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Company Profile
Chipotle Mexican Grill, Inc. (CMG) has established itself as a prominent player in the fast-casual dining space, focusing on a simple menu consisting of burritos, tacos, bowls, and salads.
But the story of Chipotle’s rise to fame isn’t just about the food—it’s also about the power of a good partnership. Back in 1998, Chipotle caught the eye of McDonald’s, which decided to take a minority stake in the company. This was a game-changer. With McDonald’s financial backing and operational expertise, Chipotle was able to scale up and expand quickly. By the time McDonald’s decided to part ways in 2006, Chipotle had already set the stage for its independent growth.
Leadership Transition
On November 11, 2024, Chipotle Mexican Grill made it official, appointing Scott Boatwright as its new Chief Executive Officer after he had served as interim CEO since August. Boatwright’s appointment follows Brian Niccol’s departure, announced on August 12, 2024, and effective at the end of that month. During the earnings call, executives also indicated that Niccol’s departure was “not expected.”
The leadership transition came with a series of strategic changes within the company. On October 1, 2024, Jack Hartung, who had previously been Chipotle’s Chief Financial and Administrative Officer, was transitioned to the role of President and Chief Strategy Officer. Hartung was originally scheduled to retire in March next year after serving as the company’s CFO for over two decades. Meanwhile, Adam Rymer stepped in as the company’s new Chief Financial Officer. Rymer has been at Chipotle for 15 years, last serving as vice president of finance.
Brian Niccol: The CEO Who Transformed Chipotle
From Taco Bell to Chipotle
Brian Niccol’s journey to the top job at Chipotle Mexican Grill wasn’t a typical career path. In late 2017, Chipotle was facing a tough situation: food safety issues and a tarnished brand image following outbreaks of E. coli and salmonella. As Niccol read about Chipotle’s struggles, he saw an opportunity to make a real impact. Having led Taco Bell to success, he admired Chipotle’s focus on fresh ingredients and its loyal customer base. What excited him most, however, was the challenge of restoring the company’s reputation and guiding it through a much-needed transformation.
Within weeks of hearing about the opportunity, Niccol connected with recruiters and began plotting his next career move. By 2018, he was leading Chipotle, and just three years later, the company was back on track, joining the Fortune 500 and launching a highly successful rewards program.
The Niccol Effect: Turning Chipotle Around
Under Niccol’s leadership, Chipotle experienced a remarkable transformation, with revenue soaring 800%. In fiscal 2023, sales nearly doubled to $10 billion, and the company’s stock price tripled over five years. Niccol’s strategic vision was clear: rebuild Chipotle’s reputation and invest in long-term growth.
First, Niccol tackled the aftermath of the food safety crisis by focusing on employee re-training and bolstering safety and wellness protocols, which helped rebuild trust with customers. Niccol implemented a comprehensive food safety checklist known as the Food Safety Seven. This system ensured that managers and employees adhered to best practices for food handling. He then shifted focus to expansion, with nearly 1,000 new locations opened globally during his tenure.
But Niccol didn’t stop there—he spearheaded numerous technological innovations, such as introducing automated avocado processors, which cut preparation times by 50%. Robotic dual-sided grills were also deployed to speed up cooking times and improve operational efficiency.
Revolutionizing the Customer Experience
One of Niccol’s standout moves was the creation of Chipotlanes—drive-thru lanes dedicated to digital orders. These were rolled out in 238 of the 271 new restaurants opened in 2023. This digital-first approach not only catered to the growing demand for convenience but also set Chipotle apart in the competitive fast-casual space.
Niccol’s commitment to digital transformation went beyond just physical infrastructure. He launched a rewards program that saw millions of loyal customers signing up, ensuring repeat business.
Capital Allocation: A Key to Long-Term Success
The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success. Much like the CEOs featured in the book, Niccol understood the importance of thoughtful capital allocation to drive lasting success. When he joined Chipotle in 2018, the company was grappling with operational challenges and reputational damage from past food safety incidents. His strategy was clear: fix the fundamentals first.
Instead of chasing flashy expansions or drastic menu overhauls, Niccol focused on strengthening the fundamentals. He directed resources into enhancing digital infrastructure, such as building second kitchen lines for online orders and redesigning restaurants for streamlined operations. These moves not only addressed immediate operational bottlenecks but also positioned Chipotle for sustainable, scalable growth.
An equally important part of Niccol’s strategy was recognizing internal talent, a trait that aligns with the leadership practices highlighted in The Outsiders. One such example is Scott Boatwright, who joined Chipotle as COO and quickly became a pivotal figure in its revival.
Recognized in Bloomberg’s People Who Defined 2019, Boatwright earned accolades for his role in streamlining Chipotle’s operations and setting new benchmarks for efficiency.
Chipotle, under Niccol’s leadership, however, faced criticism for opposing unionization, including a five-cent wage increase offer during contract talks and a 2023 $240,000 settlement over unfair labor practices related to a unionized Augusta, Maine location. The company also settled charges in Kansas for alleged retaliation against union efforts.
Starbucks – A Revolving Door
Starbucks (SBUX) has faced turbulence in recent years, cycling through four CEOs since 2022 and struggling with declining same-store sales, chaotic operations, and a weakening brand. Following Niccol’s appointment Wall Street’s reaction was overwhelmingly positive, with Starbucks shares soaring 25%—the biggest single-day jump in company history—adding a whopping $21.4 billion in market cap. In contrast, Chipotle shares dropped 7.5%, losing $5.7 billion in value, as investors worried about the impact of Niccol’s departure.
Four Minutes or Less
During the latest Starbucks earnings call, Niccol emphasized the goal of “four minutes or less” more than a dozen times, underlining its importance in improving both customer experience and operational efficiency.
Key initiatives from his “Back to Starbucks” plan revealed during the call include:
As Niccol heads to Starbucks, optimism is high that he can bring similar magic to the coffee giant.
The Boatwright Era: Chipotle’s New Leadership
Boatwright, who joined the company in 2017 from Arby’s, had been an integral part of Chipotle’s operational turnaround. As COO and Chief Restaurant Officer, he worked alongside Niccol to improve efficiency and service times, adding separate burrito assembly lines to handle digital orders and ensure smooth operations.
Under Boatwright’s leadership, Chipotle has continued to outperform its competitors, reporting strong sales despite broader declines in dine-out trends. While companies like McDonald’s and Starbucks have faced same-store sales dips, Chipotle has thrived, continuing to attract diners and expand its reach.
Boatwright also prioritized employee retention, helping Chipotle hire 15,000 workers ahead of its busy season. Chipotle plans to open 345 new locations this year.
Restaurant Association’s Restaurant Performance Index
The National Restaurant Association’s Restaurant Performance Index (RPI) is a monthly composite index that tracks the health of the U.S. restaurant industry.
The RPI is measured in relation to a neutral level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction. The index consists of two components: the Current Situation Index, which measures current trends in four industry indicators (same–store sales, traffic, labor and capital expenditures), and the Expectations Index, which measures restaurant operators’ six-month outlook for those four indicators.
The National Restaurant Association’s Restaurant Performance Index (RPI) rose to 98.8 in September, up from 98.6 in August. However, it remained below 100, signaling contraction for the 10th consecutive month.
Same–Store Sales and Customer Traffic
In September, restaurant operators reported a net decline in same-store sales for the ninth consecutive month, though conditions showed slight improvement.
Restaurant operators also continued to report dampened customer traffic in September.
Chipotle’s sales during Brian Niccol’s tenure
Same-store sales, a critical indicator of organic growth for restaurants with at least one year of operation, reflect Chipotle’s strong performance in recent years. The company has consistently delivered robust year-on-year growth, averaging 7.7%, driven by sustained demand across its established locations.
Valuation
Chipotle Mexican Grill’s strong market leadership, historical performance, and growth could partly start to explain its rich valuation. With a forward P/E of 55.56 and a forward EV/EBITDA of 38.50, there does not appear to be much room for error.
Financials
Over the past decade, Chipotle Mexican Grill has experienced consistent growth in revenue, net income, and improved margins, including a notable increase in its gross margin to 26.2%. The company’s free cash flow (FCF) has grown significantly from $222.93 million to $1.22 billion during this period. Chipotle holds net debt of $3.12 billion on its balance sheet but this is primarily because of $4.21 billion in capital leases. If you remove capital leases, the company has net cash on its balance sheet.
Share Repurchases
Chipotle Mexican Grill Third Quarter 2024 Results (Press Release)
Conclusion
As Brian Niccol transitions from Chipotle to Starbucks, the two companies stand at pivotal moments in their histories. At Chipotle, the leadership baton was passed to an insider Scott Boatwright, who will likely continue to execute Niccol’s vision for the near future. Meanwhile, Starbucks has turned to Niccol to restore stability, operational efficiency, and customer satisfaction.
Niccol is already applying the same approach at Starbucks that worked so well for him at Chipotle—focusing on the fundamentals first. Instead of introducing sweeping changes, he’s concentrating on fixing and optimizing what’s already in place. Investors are going to watch both company’s results closely over the next few quarters to see if anything slips at Chipotle and for green shoots in Starbucks’ turnaround. At this juncture, I like Starbucks’ prospects a whole lot more than I do Chipotle.
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General Counsel/Chief Legal Officer
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Appointments
1. Autodesk (ADSK): $290.64
On November 25, 2024, Autodesk appointed Janesh Moorjani as Chief Financial Officer, effective December 16, 2024.
| MarketCap: $62.50B | Avg. Daily Volume (30 days): 1,448,026 | Revenue (TTM): $5.96B |
| Net Income Margin (TTM): 18.30% | ROE (TTM): 53.25% | Net Debt: $865M |
| P/E: 57.90 | Forward P/E: 29.63 | EV/EBIDTA (TTM): 47.41 |
| P/S (TTM): 10.97 | P/B (TTM): 823.32 | 52 Week Range: $195.32 – $326.62 |
2. Microchip Technology (MCHP): $67.87
On November 18, 2024, Microchip Technology announced Board elected Microchip’s former Chief Executive Officer and President, Steve Sanghi as interim Chief Executive Officer and President effective November 18, 2024.
| MarketCap: $36.45B | Avg. Daily Volume (30 days): 6,258,798 | Revenue (TTM): $5.50B |
| Net Income Margin (TTM): 14.22% | ROE (TTM): 11.80% | Net Debt: $6.17B |
| P/E: 47.13 | Forward P/E: 22.45 | EV/EBIDTA (TTM): 21.82 |
| P/S (TTM): 6.63 | P/B (TTM): 6.87 | 52 Week Range: $62.63 – $100.57 |
3. Zillow Group (Z): $85.45
On November 14, 2024, Zillow Group announced that the board of directors of Zillow appointed Jun Choo, currently Zillow’s Senior Vice President, Real Estate Software, as Zillow’s Chief Operating Officer, effective November 14, 2024.
| MarketCap: $19.77B | Avg. Daily Volume (30 days): 3,333,156 | Revenue (TTM): $2.16B |
| Net Income Margin (TTM): -6.17% | ROE (TTM):-2.90% | Net Cash: $1B |
| P/E: -147.33 | Forward P/E: 52.86 | EV/EBIDTA (TTM): 242.75 |
| P/S (TTM): 9.19 | P/B (TTM): 3.19 | 52 Week Range: $38.45 – $86.37 |
4. Advanced Micro Devices (AMD): $136.24
On November 13, 2024, the Board of Directors of AMD appointed Philip Carter as AMD’s Chief Accounting Officer effective November 18, 2024.
| MarketCap: $221.09B | Avg. Daily Volume (30 days): 34,732,921 | Revenue (TTM): $24.30B |
| Net Income Margin (TTM): 7.52% | ROE (TTM): 3.26% | Net Cash: $2B |
| P/E: 120.57 | Forward P/E: 29.90 | EV/EBIDTA (TTM): 45.92 |
| P/S (TTM): 9.10 | P/B (TTM): 4.67 | 52 Week Range: $116.37 – $227.30 |
5. LyondellBasell Industries NV (LYB): $83.04
On November 22, 2024, LyondellBasell Industries N.V. announced that in connection with Michael McMurray retirement, the Board of Directors of the Company has appointed Agustin Izquierdo to serve as Executive Vice President and Chief Financial Officer, also effective March 1, 2025.
| MarketCap: $26.97B | Avg. Daily Volume (30 days): 2,268,414 | Revenue (TTM): $40.73B |
| Net Income Margin (TTM): 5.27% | ROE (TTM): 15.86% | Net Debt: $9.97B |
| P/E: 12.60 | Forward P/E: 10.46 | EV/EBIDTA (TTM): 7.89 |
| P/S (TTM): 0.65 | P/B (TTM): 2.27 | 52 Week Range: $81.45 – $107.02 |
Departures
1. Autodesk (ADSK): $290.64
On November 25, 2024, Autodesk interim Chief Financial Officer Elizabeth Rafael will be replaced by Janesh Moorjani effective December 16, 2024.
| MarketCap: $62.50B | Avg. Daily Volume (30 days): 1,448,026 | Revenue (TTM): $5.96B |
| Net Income Margin (TTM): 18.30% | ROE (TTM): 53.25% | Net Debt: $865M |
| P/E: 57.90 | Forward P/E: 29.63 | EV/EBIDTA (TTM): 47.41 |
| P/S (TTM): 10.97 | P/B (TTM): 823.32 | 52 Week Range: $195.32 – $326.62 |
2. LyondellBasell Industries NV (LYB): $83.04
On November 22, 2024, LyondellBasell Industries N.V. announced that effective March 1, 2025, Michael McMurray will retire as Chief Financial Officer.
| MarketCap: $26.97B | Avg. Daily Volume (30 days): 2,268,414 | Revenue (TTM): $40.73B |
| Net Income Margin (TTM): 5.27% | ROE (TTM): 15.86% | Net Debt: $9.97B |
| P/E: 12.60 | Forward P/E: 10.46 | EV/EBIDTA (TTM): 7.89 |
| P/S (TTM): 0.65 | P/B (TTM): 2.27 | 52 Week Range: $81.45 – $107.02 |
3. Microchip Technology (MCHP): $67.87
On November 18, 2024, Microchip Technology announced that Ganesh Moorthy retired as Chief Executive Officer and President and as a member of the Board of Directors of Microchip.
| MarketCap: $36.45B | Avg. Daily Volume (30 days): 6,258,798 | Revenue (TTM): $5.50B |
| Net Income Margin (TTM): 14.22% | ROE (TTM): 11.80% | Net Debt: $6.17B |
| P/E: 47.13 | Forward P/E: 22.45 | EV/EBIDTA (TTM): 21.82 |
| P/S (TTM): 6.63 | P/B (TTM): 6.87 | 52 Week Range: $62.63 – $100.57 |
4. Advanced Micro Devices (AMD): $136.24
On November 15, 2024, Darla Smith announced her resignation as Corporate Vice President and Chief Accounting Officer of AMD. She will step down as Chief Accounting Officer on November 18, 2024, and remain as Corporate Vice President until January 17, 2025, to assist with the transition.
| MarketCap: $221.09B | Avg. Daily Volume (30 days): 34,732,921 | Revenue (TTM): $24.30B |
| Net Income Margin (TTM): 7.52% | ROE (TTM): 3.26% | Net Cash: $2B |
| P/E: 120.57 | Forward P/E: 29.90 | EV/EBIDTA (TTM): 45.92 |
| P/S (TTM): 9.10 | P/B (TTM): 4.67 | 52 Week Range: $116.37 – $227.30 |
5. Zillow Group (Z): $85.45
| MarketCap: $19.77B | Avg. Daily Volume (30 days): 3,333,156 | Revenue (TTM): $2.16B |
| Net Income Margin (TTM): -6.17% | ROE (TTM):-2.90% | Net Cash: $1B |
| P/E: -147.33 | Forward P/E: 52.86 | EV/EBIDTA (TTM): 242.75 |
| P/S (TTM): 9.19 | P/B (TTM): 3.19 | 52 Week Range: $38.45 – $86.37 |
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