Chipotle Mexican Grill Inc.’s future may not be as shaky as some shareholders fear following the departure of Chief Executive Officer Brian Niccol, investors said.
The burrito chain’s shares fell nearly $6 billion on Tuesday after the company announced that Mr. Nicol would leave the company at the end of the month to become CEO of Starbucks.
But Chipotle’s Chief Operating Officer, Scott Boatwright, has been named interim CEO, and some investors say he will provide stable leadership.
Hedge fund manager Bill Ackman of Pershing Square Capital Management, one of Chipotle’s largest investors with a 2.1% stake, said Thursday that the company is running smoothly thanks to the team the outgoing CEO has put in place.
During his tenure as COO, Boatright and Nicol oversaw improvements to food quality at Chipotle’s more than 3,000 restaurants, eliminating flavor and taste variations and helping the chain increase sales and profits.
“I’m confident Chipotle will continue to double down on the smart initiatives that are already in place within the company,” said Eric Clark, a portfolio manager at Accuvest Global Advisors, who owns about $3.5 million in Chipotle shares.
When Boatright and Nicol visited Chipotle locations together, “Scott would say, ‘Hey, show me how you make guacamole,’ and they’d say, ‘This is how I do it,'” Nicol said at a 2022 event hosted by the University of Chicago Booth School of Business. “The answer we were looking for was, ‘This is how we make it at Chipotle.’ People like consistency.”
It remains to be seen whether Chipotle can continue to perform reliably under Boatright’s leadership, but some say the company is doing well.
Chipotle shares were up 3.8% to $53.62 on Thursday afternoon.
The company’s shares have risen more than 19% so far this year.
In his letter to shareholders, Ackman said he was disappointed to see Nicol step down, but added, “One measure of a great CEO is the company he leaves behind. Brian has built a great team at Chipotle and I expect that momentum will continue unabated following his departure.”
Boatright joined Chipotle in 2017, just a year before Nicol joined the company. The company’s shares have risen 243% over the past five years.
During this time, average sales per unit increased steadily as the company promoted its use of fresh ingredients and reinvested in marketing to regain consumer trust after the 2015 E. coli outbreak.
The company also partnered with DoorDash delivery service to make it faster and more convenient for customers to receive their burritos and rice bowls.
Don Nesbitt, senior portfolio manager at F/m Investments, which owns $7.4 million in Chipotle shares, said the chain remains a “great growth opportunity” compared to Starbucks, which is a “broken old growth stock.” “I think Chipotle is a good stock to own for growth, with or without Brian,” he said.
Chipotle has room to expand into Canada, Mexico and overseas into Asia and is still growing, while Starbucks already operates in those markets and around the world, Nesbitt added.
Unlike McDonald’s, for example, Chipotle “didn’t need to bring back the value meal,” he said.
The burrito chain has yet to name a permanent CEO to replace Niccol, but some Chipotle investors have said Boatwright could be a leading candidate for the chief executive position.
“Having Boatright as the new CEO would be enough news to help the company achieve its growth goals,” said Nancy Tengler, CEO and chief investment officer at Laffer Tengler Investments, which owns $3.4 million in Chipotle stock.
