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.
By: Ted Berg| January 15, 2016 4:10 pmFollow @ogtedberg
All Chipotle locations will be closed for a few hours on the morning of Feb. 8 for an all-staff meeting, presumably to discuss new food-safety protocols after sickening hundreds of customers in incidents involving E. coli bacteria and a contagious norovirus.
But while theyre at it, there are many other important business matters that Chipotle execs should discuss with their employees. They follow here. Apologies if this extends the length of meetings for Chipotle workers who signed up to make burritos and not to waste all day in stupid meetings. Meetings are generally terrible.
1. Ingredient distribution
(PHOTO: Joe Raedle/Getty Images)
Improper ingredient distribution in burritos represents the biggest threat facing Chipotle right now. No, wait: Improper ingredient distribution in burritos represents the second-biggest threat facing Chipotle right now. Plenty of Chipotle burrito creators recognize the importance of evenly spreading out the ingredients inside a burrito, because no reasonable burrito-consumer wants a bite thats only sour cream and tortilla with no meat and salsa.
But Chipotles assembly-line format too often leaves the distribution of certain ingredients to ancillary workers who ignore the fine burrito craftsmanship of the person who started making the burrito. This needs to stop: Either assign one diligent Chipotle worker to craft the entire burrito, start to finish, or make sure every Chipotle worker is properly trained to slowly spread each ingredient over the length of the burrito instead of just dumping it all in one spot.
2. Limes
I cant speak for your local Chipotle, but my local Chipotle used to have both lemons and limes in a little container near the drink station and now it only has lemons. Limes are about 1,000 times better than lemons, which is crazy because lemons are pretty good. At the Chipotle all-staff meeting, Chipotle needs to discuss the limes, where they went, and how they can be safely returned to Chipotle restaurants without anyone accidentally covering them in a dangerous norovirus first. Pro tip: When life gives you lemons, demand limes.
3. Separating the peppers and onions
This ones personal: I love peppers, but I do not much care for onions especially not the slithery sauteed kind that comes in Chipotles fajita vegetables. In these trying times, Chipotle needs to prioritize its customers specific preferences above all else besides not hospitalizing its customers. My specific preference would be to get down on some of those delicious peppers without any onions spoiling the fun. Probably there are some people out there who like onions but not peppers, too. Theyre wrong, but they still deserve Chipotle catered to their specifications.
4. Banning food-guard offenders for life
(PHOTO: AP Photo/Charles Dharapak)
If Chipotles trying to fix things that gross out its customers, it should take care to cut out the intense stomach pain, vomiting and diarrhea typical of E. coli infections. But then, after that, it should declare a zero-tolerance policy for people who put any part of their body over the food guard thats expressly designed to keep their filthy hands away from the delicious Chipotle stuff. The area behind the counter at Chipotle is sacred ground, and all who sully it must be banned from Chipotle for life. This extends all the way to the White House. No exceptions. Photograph everyone who violates the food guard and plaster every Chipotle with their pictures so they can be publicly shamed. And maybe come up with some lesser penalty for people who still say Chipol-tay. Cmon, bro, its 2016.
5. Burrito diplomacy with Minor League Baseball
Two things are true of most minor league baseball players: They dont get paid enough, and they love Chipotle. In an ideal world, Chipotle could work out some sort of deal with Major League Baseball wherein the league trades free advertising for free burritos to feed its minor leaguers, but in that same ideal world, Chipotle would not have had to close stores in nine states because of contaminated food. Any leverage Chipotle once had in this negotiation is gone now, but the company can go a long way toward restoring its image if it offers massive discounts to all minor league ballplayers. Theyre going to tweet about it, for sure, and presumably Chipotle wants people tweeting good things about Chipotle instead of things like, Hey baby! Are you Chipotle? Cuz you make me sick.
6. Meat variety
You know whats better than meat? Me neither. And the company might as well take this opportunity to introduce some new meats. For the Win proposes a rotating meat-of-the-month system, because this author would like to sample Chipotles versions of delicious meats like duck and bison and even good ol ground beef. Plus, itd be a great way to win back some customers scared off by the horrifying outbreak of illness that forced Chipotle to close stores in nine states.
Hey, you want to go to Chipotle?Are you serious? I almost died last time.Well yeah, but now theyve got pork belly.OK then!
This one is paramount: For Chipotle to ever again earn my trust, it needs to give me free guacamole. Maybe you, too, but first and foremost me. We made a deal, Chipotle: I give you money in exchange for delicious food under the understanding that my money is legal tender and your food wont leave me bedridden with extreme gastrointestinal issues. You broke the terms of our arrangement, and if you want back in my good graces, you better start with not charging me like two dollars for one scoop of guacamole on my burrito. Enough already.
Take Our PollFrank Kaminsky pledges loyalty to Chipotle "in sickness and in health"
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