Chipotle Comeback Remains Slow Going as Results DisappointBy
Burrito chain trying to bounce back from food-safety crisis
The stock declines in late trading following tepid results
Investors looking for signs of Chipotle Mexican Grill Inc.’s turnaround will have to wait a bit longer.
The burrito chain posted underwhelming earnings on Thursday, along with a smaller-than-expected increase in revenue. The results signal that the company will have a slow rebound from a series of food-poisoning outbreaks that scared away customers last year and crushed its once highflying stock.
The burrito seller has tried to draw back diners with free food and deals, along with heavy advertising. Chipotle also is trying to improve its digital ordering systems and may start selling dessert this spring. But the strategy is taking time to pay off.
“If the customer hasn’t come back by now, are they going to come back?” said Peter Saleh, an analyst at BTIG. The company may be at a “new norm,” he said.
Shares of the Denver-based company fell 1.9 percent to $415.19 at 9:42 a.m. in New York on Friday. The restaurant chain is coming off a 21 percent stock decline in 2016 and a nearly 30 percent drop the previous year.
Chipotle reported earnings of 55 cents a share for the fourth quarter, just shy of the 56-cent average estimate of analysts. Sales came in at $1.03 billion, below the preliminary $1.04 billion figure that Chipotle previously announced.
Still, there are signs of optimism: January same-store sales jumped about 25 percent, compared with a 15 percent gain in December. Improvements to Chipotle’s mobile ordering system are aiding the recovery, executives said on a conference call. The company is now better able to predict when digital orders will be ready for customers.
The company also said it’s sticking with its “stretch goal” of hitting $10 a share in earnings this year.
Chief Executive Officer Steve Ells said on Thursday that the company is working to get back to “a path of long-term value creation for our shareholders.”
To convince investors that Chipotle is truly on the mend, it will have to show same-store sales improvement on a two-year basis, Saleh said. The company also needs to restore the restaurant margins it once was famous for, he said.