Jim Cramer Backs New Starbucks CEO

By Douglas A. McIntyre Published Jan 31, 9:15AM EST

Quick Read

New Starbucks Corp. (NASDAQ: SBUX) CEO Brian Niccol is off to an uncertain start.
However, CNBC’s Jim Cramer believes good CEOs get the best results, which is best for shareholders.

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Jim Cramer Backs New Starbucks CEO — © JohnFScott / Getty Images

CNBC’s Jim Cramer believes in new Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) CEO Brian Niccol. His reason is Niccol’s success at Chipotle Mexican Grill. Cramer’s primary observation is that the best chief executive officers get the best results, and the best results are best for shareholders.

Niccol is off to an uncertain start. His $96 million pay package, given to him after less than five months on the job, has raised objections. What is not mentioned as often is that most of the total was to make up for options he surrendered when he left as Chipotle’s head. It is another sign of how well he did in his previous job.

One tough quarter was posted just after Niccol joined. The primary concerns were that U.S. (North American) same-store sales declined 6%, and in China they were down 14%. Revenue dropped 3% to $9.1 billion, while per-share earnings of $0.80 were 25% lower.

The first full quarter in which he ran the company was better, but his turnaround plan has yet to take hold. In the period announced this week, revenue was flat at $9.4 billion. Earnings were still weak, down 23% to $0.69 per share. However, the same-store sales decline started to improve. The U.S. figure was down only 4%. The best financial news was from China, where same-store sales were just 6% lower, which is a significant recovery.

One hurdle Niccol has to overcome is that $96 million is not his only benefit. He can work from his home in California and commute to the headquarters in Seattle. At the same time, he has indicated he will make layoffs in March.

A few days after Niccol arrived, he posted a letter to partners, customers, and shareholders that said Starbucks had to “empower” baristas to offer better in-store service. Starbucks also needs to return to its roots as a “community coffee house.” More recently, during the Starbucks earnings call, he mentioned what should be larger improvements. One is to cut the size of the menu.

Can Starbucks be saved, even by turnaround experts like Niccol? He has to fix poor customer service in the United States. He has to successfully fight a larger competitor, Luckin Coffee, in China.

Cramer may be right that good CEOs get good results. Sometimes, though, the hurdles to that are just too high.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.