Nestle touts CEO ousting as ‘generational shift’ — here’s what that means for the stock
Nestle ‘s abrupt axing of its CEO has been billed as a “shock” and an “emergency” by analysts, who are bracing for more pressure on the company’s stock in the aftermath. The Swiss consumer staples giant on Monday announced that it had terminated CEO Laurent Freixe with immediate effect, following an internal investigation into an undisclosed romantic relationship between him and a direct subordinate that breached company rules. Shares of Nestle were 3.1% lower by 8:21 a.m. in London (3:21 a.m. ET) on Tuesday as investors reacted to the news, which was announced after trading hours the previous day. Freixe has been replaced with veteran Philipp Navratil, who had been serving as CEO of Nestle’s Nespresso business. A Nestle spokesperson said in an emailed statement on Tuesday that Pablo Isla, lead independent director and vice chairman of the firm’s board of directors, had been a “big influence” on the leadership changes. Isla jointly oversaw the investigation into Freixe’s conduct with Nestle Chairman Paul Bulcke, who labeled Freixe’s ousting as “a necessary decision” in a Monday statement. “Navratil is clearly a generational shift/changing of the guard at Nestle,” a company spokesperson told CNBC on Tuesday. Freixe’s ousting is likely to spark some market turbulence for Nestle, as investors grapple with the company’s second CEO change in a year’s span. Freixe only took the helm in August 2024 after the exit of Mark Schneider, who Reuters reported had been let go. Nestle has been contending with challenges beyond its succession line. The company — which owns more than 2,000 brands globally — has been dealing with slowing sales, U.S. tariffs uncertainty and commodity price headwinds that have already put some pressure on its share price. In the year under Freixe’s leadership, Nestle shares have fallen by 17%. NES.N-CH 1Y line Nestle share price Yet analysts are viewing his departure as another “negative” development for Nestle stock — and a shock. “When he took over as CEO just over a year ago following Mark Schneider’s ejection from the role, we thought of him as a Nestlé lifer who would restore the company’s reputation of slightly boring predictability,” said RBC Capital Markets analyst James Edwardes Jones in a note to clients on Sept. 1. “How wrong we were.” Wall Street analysts also criticized the rapid shift in permanent leadership at Nestle. JPMorgan’s Celine Pannuti flagged fresh uncertainty as a result of the company’s decision to respond to its investigation findings as “an emergency,” rather than conducting a thorough search for a replacement under the leadership of an interim CEO. “We are disappointed that the new CEO is boxed in for now to follow his predecessor’s strategy at a time where the market is doubting the outcome with Nestlé’s share valuation at a historical low,” she said in a Sept. 1 note to clients. “This new change is likely to keep afloat the question mark about the mid-term direction of the company and keep a lid on the equity story until we hear more about Mr Navratil’s plan.” Navratil’s reassurance that the company will not be “changing course on strategy,” has yet to allay concerns. “Investors, we think, will be concerned about Navratil looking to conduct a full review of the group and set his own agenda and targets for the medium term,” said Jefferies’s David Hayes in a note to clients. “That could see another review of investment plans and margin targets and portfolio assessment.” Such reviews have led to companies clearing the deck for new CEOs by slashing top and bottom line expectations, leaving stocks vulnerable to steep corrections. Most recently, the abrupt departure of Novo Nordisk’s CEO — for unrelated reasons — saw the Danish pharma giant’s stock plunge to multi-year lows. Investors in the consumer staples sector have been grappling with a string of abrupt departures of senior executives, leaving the outlook for their stocks in the lurch. “We can’t remember a time when so many individuals left unexpectedly,” added RBC’s Jones. ‘Safe as houses’ Jon Cox, head of European consumer equities at Kepler Cheuvreux, offered some silver linings. “I think the positive, clearly, is that they’ve moved to appoint an insider who has been there for 25 years [and] seems to have a decent execution track record,” he told CNBC’s “Squawk Box Europe” on Tuesday. He argued that an external appointment would have sparked “a big review,” followed by a new strategy in 12 to 18 months’ time, which could derail the company’s existing turnaround plan. “[Navratil has] said he’s committed to the existing strategy — [you] should be able to start seeing delivery on the results, I would hope, from Q3 rather than delaying the whole turnaround.” Cox noted that Nestle’s earnings over the first half of the year had been “very, very disappointing,” but said the second six-month stretch should bring some relief to shareholders thanks to the strategy that should now remain in place. “It’s focusing on the core business. It’s investing behind the key brands. It’s developing new products. It’s putting your pricing and the taste profile of the products on a stable footing, and that ultimately will deliver,” he told CNBC. He added that Nestle expects to return to a minimum organic sales growth of 4% in the short to medium term as a result of its turnaround plans. Organic sales growth at Nestle was up 2.9% year-on-year in the first six months of 2025. “And [it expects] go back to the Nestle model: 4% to 6% topline growth, margin improvement, a progressive dividend — safe as houses,” Cox said. “This is what we want to see Nestle return to.” — CNBC’s Carolin Roth contributed to this article.
