Here is the bottom line on Chipotle (CMG) : new CEO Brian Niccol will exit 2018 sitting atop a much different company.
And that is damn good for shareholders who have watched years of mismanagement hold back the burrito giant's growth potential. Here are several takeaways from Real Money's chat with Niccol following his talk with Wall Street on Wednesday evening.
Big Digital Push
As we noted on Tuesday, Chipotle only gets about 9% of its sales digitally. The pizza delivery players such as Domino's Pizza (DPZ) and Papa John's (PZZA) derive more than 50% of their sales digitally. So suffice to say, Chipotle has massive potential to unlock sales and profit growth via digital to an extent that Wall Street isn't factoring into their long-term thinking.
Niccol says the company will have "in-app" delivery available at most locations by year end. Huge. There will be dedicated pickup stations inside Chipotle restaurants so people can get in and out with their food. On top of that, Niccol is having his team build out a strong loyalty program that is likely to help drive more digital sales. That could prove quite lucrative in 2019 and beyond judging by how loyalty programs have fueled results at Starbucks (SBUX) , Dunkin' Brands (DNKN) and Papa John's (PZZA) .
Welcome to the modern day, Chipotle. Be excited shareholders.
Niccol tells us the company will be bringing in new kitchen equipment so it could experiment with new menu items, quickly prepared. I didn't get the sense Niccol would clutter up Chipotle's kitchen with gadgets, ala his prior employer Taco Bell, though. Niccol seems to respect founder Steve Ells' vision to freshly prepare food each day. But more modern day restaurant equipment is likely to turn Chipotle, at long last, into a testing ground for new ideas like others in the industry.
Where there is innovation, there are marketing plans designed to get people in the door and generate sales/repeat visits. Niccol still won't commit to a breakfast or brunch rollout, but it's likely to happen within the next three years. Too big an opportunity to pass up.
Some things in stock analysis are just gut instinct -- not everything can be neatly put into an Excel spreadsheet. Despite this being his first CEO gig (running Taco Bell is no small job, though), I came away very confident in Niccol. He has a clear plan -- he has already installed a good portion of his team (and driving change at the store management level, too). No sound of uncertainty in his voice, just a spirit to get the Chipotle brand back in the good graces of consumers.
As with any corporate turnaround plan, there will surely be challenges. But Niccol has a strong chance to have much higher stock price three years from this day if he pulls off his vision.