Starbucks Corp., the world's largest chain of coffee shops, ousted Chief Executive Officer Jim Donald on Monday and brought former CEO and Chairman Howard Schultz to the post after reporting its worst-ever annual performance and competition from fast-food rivals such as McDonald's.

Shares of the Seattle-based coffee empire rose 8.7 percent after U.S. markets closed.

Jim Donald is leaving Starbucks less than three years after joining the chain, Starbucks said today in a statement. Schultz, the company's founder who engineered its exponential rise, will immediately assume the responsibilities of chief executive. Schultz will keep his title as chairman.

Starbucks faces increased competition from McDonald's Corp. after it said on Monday it will introduce specialty coffee counters at its restaurants. The fast food store plans to add counters to serve lattes and cappuccinos in almost 14,000 U.S. stores after U.S. coffee sales increased 39 percent during the first nine months of 2007.

Higher commodity costs and slower economic growth have affected Starbucks' sales but Schultz said the serious problem was the company itself, as its focus has been more on expansion and not on customer service. In short, he said, the company had gone from being quintessentially entrepreneurial to becoming soft.

To improve shareholder returns, Starbucks also said it would slow the pace of U.S. store growth to improve performance at existing locations by re-igniting the emotional attachment with customers.

I am enthusiastic about returning to the role of CEO Schultz said in a statement. We must address the challenges we face and we know what has to be done. Put simply, we are recommitting ourselves to what has made Starbucks and the Starbucks Experience so unique.

Shultz took over in 1987 and was CEO until 2000 and brought the company public in 1992 and expanded it overseas. The franchise currently is currently in 43 countries

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