Chipotle Seeks Break From Past By Tweaking Almost Everything

(Bloomberg) -- Chipotle Mexican Grill Inc. Chief Executive Officer Brian Niccol has a message for investors: “We have a lot of work to do.”

That work will entail investing in employees and store remodels, working on faster service times and better advertising to draw in diners, Niccol said during a call Wednesday for shareholders and analysts.

“There was a general lack of customer understanding,” Niccol said during an investor call Wednesday. “Our marketing dollars had been inefficiently allocated.”

The shares fell in extended trading, underscoring Niccol's challenge. He has been working to quickly restore sales at the burrito chain that's been hurt by multiple illness outbreaks and a data breach. Last week, Chipotle said it would start testing new foods in New York City including chocolate milkshakes, avocado tostadas and nachos. Niccol also recently partnered with DoorDash to offer delivery service.

The restaurant chain will begin testing a loyalty program in the second half of this year, which it expects to put in place more widely in 2019. It's also planning to add delivery to its mobile app and expand its digital order pick-up shelf tests, and will test a new restaurant design this fall.

Chipotle said it expects charges of $115 million to $135 million in the coming quarters as it moves forward with the already-announced plans to move its headquarters to Newport Beach, California, from Denver. The new location is near the Irvine, California, head office of Niccol's former employer, Taco Bell. The charges will also reflect the closure of 55 to 65 poorly performing stores, the company said Wednesday.

Chipotle shares fell as much as 3.1 percent in late trading to $443. They had jumped 58 percent this year.

In the past, Chipotle has mostly stayed away from menu changes and international expansion. As of March 31, Chipotle had more than 2,400 restaurants with just a handful of those overseas. It did try selling Asian food with its ShopHouse offshoot but closed that chain last year.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson, Jonathan Roeder

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