Chipotle_Niccol.jpg David Sundberg / Esto

Chipotle’s new CEO draws warm welcome

Analysts call Brian Niccol a “strong choice,” citing success at Taco Bell

Analysts are giving Brian Niccol’s appointment as CEO of Chipotle Mexican Grill Inc. good reviews, and the company’s stock is on the rise.

As of midday Wednesday, Chipotle’s stock rose more than 14 percent from Tuesday’s close of $287.20 per share, after the after-market announcement that Niccol, CEO of Yum! Brands Inc.’s Taco Bell brand, would succeed Steve Ells at the Denver-based fast-casual operator on March 5.

In notes issued after Niccol’s announcement, analysts expressed optimistic about the successor to Ells, who founded Chipotle in 1993 and will step down to become executive chairman.

David Tarantino, senior research analyst at Robert W. Baird & Co., said in a note Wednesday that Niccol (left) was a strong choice to lead 2,408-unit Chipotle, given his track record as CEO of 6,849-unit Taco Bell since 2015.

“We believe Niccol brings highly relevant skill sets in the areas of marketing and operations that can help [Chipotle] to address the primary issues that have weighed on traffic trends since the late-2015 food safety incidents,” Tarantino wrote.

Chipotle changed its cooking methods after foodborne illness outbreaks in late 2015 sickened at least 50 people in 12 states with E. coli and at least 140 people in the Boston area with norovirus. The company’s traffic, sales and stock suffered months of decline after those incidents.

Tarantino said Niccol’s hiring made his team “more optimistic about the long-term fundamental outlook for Chipotle.”

“We suspect turnaround efforts under Niccol's leadership could take time to gain traction, leaving a relatively balanced near-term risk/reward on the shares at prospective levels,” he said.

Stephen Anderson, an analyst at Maxim Group Equity Research, said Niccol checked all the boxes for experience in brand leadership, menu innovation, technology and international franchise development.

“We note that since Mr. Niccol joined Taco Bell in late 2011, initially as its chief marketing and innovation officer, comps have been positive in 22 of the past 24 quarters, with an average quarterly comp of [positive] 4.1 percent,” Anderson wrote, noting that Taco Bell was an early adopter of digital marketing and mobile payments.

Sharon Zackfia, an analyst at William Blair, said Niccol helped Taco Bell make strides in new products, such as breakfast in March 2014 and the Cantina Bell menu in 2012, as well as the more recent “All Access” digital initiative, which will put self-service kiosks in all Taco Bell locations by the end of 2019.

“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 wrote.

Nicole Miller Regan, senior research analyst at Piper Jaffray, said her team had been impressed by Taco Bell's approach to menu innovation, marketing creativity and consistent operations under Niccol’s leadership.

“Our industry conversations also lead us to believe that Taco Bell leadership helped to develop a relatively strong partnership between the brand and operators, which we believe is an important dynamic,” Regan wrote.

“We believe Mr. Niccol's experience could help Chipotle lean into menu innovation, digital technologies, restaurant operations and marketing over the near-term,” she added.

For the fourth quarter ended Dec. 31, Chipotle’s same-store sales increased 0.9 percent, which the company partially attributed to menu price increases. Net income was $43.8 million, or $1.55 per share, compared with $16 million, or $0.55 per share, the previous year. Revenue rose 7.3 percent, to $1.1 billion.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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