Chipotle Mexican Grill Inc.’s food-safety crisis has brought an unwanted milestone towards the beleaguered restaurant chain: its first quarterly loss like a public company.
The company, which saw sales be seduced by a minimum of the third straight month in February, now expects a loss of US$1 a share or even more in the first quarter, based on an argument Tuesday. Higher spending on marketing and food safety, including increased waste from discarding ingredients, is weighing on profit, Chipotle said. The chain had previously predicted a break-even quarter.
Customers have been slow revisit Chipotle following multiple foodborne-illness outbreaks this past year, even as the organization has passed out coupons free of charge burritos. Same-store sales tumbled 26 percent in February, and they haven’t shown much recovery in the first two weeks of March. Sales could have been a whole lot worse in February if it weren’t a leap year, which added an extra day to the month.
The sales numbers indicate Chipotle faces an extended route to recovery, based on Asit Sharma, an analyst at the Motley Fool.
“Consumers still have a level of distrust or reluctance to embrace the company,” he explained. “Chipotle is finding that yes, it is in a position to now slowly move the needle on sales, but the marketing and promotion expense required to pull customers back in is greater than expected.”
The shares fell as much as 5.9 per cent to US$473.11 in New York on Wednesday. The stock had already lost 25 per cent in the past 12 months.