Starbucks CEO Under Pressure as Earnings Loom

When Starbucks Corp. (NASDAQ: SBUX) releases earnings on October 29, the report is expected to confirm what many company observers already suspect: same-store sales remain in trouble, revenue is projected to remain flat, and earnings are anticipated to decline. This continuation of negative trends comes despite CEO Brian Niccol’s frantic efforts to change Starbucks’ direction, including the recent closure of several hundred stores under the initiative named “Project Bloom.” The timing of these closures is particularly concerning given that closing stores is rarely an effective tactic when same-store sales are already struggling.

The market has already priced in much of this pessimism, with Starbucks stock declining 15% over the past year while the S&P 500 gained 17% during the same period. This significant underperformance highlights the growing disconnect between Starbucks and broader market trends. With bad earnings likely to further depress the stock price, the pressure on Niccol’s leadership has reached a critical juncture, raising questions about whether the current strategy can reverse the company’s fortunes.

Brian Niccol’s approach to Starbucks’ challenges has involved naming his significant corporate changes, with “Project Bloom” representing the store closure initiative and a “Back to Starbucks” strategy encompassing multiple operational adjustments. This broader strategy includes creating new barista uniforms, reducing the number of menu items, positioning Starbucks as a local coffee shop, and laying off hundreds of corporate employees. These moves represent a fundamental rethinking of Starbucks’ market position and operational structure.

The responsibility for evaluating Niccol’s performance and potential replacement falls to independent lead director Jørgen Vig Knudstorp, who must push the plan for leadership change if necessary. The board’s consideration of alternatives comes at a time when investor patience is wearing thin, and the company’s traditional strengths in customer experience and brand loyalty appear to be eroding. The combination of strategic uncertainty and poor financial performance has created an environment where leadership change appears increasingly inevitable.

Among the most prominent candidates being considered is founder Howard D. Schultz, who has repeatedly returned as CEO when Starbucks faced previous crises. While worker unions have expressed dissatisfaction with Schultz, his intimate knowledge of every aspect of the company makes him a compelling candidate for steering Starbucks through its current challenges. His historical success in revitalizing the brand during previous downturns provides a template for what might be needed now.

Josh Kobza, Restaurant Brands International’s chief executive officer, represents another strong contender given his experience leading a portfolio that includes Tim Hortons, Burger King, Popeyes, and Firehouse Subs. His background spanning chief operating officer, chief technology officer, and chief financial officer positions, combined with managing 32,000 locations across 120 countries generating nearly $45 billion in annual revenue, provides the global scale and operational expertise Starbucks requires.

Rick Cardenas of Darden Restaurants brings strategic training from his time at management consulting firm Bain & Company, along with experience leading a diverse portfolio including Olive Garden, LongHorn Steakhouse, and The Capital Grille. Similarly, Scott Mezvinsky, CEO of KFC, offers proven success in running what is arguably Yum! Brands’ most successful division, with experience in financial and strategy management across 30,000 stores in 150 countries. These candidates represent the depth of talent available to Starbucks’ board as it contemplates leadership change.

The convergence of disappointing financial performance, strategic uncertainty, and available leadership alternatives creates a compelling case for the Starbucks board to act decisively. With the stock already under significant pressure and the upcoming earnings report likely to exacerbate concerns, delaying a leadership decision could risk further erosion of shareholder value. The board’s assessment must balance the need for immediate stabilization with the long-term strategic vision required to compete in an increasingly challenging market.

The contrast between Starbucks’ struggles and the success of competitors like Chinese company Luckin, which is described as surging while the U.S. icon slows, underscores the competitive pressures facing the company. This dynamic makes the leadership question not merely about replacing an individual but about fundamentally rethinking Starbucks’ position in the global market. The board’s decision will signal whether the company intends to retreat to its core strengths or pursue more aggressive transformation in response to changing consumer preferences and competitive dynamics.