Behind the Counter: Inside Chipotle
Have shares ofChipotle Mexican Grill (CMG) finally bottomed?
Those holding shares of the fast-food chain or who have been waiting for a chance to buy in, no doubt hope so. Since an E.coli outbreak sickened hundreds of Chipotle Mexican Grill customers a year ago, the stock has nosedived some 42%.
That includes a 9% drop last Wednesday to $368.02, after the company reported its fourth straight quarter of year-over-year sales declines. The stockis down another 1%-plus percent on Monday.
What gave investors indigestion? In the third quarter, the 2,178-store chain saw its sales plunge 14.8%, to $1.04 billion, missing the $1.09 billion consensus forecast.
Same-store sales dove 21.9%, way worse than the 18.9% drop analysts expected, despite a new loyalty program and enhanced marketing. Adjusted earnings slumped 88%, to 56 cents a share, a full dollar below consensus forecasts.
The question for investors is this: Is the worst over, or is Chipotle Mexican Grill still a stock to avoid?
To be sure, the chain is far from the first to fall victim to a food safety scare. Jack in the Box,McDonald"s,Yum! Brandsand others have been tripped up by food safety issues in the past and all have recovered.
But with Chipotle Mexican Grill there are other factors at play both inside and outside its business that suggest that the company"s turnaround is still a long way off, if it happens at all.
Management"s recovery plan includes a move into selling burgers and pizza using the same fresh, hormone-free ingredients for which Chipotle Mexican Grill is known. The company opened itsfirst burger outlet, called Tasty Made, in Lancaster, Ohio, on Thursday.
Source: http://news.google.com/news/url?sa=t&fd=R&ct2=us&usg=AFQjCNEkHPFcVITQDIrmQnRmjO5fF-jjtg&clid=c3a7d30bb8a4878e06b80cf16b898331&cid=52779255963477&ei=72QYWJizFsKK3AG8mJrYAQ&url=https://www.thestreet.com/story/13872865/1/here-is-why-chipotle-hasn-t-bottomed-and-it-is-a-stock-to-avoid.html
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