Chipotle Exec: We're Not Recovering Like We Hoped

Chipotle Mexican Grill, Inc. (NYSE: CMG) opened Tuesday’s session down more than 7.5 percent following yet another disappointing quarterly report.

Disappointment Continues

A number of food safety issues plagued the company throughout late 2015 and early 2016, including multiple outbreaks of E. coli.

Chipotle lost a large portion of its customer base during that period, while sales and share prices plummeted as well. For most of the year, the company has been focused on efforts to win back its lost business. So far, it has been an uphill battle.

Q3 sales fell 21.9 percent, missing consensus expectations of an 18.9 percent decline. EPS of $0.56 also fell well short of consensus predictions of $1.59.

Commentary

The Street’s Brian Sozzi tweeted that Chipotle management said they are nervous about forward guidance on this morning’s earnings call.

Bloomberg’s Shelly Banjo also noted that management is disappointed with the company’s sales recovery so far.

Founder Steve Ells is among those dissatisfied.

“We are not offering the necessary guest experience,” he admitted.

Banjo pointed out some troubling statistics for Chipotle and its investors. In the first half of 2016, 78 percent of Chipotle’s least-frequent customers abandoned the restaurant.

Ironically, Banjo pointed out that Chipotle management said lines at Chipotle restaurants have returned, but this time, it’s because throughput is down. Chipotle investors were hoping those lines were an indication of increasing demand.

Nations Restaurant News editor Jonathan Maze tweeted that Chipotle’s two-year same-store sales have fallen 19.3 percent in the first three quarters of 2016.

The Chipotle recovery clearly hasn’t materialized the way investors had hoped. After Tuesday’s news, it looks like Chipotle bulls have at least another few months to wait.

Image Credit: By Mjs92984 (Own work) [CC BY-SA 4.0], via Wikimedia Commons