Chipotle Stock Pops as Taco Bell Boss Takes the Reins

Friday, 16 Feb, 2018

The new chief executive officer will be Brian Niccol, who ran Taco Bell for three years and met sweet success courting crowds with indulgent dishes such as Doritos Locos Tacos and A.M. Crunch Wraps.

The chain has been searching for a new CEO since November, when founder Steve Ells announced he would step down from the role and become executive chairman when a replacement was found.

Beleaguered burrito chain Chipotle Mexican Grill, Inc.

Chipotle credited Niccol with expertise in digital technology, branding and restaurant operations.

Niccol, who has headed Taco Bell since 2015, replaces Chipotle founder Steve Ells. The Denver-based company has struggled to recover from a foodborne illness outbreak in 2015 that included 55 cases of E. coli O26 across 11 states followed by a norovirus outbreak at a Boston-based restaurant that reportedly sickened 80 individuals.

"From the beginning of the search for a new CEO, we noted that we wanted an experienced leader with a passion for driving excellence across every aspect of our business, and that was a top consideration for the search committee throughout the process".

Niccol helped worldwide system sales climb by 7% at Taco Bell in 2017. While some on Wall Street support the hiring, CNBC's Jim Cramer said Niccol represents the anithesis of Chipotle's values. Niccol, who formerly worked at Pizza Hut, has led Taco Bell during a period of growth at the chain. Yum gained 14 percent in the previous year through Tuesday's close - partly powered by Taco Bell's strength.

"Further, we note Mr. Niccol has less experience with cost management, given Taco Bell is a primarily franchised brand compared to Chipotle's 100 percent company-operated model", Charles said.

Despite its problems, Chipotle shares traded recently at a premium to peers: 28.8 times earnings projected over the next 12 months, versus 21.3, according to Thomson Reuters data.

"I want to thank Brian for his leadership and focus on always keeping Taco Bell culturally relevant, innovative and accessible for customers", he said in a release.

Presumably, that applies to Ackman's Pershing Square, too, which held more than 10% of it shares as of September.