Chipotle Shows Ackman's Got Some Work to Do

The burrito chain is saying the right things, without much to show for it.
At Closing, June 19th
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Bill Ackman seems to have made the world's tiniest dent in Chipotle Mexican Grill Inc. 

Sitting This Meal Out

Chipotle's shares dipped down past $400 in after-hours trading

It has been more than a year since the burrito chain suffered a sales-gutting food-safety crisis -- and a month since the activist investor took a 9.9 percent stake -- but Chipotle finally seems to be at least saying the right things to get back on track.

Chipotle said Tuesday that advertising to address its food crisis head-on has resonated with customers and that it wouldn't rely on discounting to juice sales in the long term. It also said it will slow new store openings, cut operating costs to help profit margins, and shutter a distracting offshoot, its Asian Shophouse concept. 1  

Profit Dip

Chipotle's operating profit will not be able to recover without a meaningful boost in sales

Source: Bloomberg

The question now is whether Chipotle will follow up its words with actions strong enough to win back customers and convince investors the worst is over, after a 40 percent share decline in the past year.

Let The Chips Fall

Chipotle's shares are down nearly 40% in the last year

Source: Bloomberg

It's certainly not there yet. Chipotle shares fell 4 percent in after-hours trading Tuesday, after the company reported its tenth straight month of more than 20 percent year-over-year sales declines. Investors shrugged off Chipotle's promises of more share repurchases and estimates of positive sales growth in 2017. 

Seeing Red

Chipotle's year-over-year sales have declined by more than 20% for 10 straight months

Source: Chipotle

Investors aren't seeing results from Chipotle's efforts to use advertising, giveaways, and menu additions such as chorizo to draw customers. It's also starting to seem less and less likely that Chipotle will entertain a shareholder push to overhaul its entrenched board, not to mention holding accountable executives who were slow to adequately address food-safety issues.  

It's only been little more than a month since Ackman got involved, hardly time to make a significant difference. But Tuesday's share declines show investors are hungry for more. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
  1. To be sure, Chipotle says the slowdown of new locations is temporary and that it envisions 5,000 Chipotle locations in the U.S. eventually.

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

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

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