Chipotle Tumbles After E. Coli Outbreak Is Linked to Chain

Chipotle Takes Hit After E. Coli Scare
  • Mexican chain closes 43 restaurants in Seattle and Portland
  • More than 20 people have been sickened over two-week period

Chipotle Mexican Grill Inc. shares declined after the chain was linked to an E. coli outbreak, prompting it to shut dozens of restaurants in Seattle and Portland, Oregon.

Forty-three restaurants in the two areas were closed after six of them were connected to the outbreak, which has sickened about 20 people over two weeks, the Denver-based company said over the weekend.

Chipotle slipped 2.5 percent to close at $624 in New York on Monday, erasing about half a billion dollars from its market value. The stock was already down 6.5 percent this year through the end of last week, hurt by concerns about slowing growth. Chief Financial Officer Jack Hartung said last month that sales had been "very, very choppy" in October.

QuickTake Food Safety

The E. coli scare follows a salmonella outbreak in Minnesota in September, when Chipotle restaurants were linked to dozens of infections. In that case, authorities identified tainted tomatoes as the source. One Chipotle location in California, meanwhile, saw about 80 customers sickened by an outbreak of norovirus over the summer.

“Most every chain restaurant is vulnerable to the outbreak of food-borne pathogens, and Chipotle is not immune,” Bob Derrington, an analyst at Telsey Advisory Group, said in a research note.

Marketing Campaign

The incidents have marred the reputation of a restaurant chain known for its simple, unprocessed ingredients. Chipotle also has worked to get genetically modified organisms, or GMOs, out of its menu this year. The company kicked off a marketing campaign earlier this year where it criticized the artificial ingredients and processed foods used by its competitors.

The disruption at Chipotle could benefit rival chains such as Panera Bread Co. and Jack in the Box Inc.’s Qdoba Mexican Grill, according to Derrington. Like Chipotle, Panera has stepped up marketing this year about the purity of its food.

“Panera is one of the few chains who could rival Chipotle’s ‘Food With Integrity’ thesis on a national scale,” Derrington said.

Three people in the Portland area and 19 in Washington state became ill after eating at the Chipotle restaurants since Oct. 14, according to a statement posted Saturday by the Oregon Health Authority. There have been no deaths, but a third of those affected have been hospitalized, the agency said.

The illness is believed to be caused by the Shiga toxin E. coli. The symptoms include vomiting and bloody diarrhea.

Chris Arnold, a spokesman for Chipotle, said on Monday that it wasn’t clear when the Portland and Seattle locations would be operating again.

“Timing of reopening will be determined by progress of the investigation,” he said in an e-mail. “Right now, it is our priority to work through that process with health department officials.”