The struggles of Chipotle Mexican Grill (CMG 295.99, +10.14, +3.6%) are well known on Wall Street. The clearest proof of that point is the company's stock price, which has plummeted from a high of nearly $760 per share in 2015 to a low of $263 as recently as November 13.
The downfall of the stock was precipitated by food safety issues that hit a fevered pitch in late 2015 when there was an E. coli outbreak at several of its restaurants. The company has been trying to make up for that scare ever since and it has had a hard time doing so, not only because of the highly-publicized reporting on the issue but also because of increased competition in the quick casual restaurant industry.
Chipotle's comparable restaurant sales growth just hasn't been what it used to be even though the company has stepped up its investment in food quality control efforts and marketing initiatives to drive traffic back to its restaurants.
Because it isn't growing like it used to, CMG has lost its appeal as a growth stock, so investors are no longer as willing to pay up for every dollar of earnings as they used to be.
Today, however, shares of CMG are trading higher following the news that the company will be conducting a search for a new CEO who can improve execution, build customer trust, and drive sales.
Current CEO -- and founder -- Steve Ells will step aside as CEO when the search has been completed and will become Executive Chairman. The change, Ells said, will enable him to focus on his strengths, which include bringing innovation to the way Chipotle sources and prepares its food.
The positive response to this news underscores the belief that investors had lost faith in Ells as CEO. To his credit, Ells has done a tremendous job growing the Chipotle brand, yet he has struggled to effect the turnaround for the company's operations that is desperately needed.
Accordingly, a search committee, which Ells will be part of, is aiming to identify a new leader with turnaround expertise. Executive recruitment firm Spencer Stuart will aid in the search.
No timetable was set for when Chipotle hopes to complete its search, yet the news itself has provided a modicum of hope that a new CEO will get the company and its stock back on a more appetizing growth track.