenge," McCarthy said. His firm holds Starbucks Corporation stock in some client portfolios. "In a changing world, transforming a complex traditional coffee business is extremely difficult." "It is hard to foresee significant performance improvements or a significant increase in stock price from the current situation," he admitted, "but I still support this helmsman."