Shelly Banjo is a Bloomberg Gadfly columnist covering retail and consumer goods. She previously was a reporter at Quartz and the Wall Street Journal.

Chipotle investors waiting for a real recovery will just have to keep waiting. 

Sales at the beleaguered burrito maker's established locations fell by 24 percent from the year before in the latest quarter, it reported Thursday -- an even worse showing than the 20 percent drop Wall Street analysts expected. Traffic fell by 19 percent. Meanwhile, costs related to new food-safety procedures -- enacted in response to last year's devastating food-safety crisis -- and food waste rose. 

Hunger Strike
Chipotle's sales dropped 24% from the year before
Source: Bloomberg

Chipotle did return to profitability after suffering its first loss as a public company in the prior quarter. Newly opened stores helped in that regard, helping boost some of the revenue lost at established stores.  

Executives said the "Chiptopia" loyalty program launched on July 1 seems to be going well so far, despite the scheme's off-putting complexity, and that sales trends have improved in July (though they are still down from a year ago). 

This is all cold comfort for folks hoping this quarter -- filled with free-burrito promotions and the addition of chorizo to the menu -- could be the turning point for the company. Not quite. 

Chipotle's stock bounced around in after-hours trading on Thursday, echoing the confusion of Chipotle investors, who still have little insight as to when or whether the company's sales growth will return. 

Bowled Over
Chipotle's shares dropped below $400 in June, but have inched up higher in July
Source: Bloomberg

One problem for investors is that a lot of progress seems already to have been priced into the stock. As much as Chipotle shares have been battered, they still trade around 50 times forward earnings, compared to a multiple of 29 for Panera Bread and 27 for Starbucks. 

At the same time, short interest keeps rising: The percentage of investors betting against Chipotle's stock hit a record high earlier this month, before sliding slightly to 18 percent of Chipotle's free float on Thursday. That compares to a median of 5.5 percent for U.S. retailers and restaurants valued at more than $100 million.

Betting Against Chipotle
Bets Chipotle's shares will fall further hit another record high in July
Source: Markit, Bloomberg

The stock's doubters have a point. Even if Chipotle were completely back up to speed and had completely erased from consumers' minds the memory of its food-safety crisis, it would still face the general sales funk that has gripped the entire restaurant industry as of late. 

And it's doubtful Chipotle is firing on all cylinders. Its Chief Marketing Officer remains on administrative leave without a formal replacement after being indicted on charges of allegedly buying cocaine. Chipotle desperately needs good marketing and public relations to convince customers its food is safe to eat. So far it has simply been recycling old advertising spots about how nicely it treats farmers. That certainly isn't going to do the trick. Investors should brace for more indigestion.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shelly Banjo in New York at

To contact the editor responsible for this story:
Mark Gongloff at