The Board of Chipotle Mexican Grill (NYSE:CMG) has retained the services of leading executive recruitment firm Spencer Stuart to assist in the search for a new CEO, and Chipotle stock is on the move following the news.
Steve Ells, Chipotle chairman and CEO – and the founder of the company in 1993 – will become executive chairman following the completion of a search to identify a new CEO.
The Board has formed a search committee comprised of Directors Robin Hickenlooper and Ali Namvar, as well as Ells, to identify a new leader with demonstrated turnaround expertise to help address the challenges facing the company, improve execution, build customer trust, and drive sales.
Chipotle stock is up 4% following the news.
“I am incredibly proud of Chipotle and our people – and grateful to our loyal customers – and while we are continuing to make progress, it is clear that we need to move faster to make improvements,” said Ells. “Simply put, we need to execute better to ensure our future success. The Board and I are committed to bringing in an experienced leader with a passion for driving excellence across every aspect of our business, including the customer experience, operations, marketing, technology, food safety, and training.”
Added Ells, “Bringing in a new CEO is the right thing to do for all our stakeholders. It will allow me to focus on my strengths, which include bringing innovation to the way we source and prepare our food. It will ultimately improve our ability to provide our guests with delicious food that is prepared with high quality ingredients that are raised responsibly and served in a way that is accessible to everyone. I am confident that this will allow us to deliver value for our shareholders, and provide rewarding opportunities for our employees. Chipotle has vast unrealized potential. As we work hard to restore our brand, I believe we can capitalize on opportunities, including in areas such as the digital experience, menu innovation, delivery, catering, and domestic and international expansion, to deliver significant growth.”
William Blair isn’t taking the news in a positive way, downgrading Chipotle stock to Market Perform from Outperform on concerns over the uncertain transition.
Mizuho Securities likes the strategy. “This news is unexpected given the recent moves to streamline the CEO position, but is an absolutely critical, important next chapter for Chipotle stock, which has been struggling to recover sales under Ells,” writes analyst Jeremy Scott in a fresh note. “We believe the move today will help to restore confidence in the board, the activist, and in the stock,” he adds.
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