The teacher is obviously missing the 'sensitive gene' and she could have approached the matter far more diplomatically.
I would go in and meet with her and hear it from her directly as to her reasons for moving DS - but why don't you either phone or drop her a note and make a proper appointment to see her next week.
By then, she will be prepared and hopefully have all the necessary information in front of her to explain her way of thinking.
In the meantime, you can make a brief list of a) why was she so blunt especially as it has been DS favourite subject b) how much is he struggling or does she anticipate he will struggle next year c) how does she suggest you can help him over the summer to bring him up to his usual high level in the subject.
I don't agree with the surprise visit on a teacher tactic, you would probably be quite uptight, the teacher will be totally unprepared and that sort of meeting won't resolve anything.
Good luck, although I see it is now school pick up time so may be you are already in that class room giving the teacher 'what for'
I hope not and I hope you get a satisfactory outcome.