Retail

Stocks Sink At Chipotle As Burrito Chain Announces Disappointing Quarter

Chipotle Mexican Grill will be opening fewer locations in 2017 and 2018, according to news from Reuters. This comes after the announcement of disappointing quarterly sales in Chipotle’s earnings report on Tuesday (Oct. 24).

The fast food chain is still struggling to recover from a series food safety issues, reported Reuters. Most recently, a norovirus outbreak in Virginia negatively affected sales in July.

Chipotle shares fell 9.5 percent after the company reported lower than expected revenue at established retail locations after introducing a new cheese dip in September. Reuters said that the chain will increase prices in nearly 900 restaurants this November as well as scaling back the number of restaurants it planned to open in 2017. Next year, the chain will only open between 130 and 150 new locations.

“We’re going to slow down just a little bit, but this is a temporary slowdown for 12 to 18 months,” Founder and Chief Executive Steve Ells said in an interview. “You have to get the fundamentals right first. Looking inward and understanding where you made mistakes in the past helps you set up for change.”

Revenue at established Chipotle restaurants rose 1 percent during the third quarter that ended on September 30, Reuters said. Analysts had expected growth of 1.2 percent, according to Consensus Matrix. The Chipotle executive said that sales were down 2 percent before the introduction of queso in September, reported Reuters.

The fast food chain is emphasizing employee training and new menu items after giveaways failed to help the business recover after E. coli, salmonella and norovirus outbreaks at retail locations in 2015, according to Reuters.

More than 18 percent of Chipotle shares available for trade have been sold short, Reuters said.

“With more than $1.68 billion at risk betting against the shares, it remains the No. 1 short in the restaurant sector,” said Matthew Unterman, director at financial analytics firm S3 Partners.

Compared to Chipotle’s most recent earnings report, profits at the chain increased to $19.6 million from $7.8 million a year earlier, Reuters reported, while revenue was up 8.8 percent to $1.13 billion.

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