Wednesday, June 19, 2024

Worst may finally be over for Chipotle


Why Shake Shack's CEO still eats Chipotle burritosChipotle shares surged 5% in premarket trading Monday following reports that the Centers for Disease Control and Prevention may soon declare that the E. coli outbreak at the popular Mexican food chain is over.

The Wall Street Journal reported that the CDC may make such an announcement as early as Monday. But according to report, the cause of the outbreak is still unknown. Chipotle and the CDC were not immediately available for comment.

Chipotle has been reeling as a result of the E. coli outbreak. The company will report is fourth quarter results on Tuesday -- and they will not be good.

Chipotle(CMG) has already warned that same-store sales plummeted in the fourth quarter as the E. coli outbreak -- which has affected 53 customers in nine states since the end of October -- caused some customers to stay away.

Wall Street is expecting that overall sales fell 6% in the fourth quarter and that earnings per share plunged more than 50%.

Chipotle's stock is down nearly 30% since the initial reports of the outbreak and is trading 40% below last summer's all-time high.

The company was already faced with slowing sales before the E. coli outbreak -- partly due to separate health incidents.

More than 200 customers became sick as a result of a norovirus in Simi Valley, California in August. A salmonella outbreak tied to tomatoes in Minnesota in August and September made more than 60 customers ill as well. Then there was another norovirus episode at a restaurant in Boston in December -- at the height of the E. coli concerns.

But shares have bounced back about 15% from their lows in recent weeks. Chipotle has taken several steps to address food safety problems.

The company is even planning to close down all its restaurants on Monday Feb. 8 for a few hours to have meetings about the issue with employees.

Now Chipotle needs to convince customers that it's time to come back for its trademark burrito bowls. Chipotle is planning big discounts for Super Bowl parties this weekend.

But some analysts feel that it will take some time before Chipotle truly regains the trust of consumers.

Wall Street is predicting another sizeable drop in sales and profits for the first quarter.

Chipotle also faces tough competition from the likes of Mexican food rival Qdoba -- which is owned by hamburger chain Jack in the Box (JACK) -- fast casual king Panera (PNRA) and even a resurgent McDonald's (MCD). Mickey D's used to own a stake in Chipotle.


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Author: Red

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