American coffee chain Starbucks (SBUX) has found its new CEO in Laxman Narasimhan, an expert in consumer goods. Narasimhan will join Starbucks on October 1, and assume the full responsibility of CEO and join the company’s board on April 1, 2023. Until April 2023, Narasimhan will gain in-depth knowledge about the coffee giant’s business operations and master the trade under the current interim CEO Howard Schultz.
Narasimhan is based in London and currently heads U.K.-based consumer goods company Reckitt Benckiser Group PLC (GB:RKT). He also announced his departure from Reckitt yesterday but will continue to serve until September 30. Narasimhan also has prior experience at the food and beverage giant PepsiCo Inc. (PEP).
Meanwhile, Schultz, who has headed Starbucks before and has a long-standing relationship with the company, will continue to play a “special role” at the coffee house, a WSJ report stated. Starbucks board chairwoman Mellody Hobson said about Schultz, “He certainly has a special voice, a deep knowledge of the business in ways none of us has and we want that.”
And about Narasimhan’s appointment, Hobson stated, “We really do believe that we have found an exceptional individual to be our next CEO. He’s a tested leader.” In a regulatory filing yesterday, Starbucks notified shareholders of Narasimhan’s annual package.
As per the filing, Narasimhan will receive an initial base salary of $1.3 million. Plus, he will receive an opportunity to earn an annual cash incentive target of 200% of the base salary upon performance. Moreover, in 2023, Narasimhan will be eligible for annual equity awards to the tune of $13.6 million, subject to shareholder-approved terms. Furthermore, he will receive a cash signing bonus of $1.6 million concerning the forfeited compensation from his current employment.
What is the Target Price for SBUX Stock?
On TipRanks, SBUX stock has a Moderate Buy consensus rating. This is based on nine Buys versus ten Holds. The average Starbucks price target of $92.89 implies 8.8% upside potential to current levels. Meanwhile, the stock has lost 25.5% so far this year.
Takeaway – New CEO to Solve Starbucks’ Issues
Starbucks has been facing multiple challenges at both the macro and micro levels. The pandemic-triggered lockdowns had forced the coffee shop to shut down its stores. Later in 2021, takeaway orders amped up its business. However, the current inflationary pressures have shrunk the company’s margins and forced the coffee house to increase the prices of its offerings.
On the other hand, continued unionization efforts by baristas at several of its locations have turned up the heat at the company. Negotiations for higher pay as well as employee resignations are adding to Starbucks’s already chaotic situation. Amid the chaos, Starbucks’ board hopes that Narasimhan will be able to strategically turn around the company with his years-long experience in the consumer goods industry.