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A Coup for Chipotle

A Coup for Chipotle

We're hard-pressed to find a better fit for Chipotle's CEO position than Brian Niccol, the former CEO of Yum Brands' Taco Bell division who will join the company on March 5. Under Niccol's leadership, Taco Bell has been one of the bright spots in U.S. quick-service restaurants. We believe his appointment confirms our thoughts about Chipotle being open to more aggressive measures to drive sales and improve operations, and expect Niccol's influence to lead to new approaches to menu innovation, marketing, mobile technologies, and restaurant experience while elevating the Chipotle brand-intangible asset.

In fact, we believe many components of Taco Bell's U.S. strategies can be dropped into the Chipotle turnaround playbook. These include adding new products; increasing mobile ordering and one-to-one marketing efforts; expanding ways to reach consumers outside restaurants, including delivery; and upgraded restaurant aesthetics.

There is no change to our fair value estimate, narrow-moat rating, or standard stewardship rating until we have greater visibility regarding Niccol's strategic priorities. We do acknowledge upside to our longer term comparable sales outlook of 3% is possible if he can translate aspects of Taco Bell's recent operational success to Chipotle.

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About the Author

RJ Hottovy

Sector Strategist
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R.J. Hottovy, CFA, is a consumer strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is responsible for consumer discretionary and staples research. He has covered the consumer sector as an analyst and director of global consumer equity research for Morningstar since joining the company in 2008, and specializes in a broad range of consumer categories including restaurants, footwear and apparel retailers, consumer electronics retailers, fitness clubs, home improvement and furnishing retailers, and consumer product manufacturers.

Before joining Morningstar, Hottovy was a director and senior stock analyst for Next Generation Equity and an analyst for William Blair & Co., specializing in a wide range of retail and consumer product companies. He also spent two years at Deutsche Bank, covering waste management, water utilities, and equipment rental stocks.

Hottovy holds a bachelor’s degree in finance and a second degree in computer applications from the University of Notre Dame, where he graduated magna cum laude. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Institute and the CFA Society of Chicago.

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