Chipotle Says Sales Plunged Due to E. coli Outbreak

Chain Rescinds Sales Growth Target for 2016

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Chipotle Credit: Chipotle

Chipotle Mexican Grill said the E. coli outbreak has taken a major bite out of its sales, leading it to project steep sales declines at existing locations and rescind its 2016 sales forecast.

"In light of recent sales trends and additional uncertainty related to the E. coli incident, we cannot reasonably estimate 2016 comparable restaurant sales at this time," Chipotle said in a statement issued Friday afternoon.

The company has been dealing with the E. coli issue for more than one month. Friday's announcement was the first time Chipotle has declared how much of an impact the issue has had on its operations.

According to the U.S. Centers for Disease Control and Prevention, 52 people infected with a strain of E. coli have been reported from nine U.S. states, and 47 of those people said they ate at a Chipotle restaurant in the week before their illnesses began.

Chipotle said November comparable sales fell 16%. If recent sales trends continue, it expects comparable sales to fall 8% to 11% this quarter, after starting out with growth in the low-single digit range. Chipotle's comparable sales, often referred to as same-store sales, track year-over-year changes in sales at restaurants open at least 13 full calendar months.

The company rescinded its 2016 forecast which called for comparable sales gains in a low-single digit percentage range.

Company-wide comparable sales plunged about 20% over the few days after Nov. 3, the day the company announced the closure of 43 restaurants due to E. coli then, such sales fell about 22% after Nov. 20, when the U.S. Centers for Disease Control and Prevention announced four more related E. coli cases.

Chipotle said it still continues to serve more than 1 million customers daily. Earlier on Friday, it had announced its commitment to become an industry leader in food safety. That statement was issued hours before the CDC announced an additional seven cases.

Chipotle, which uses the slogan "Food With Integrity" in its advertising, said none of its employees have been identified as having E. coli at any time during this incident. Denver-based Chipotle has long been outspoken about its use of local and organic ingredients when possible and has enjoyed years of successful growth. Chipotle has long been seen as a leader in the fast-casual dining space, with food that is priced higher than mainstream fast food but is still served in a quick style. The first location opened in 1993 and today there are more than 1,900 locations.

Chipotle anticipates $6 million to $8 million in fourth-quarter expenses related to replacing food in certain restaurants, lab analysis and environmental swabs, and retaining expert advisors on epidemiology and food safety. Those costs exclude any estimate for legal claims and related expenses.

Chipotle forecast fourth-quarter earnings of $2.45 to $2.85 per share. The company earned $4.59 per share in the recent third quarter and $3.84 per share in the fourth quarter of 2014.

The company also said its board has authorized $300 million in additional stock repurchases. The shares have fallen in the weeks since the outbreak was first reported and were down 7% in after-hours trading following Friday's announcement. The new authorization is in addition to earlier repurchase plans totaling $1 billion.

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