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Chipotle Mexican Grill expects negative 4Q same-store sales

Chipotle Mexican Grill expects negative 4Q same-store sales

Outlook for 2016 uncertain after ongoing E. coli reports

Chipotle Mexican Grill Inc. fourth-quarter same-store sales are expected to dive into negative territory, in the range of 8 percent to 11 percent, as a result of foodborne illness outbreaks in the second half of the year, the company said late Friday.

Chipotle also rescinded its previous projection of low-single-digit same-store sales increases for fiscal 2016, saying recent sales trends and uncertainty related to the recent E. coli incident has prevented the company from making a reasonable estimate of same-store sales.

The company described sales trends so far during the fourth quarter as “extremely volatile.”

October same-store sales were positive, in the low-single-digit range, Chipotle said. Reports of the outbreak first began to appear on Oct. 31.

“When we announced the closure of 43 restaurants on Nov. 3, company-wide comparable sales dropped for the ensuing few days to approximately negative 20 percent,” Chipotle said in a statement.

The severity of the impact was temporary, however. When the company announced the reopening of restaurants in Washington and Oregon on Nov. 10, same-store sales quickly improved over the next several days, to negative 9 percent.

On Nov. 20, the Centers for Disease Control and Prevention announced additional cases of illness and broadened the geographic scope of the outbreak, forcing daily same-store sales trends to fall again, to negative 22 percent, although trends gradually improved over the past five days, to negative 16 percent.

For the month of November, Chipotle said same-store sales were negative 16 percent.

The company warned that sales trends could be influenced by further developments before the end of the Dec. 31-ended fourth quarter.

During the fourth quarter, the company estimated the non-recurring cost associated with replacing food in select restaurants, lab analysis of food samples and environmental swabs, and the hiring of food-service consultants will range between $6 million to $8 million. That estimate does not include any estimate of legal claims and related expenses, the company said.

Chipotle projected earnings per share in the range of $2.45 to $2.85 for the fourth quarter, with restaurant operating margins of 22 percent to 24 percent.

The incident is not expected to impact new restaurant openings. For the year, Chipotle expects to open between 215 to 225 new restaurants.

Early Friday, the CDC said illnesses tied to the outbreak were reported in three more states, for a total of 52 cases in nine states.

As a result, Chipotle’s stock price took yet another battering, dropping below the lowest point of the past 52 weeks to $518.70 in after-hours trading, a decline of almost 8 percent.

Update: Dec. 4, 2015  This story has been updated with additional information about costs incurred to Chipotle following the E. coli outbreak and the after-hours trading.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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