Starbucks shares surge as it replaces CEO in bid to reverse declining sales

US coffee chain's stock soars more than 20% after announcing Chipotle boss Brian Niccol as new chief

Starbucks reported its third-quarter revenue had missed expectations due to declining demand in the US and China. Reuters

Starbucks' shares soared more than 20 per cent after the US-based coffee chain announced it is replacing chief executive Laxman Narasimhan to try to reverse declining sales.

The company announced he will be replaced by Chipotle Mexican Grill chief Brian Niccol. Under Mr Niccol, shares in Chipotle have surged more than 200 per cent in five years.

Starbucks said Mr Narasimhan was to step down from his position immediately, with Mr Niccol due to begin his role as chief executive on September 9.

Starbucks' stock was up 24.50 per cent higher at $95.90 a share when trading closed in the US on Tuesday. Shares in Chipotle were down 7.53 per cent.

“Like all of us at Starbucks, [Mr Niccol] understands that a remarkable customer experience is rooted in an exceptional partner experience,” Starbucks chairwoman Melanie Hobson said in a statement.

Mr Narasimhan's abrupt departure comes less than two years into his tenure. Shares in the coffee chain have slumped 7.5 per cent in the last year.

Weakening sales led former Starbucks chief executive Howard Schultz to publicly call on the company to address its US operations in a lengthy LinkedIn post in May.

Last month, Starbucks reported its third-quarter revenue had missed expectations due to declining demand in the US and China.

During an earnings call, Mr Narasimhan also noted persistent challenges in the Middle East, South-East Asia and parts of Europe. Overall, global same-store sales fell 3 per cent.

The move also comes less than a month after activist investor Elliott Investment Management took a sizeable stake in Starbucks.

The investment firm has been privately pushing the company to find ways to get its stock price back up, according to a report by The Wall Street Journal.

Elliott said it viewed Tuesday's announcement “as a transformational step forward for the company”.