Chipotle Mexican Grill’s (CMG) E.Coli outbreak last year is the gift that keeps on taking.
The burrito chain said on Tuesday that comparable sales, or sales at established restaurants, fell 26.1% last month, a bigger drop than the 22% decline that Wall Street analysts were expecting, according to Consensus Metrix. Shares fell 5% in after-hours trading following the announcement.
The beleaguered company tried to put some lipstick on this carnita, saying the decline was more modest than the 36.4% drop in January, and that so far in March, the sales drop has moderated even more.
Chipotle, long a Wall Street darling for its breathtaking growth and profits, said it expects a loss of $1 per share this quarter. That is because Chipotle is spending a lot more money on additional safety protocols and throwing out more food as waste as a result of more rigorous DNA testing. It also said it would have to spend more on fully staffing stores to serve customers redeeming a free burrito offer as part of Chipotle’s efforts to get customers back. Chipotle also warned investors it will have to spend money on a federal probe into its food safety practices.
“We continue to expect that our margins and earnings potential will fully recover,” the company said in a regulatory filing.
But the company learned last week how fragile that recovery is proving to be. Though comparable sales fell 21.5% in the first week of March, that rate deepened the following week to 27.3% because of headlines about a single store near Boston getting slammed by norovirus without any customers getting sickened.
Chipotle said on Tuesday it has hired Dr. Jim Marsden as its executive director of food safety, calling him “one of the nation’s foremost authorities” in the field.
The store is still grappling with the sales and public relations fallout from an E.Coli outbreak in the autumn that affected 53 people who’d eaten at its restaurants in nine states. In December, the company took out full-page ads in several major newspaper s, including the Wall Street Journal, to apologize, and more recently, Chipotle undertook a campaign to lure customers back.