Pros And Cons Of Chipotle's Change To CEO Structure

Chipotle Mexican Grill, Inc. CMG announced Monday it was undertaking a key shift in its corporate structure, with the resignation of co-CEO Monty Moran.

Deutsche Bank’s Brett Levy maintains a Sell rating on the company, with a price target of $280.

Corporate Structure Change

“The investment community has long questioned the benefits of CMG's two CEO structure, so we were not surprised to see it well received,” Levy mentioned.

While there are both pros and cons to this change, the analyst expects it to remove a “layer of complexity,” while allowing Chipotle to undertake more rapid changes.

At the same time, the change does “put more on the shoulders of a management team that we believe lacks considerable depth at the top during a challenging time,” Levy stated.

Expectations From The Change

CEO Ells stated an intention to also remove the higher complexity at the field level, by working on simplifying in-store operations.

“We believe the operational benefits will materialize over time, but we do not share management’s optimism that these changes will be immediate or seamless in nature,” the analyst noted.

Seeing this change as a step in the right direction, Levy pointed out that the continuing uncertainties regarding the underlying brand, operational recoveries and sales still persist.