A change in leadership can have a drastic impact on a company's strategy, its vision, and ultimately, its financial performance. This month, coffee-chain giant Starbucks (NASDAQ: SBUX) made a big move by removing its CEO and bringing in an established leader from Chipotle Mexcian Grill, Brian Niccol.

Investors reacted positively, with shares of Starbucks spiking on the development. Can this move solve Starbucks' problems, and is the stock a good buy on this news?

Investors are hoping for a return to growth

Chipotle is known for being one of the fastest growing fast-food chains in the world. Many stocks strive to mimic its level of growth, and investors are often on the lookout for the "next Chipotle," knowing that a business with similar growth opportunities could generate impressive returns.

Niccol took over as CEO of Chipotle back in 2018. Since then, the company has doubled its sales from $4.9 billion to $9.9 billion this past year. More impressively, its bottom line jumped from $177 million to $1.2 billion.

In Starbucks, Niccol is taking on a much larger company. Revenue over the trailing 12 months has totaled $36.5 billion. But in the past two quarters, the company has posted negative comparable-sales numbers.

A big struggle for Starbucks these days is the challenge of balancing mobile ordering and the in-person experience. Former CEO Howard Schultz says the problem with the company is in the store and the "mosh pit" that exists when there's an influx of customers, resulting in frustration and long wait times.

Fixing Starbucks may not be easy

There will be opportunities to tackle things like the ordering process and improving wait times, but that alone may not be enough to turn the business around.

A particularly concerning problem for Starbucks, for example, is its international business. Addressing problems in its stores could help bolster sales in North America but may not be so simple in other parts of the world where there are different economic concerns and competitors to worry about there.

In Starbucks' most recent quarter, which ended on June 30, comparable-store sales in North America were down 2% but international same-store sales declined by 7%. In China, which is a key market for Starbucks, same-store sales were down by a staggering 14%.

While Niccol has experience in growing sales and profits for a large chain in Chipotle, whether he can replicate that success at a much larger behemoth in Starbucks and address growth problems in several international markets, as well, is a big question mark. Chipotle, for instance, has over 3,500 locations in total, with the vast majority in North America. Starbucks has more than 39,000 stores, with 6,500 in the Chinese mainland alone.

Starbucks may not be the no-brainer buy it appears to be

A change in CEO can impact a company's trajectory. But judging from the surge in Starbucks' stock, investors may be overestimating the effect Niccol may have. While he can improve efficiencies and change the ordering process at stores, he may not be able to transform Starbucks into a fast-growing business like Chipotle or fix all the company's problems.

Its market in China, for instance, has been struggling with slowing growth, and that's going to make it difficult for the business to find a lever to pull to grow sales and ensure profits are also rising. There's a lot of low-cost competition there. How Starbucks performs in China will be key to its overall performance, and investors shouldn't expect a quick or easy fix.

At the very least, this process could take a while. It would be prudent for investors to take a wait-and-see approach and see if the CEO's plans show some early results.

Buying the coffee stock on the assumption that the move will fix Starbucks' problems and put it right back on a growth path could prove to be costly. The company can turn things around in the long run, but a lot will depend on economic conditions, which could outweigh any changes a CEO makes.

Starbucks can be a good buy, and there's hope for the business to get back to growing its operations. However, investors should be careful to temper their expectations and not bet on a quick turnaround.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Starbucks. The Motley Fool recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Can a Change in CEO Help Turn Starbucks' Business Around? was originally published by The Motley Fool