After reporting yet another disappointing quarter in October, Chipotle Mexican Grill, Inc. (NYSE: CMG) announced on Wednesday that founder Steve Ells is stepping down from the CEO position and the company has begun the search for his replacement.
Investors are hoping a leadership change is just what the battered restaurant needs. Chipotle stock rose by more than 5 percent following the announcement.
Ells founded the company in 1993 and was named co-CEO in 2009. He became sole CEO in December 2016. Ells will now be assuming the role of executive chairman.
[See: 7 of the Best Stocks to Buy for 2018.]
Ells says Chipotle is focused on a number of strategies aimed at speeding up its recovery from food safety problems dating back to 2015.
“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,” Ells says in a statement.
Chipotle is now two years removed from a string of E.coli outbreaks at several of its restarants, but the company has struggled to regain lost sales and restore its reputation. The stock is down another 20 percent in 2017 and recently dropped below $280 for the first time in nearly five years.
This year, Chipotle made a big bet that its new queso offering could boost earnings and margins heading into the end of the year. Unfortunately, the new queso was met with lukewarm customer reviews, and Chipotle’s same-store sales growth, earnings per share and revenue all missed consensus analyst estimates in the third quarter.
The company’s full-year guidance implies a 1 percent decline in same-store sales in the fourth quarter, and Bank of America analyst Gregory Francfort says consensus analyst earnings expectations for 2018 and 2019 are at least 10 percent too high.
“The company continues to trade at an expensive level on aggressive street earnings consensus, and therefore we see risk to the stock going forward,” Francfort says.
[See: 8 Ways to Satisfy a Craving for Restaurant Stocks.]
Bank of America has an “underperform” rating for Chipotle stock.
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Chipotle Mexican Grill, Inc. (CMG) Investors Cheer Leadership Change originally appeared on usnews.com
