Chipotle Pulls Forecast After E. Coli Scare Crushes Salesby and
Chipotle Mexican Grill Inc. rescinded its 2016 forecast in the wake of an E. coli outbreak that has scared away customers, saying that sales plunged as much as 20 percent in the days after the illnesses were reported.
Same-store sales -- a closely watched benchmark -- are now expected to be down 8 percent to 11 percent in the fourth quarter, the Denver-based company said in a regulatory filing on Friday. The Mexican-food chain also announced plans for a $300 million stock buyback, aiming to reassure investors after the highly publicized health scare.
“Sales trends during the quarter so far have been extremely volatile,” the company said.
Chipotle shares fell more than 6 percent in late trading after the filing was posted, further battering a stock that already had tumbled 18 percent this year.
Before scrapping its 2016 guidance, Chipotle had said same-store sales next year would rise by a percentage in the “low single digits.”
Earlier on Friday, the Centers for Disease Control and Prevention reported seven new instances of consumers falling ill due to the E. coli outbreak linked to the Mexican-food chain. The illnesses have been reported in states including Illinois, Maryland and Pennsylvania, none of which had previously been affected by the outbreak.
The update brought the total to nine states and 52 illnesses, with 47 saying they’d eaten at Chipotle. Twenty people have been hospitalized. Of the three most recent cases, only one person reported eating at Chipotle in the week before falling sick.
Chipotle’s filing made it clear that the chain’s sales are suffering. The company had previously reported a 2.6 percent same-store sales gain for the third quarter and said it expected the fourth-quarter numbers to come in at roughly that level. Instead, they’ll suffer a steep decline.
The CDC report of new illnesses came on the same day that the company unveiled revamped food-safety procedures that include improving its supply chain and conducting DNA testing of produce. Chipotle developed the program with Seattle-based IEH Laboratories & Consulting Group, and also is retooling its training to help employees handle food more carefully.
“While it is never possible to completely eliminate all risk, this program eliminates or mitigates risk to a level near zero, and will establish Chipotle as the industry leader in this area,” Mansour Samadpour, head of IEH Laboratories, said in the statement.
Chipotle said this week that it had tightened its supplier standards in the wake of the outbreak, a move that threatens the chain’s longstanding pledge to buy local food. Chipotle changed its website last month to remove a description of the local produce program, which it started in 2008 and runs from about June through October in most of the U.S.