Chipotle Mexican Grill, Inc. (NYSE: CMG) has hired former Taco Bell CEO Brian Niccol to be its new CEO, and investors are optimistic that Niccol could be the man to finally fix Chipotle. Chipotle stock was up 11.8 percent on Wednesday morning on hopes that Niccol can repeat the success he had while head of Taco Bell.
Niccol first joined Taco Bell, a subsidiary of Yum Brands, Inc. (YUM), in 2011 and took over as CEO in January 2015. Niccol played a huge role in shaping Taco Bell’s brand and targeting younger consumers. He also oversaw the highly successful launch of Taco Bell’s breakfast menu, and the company rolled out mobile ordering in more than 7,000 locations.
Taco Bell reported a 5 percent increase in sales last year, and sales comps during Niccol’s tenure averaged between 3 and 4 percent compared to around 2 percent in the previous four years. In the most recent quarter, Chipotle reported 0.9 percent same-store sales growth as it continues to struggle to recover from a string of food safety outbreaks in 2015.
In a statement, Niccol said he will “focus on dialing up Chipotle’s cultural relevance through innovation in menu and digital communications.”
Niccol’s track record may be impressive, but Wall Street analysts say he has his work cut out for him. William Blair analyst Sharon Zackfia says throwing a new CEO into the mix could prolong Chipotle’s recovery period.
“Indeed, Mr. Niccol has a well-earned reputation as a seasoned restaurant executive with turnaround expertise, and we expect more new menu items as well as reinvigorated marketing under his leadership at Chipotle,” Zackfia says. “While we are encouraged by the company’s selection, we remain cautious on Chipotle’s earnings recovery trajectory as the company remains in a transition period, with shifts to improve operational excellence likely to persist in 2018 before potentially yielding more tangible results in 2019 and beyond.”
Still, Morgan Stanley analyst John Glass says Niccol is a best-case scenario for Chipotleinvestors.
“Naming Taco Bell’s chief Brian Niccol as its new CEO was the best possible outcome for CMG’s search, in our view, given his track record of innovation, expertise in marketing, menu development, operations, and digital,” Glass says.
William Blair has…
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