Shares of Chipotle Mexican Grill (CMG) shot higher on Wednesday as Wall Street welcomed word that fast-food veteran Brian Niccol would succeed Steve Ells as CEO starting next month.
During the last two years, Chipotle has lost nearly half of its market value, plagued by a series of food-safety scandals that battered its brand and sent customers fleeing. Chipotle is now turning to Niccol in hopes of turning things around, particularly when it comes to repairing its image with younger consumers.
"His expertise in digital technologies, restaurant operations and branding makes him a perfect fit for Chipotle as we seek to enhance our customer experience, drive sales growth and make our brand more relevant," Ells, who founded the casual-dining chain in 1993, said in a statement.
With Yum Brands' (YUM) Taco Bell since 2011 and CEO since 2015, Niccol is credited by analysts with delivering consistently strong results. When he takes the helm at Chipotle on March 5, Niccol will be under pressure to repeat his success at Taco Bell, which improved its offerings and became savvier on social media during his reign.
"Taco Bell has also avoided negative PR issues in recent years and generates some of the highest restaurant margins in the industry," said Credit Suisse analysts Jason West and Olya Voronetskaya in a note.
Chipotle's slide began in 2015that forced the closure of dozens of restaurants in Oregon and Washington and a case of norovirus in Boston that sickened more than 100 patrons.
Beyond the need to new consumers trust in the company, some questioned whether Niccol could succeed in forging a new strategy to drive growth at Chipotle.
"While an effective marketing campaign to address the brand's post-food crisis impairment is necessary, we have difficulty in seeing a near-term solution or pointing to a strategy that could result in a meaningful step-up in Chipotle's current low single-digit sales trajectory," noted Wedbush analaysts Nick Setyan and Marshall Pittman.
Shares of Taco Bell were lately up 15 percent, while Yum shares slid nearly 1 percent.