Chipotle Shares Slip 15% On Weak Outlook

Chipotle Shares Down On Weak Earnings Report And Outlook


Shares of Chipotle declined by more than 14% on Wednesday after the embattled American fast food chain delivered a weak earnings report that led to a number of analysts cutting their price target on Chipotle’s stock.

Although the same-store sales of the company have grown by around two to three percent, investors commented that this was not a feat that can be considered as a quarterly report beat.

Chipotle Mexican Grill’s earnings for the quarter came at $1.33 per share missing largely on estimates of $1.63 per share. Their revenue also slightly missed most estimates of $1.14 billion after it reported a quarterly revenue of $1.13 billion. However, their revenue is still up by 8.8% from the same period last year. The earnings report also revealed that their same-store sales have grown by 4.5% during the month of July before it fell to a growth rate of 2.3%.

Net profits of the company amounted to $19.6 million which represents 69 cents per share up from their net profits of $7.8 million from the same period last year.

In their earnings report, Chipotle also revealed that starting this November, the prices of its menu would be raised by 5% in almost 900 of its establishments. It also lowered its outlook for the number of restaurants it intends to open. From having previously planned to open around 195 to 210 stores next year, Chipotle now expects to open only around 130 to 150 by 2018.


Ongoing Concerns

Over the past two years, Chipotle faced issues from their consumers and the general public such as the safety of their food following the e.coli outbreak as well the most recent norovirus that took place in September.

Shares of Chipotle inched down by more than 3% following the incident that was confirmed by customers who tested positive for norovirus in their Virginia branch. The company also faced a norovirus incident back in July that sent its shares down by more than 4%. Other issues included claims of unfair labor practices and employee maltreatment.

Chipotle’s stock previously hit a new low at the end of August following a stock price target downgrade from Deutsche Bank due to its performance in the past two years as well as the presence of the ongoing pressure on the fast-food chain company. The stock also declined despite the company making new additions to its menu that failed to get the approval of their customers.

Aside from concerns from customers, the company is possibly facing a threat of 20$ tariff being placed on their goods or supplies coming from Mexico after Trump stated that he intends to place such tariff to support his plans to build a wall border between the United States and Mexico.

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