When

Starbucks Corp.

landed Brian Niccol, the

star chief executive

who fixed

Chipotle Mexican Grill Inc.

and

Yum Brands Inc.’s

Taco Bell, to turn around its fortunes, it triggered a frenzy on

Wall Street

. The stock popped 20 per cent in a matter of minutes and racked up its biggest one-day gain ever as investors and analysts, one after another, gushed about the move: “dream hire;” “exceptional;” “hall of fame restaurant CEO.”

A year and a half later, the buzz is all but gone.

Niccol, who scored a pay package worth more than US$100 million, has only managed to deliver tepid signs that his makeover of Starbucks is working. The stock rally, unlike at Chipotle, quickly stalled out and even some of those uber bulls are starting to get anxious.

It’s not necessarily that they have lost confidence in Niccol but rather that the operational problems he inherited at Starbucks were more deep-rooted and dire than they had appreciated. Possibly to the point, some of them worry, that even Niccol can’t turn around the company fast enough to keep investors from abandoning the stock. It’s been listing sideways for most of his tenure, with shares down about four per cent since they posted that wild rally the day he was named CEO.

“For me, the real surprise has been the amount of time and effort and investment needed to operationally clean up Starbucks,” says Danilo Gargiulo, an analyst at Bernstein in New York who covers restaurant stocks.

Gargiulo was one of the many analysts who had quickly lifted his Starbucks stock rating and price target after the Niccol hire, calling him the “perfect CEO” to orchestrate the comeback. In all, the number of buy ratings on the stock soared more than 60 per cent in a matter of days, Bloomberg data show. Even the activist firm Elliott Investment Management, which had amassed a large position in Starbucks, rushed to heap praise on Niccol, calling his hire a “transformational step forward for the company.”

Gargiulo had acknowledged back then that it would take a while for the strategy to take hold and says he isn’t giving up on the stock yet. But, he admits, he thought they would be further along by now. He has ratcheted down his price target for the stock to US$100 from US$115 — part of a broader decline in analysts’ average forecasts over the past year — while keeping his “outperform” rating.

“What I didn’t expect was how much work was really needed behind the scenes,” says Gargiulo.

A spokesperson for Starbucks and for Niccol declined to comment, saying the presentation that management gave in January reflects the company’s position. Niccol told investors that day that the turnaround plan was running ahead of schedule. “Our progress, the pace of change, and the opportunity ahead of us, I am unbelievably confident,” he said.

A spokesperson for Elliott declined to comment.

Much of Niccol’s plan hinges on “Back to Starbucks,” a push he initiated to re-establish the chain’s image as a

comfortable hangout

rather than the

quick-stop coffee depot

it had become. That previous model, powered by a focus on the company’s take-out business, led to years of stagnant growth.

The campaign has touched nearly every aspect of the customer experience, from trimming the sprawling menu to store renovations — at a price tag of about US$150,000 apiece — that aim to restore the cozy, café-like atmosphere the Starbucks brand was built on. The idea is to encourage clients to linger and, in turn, spend more.

Niccol for the most part has expressed satisfaction with the progress that has been made, as he did in January.

Last week, though, he sounded a bit like the surprised Wall Street crowd when he acknowledged some things haven’t gone as quickly as he would like.

Starbucks franchisees and store employees

immediately grasped the concept, he said on a Semafor podcast, but there was some reluctance to it in the corporate office in Seattle. The plan was an abrupt change after they had spent so much time focusing on the takeout-order business.

“It challenged a lot of the work they were doing,” Niccol said. He is pressing his executives to pick up the pace. He wants faster decisions and faster execution of those decisions. “Speed matters,” he said. “We still have an opportunity to be a lot better.”

The company’s numbers have started to improve of late: Global sales at established locations rose four per cent in the past quarter, the fastest growth in two years and more than even the most optimistic analyst forecast. Niccol’s team also gave a stronger-than-expected outlook for 2026.

For the biggest Niccol bulls, those results are a sign of things to come. And over the winter the stock staged a rally for a couple months, climbing more than 16 per cent before sliding again in March.

Jamie Meyers, a senior analyst at Laffer Tengler Investments, called the operational improvements that Niccol has made so far “pretty impressive” and said he believes earnings growth will pick up.

“Turnarounds take time, investors get frustrated,” Meyers said. Laffer Tengler had purchased more Starbucks shares when Niccol took over. “It’s taking longer than we like, but not longer than expected.”

Business in general isn’t great right now for the restaurant industry. As workers’ wage growth stagnates, their dining-out budgets are getting squeezed. Starbucks’s stock, while lagging the broader equity market, has performed in line with its peers, edging out the S&P Restaurants index over the past 18 months.

The stock, though, remains 27 per cent below the all-time high it hit in 2021. And “sell” ratings, a label only handed out sparingly on Wall Street, are starting to pile up. There are six today, according to data compiled by Bloomberg. The day after Niccol was appointed, there were none.

What’s more, at around US$99, analysts’ average 12-month price target is just eight per cent above the current price. This has caught the attention of Kevin McCarthy, senior research analyst and managing director at Neuberger Berman. In some ways, he says, turning around Starbucks is a much tougher task than fixing the problems at Chipotle, which is a newer, more nimble business.

“It is a big challenge,” says McCarthy, whose firm holds Starbucks shares in some clients’ portfolios. “It’s about dealing with a multi-faceted, legacy coffee business in a world that has changed.”

“It’s hard to see a path to meaningfully higher numbers from here or a meaningfully higher price,” he says. “But I’m still rooting for the guy.”

Bloomberg.com

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