Chipotle sales fall again as it tries to win back customers

Posted at 11:18 PM, Oct 25, 2016
and last updated 2016-10-26 01:20:46-04

NEW YORK (AP) -- Chipotle is still struggling to bring back customers to its restaurants after a food safety scare last year.

The burrito chain said Tuesday that sales fell 21.9 percent at established restaurants during the third quarter, worse than the 18.3 percent drop Wall Street analysts expected, according to FactSet. It's the fourth straight quarter of sales declines for the company after an E. coli outbreak last year sickened some customers.

Chipotle has given out millions of free burritos, launched a loyalty program and released food safety ads to try and win back customers. But the company is still hurting from the outbreak. Chipotle, which has more than 2,100 restaurants, said its profit plummeted 95 percent in the quarter.

Shares of Chipotle Mexican Grill Inc. fell 2.4 percent after the market closed Tuesday.

To try to boost sales, Chipotle is cooking up new menu items and upgrading its digital ordering platform. Earlier this month, it started selling chorizo, a spicy pork sausage, at restaurants nationwide. And it announced Tuesday that it is testing two dessert items and plans to add one to its menu in the future - but didn't say what the treats would be. It also hopes that an updated site will lead to more digital orders, which now make up only 6 percent of sales, the company said.

Still, Chipotle said pricier avocados may keep its costs high. The company said a shortage is causing avocado prices to nearly triple from $30 a case to $80 a case.

Overall, Chipotle reported net income of $7.8 million, or 27 cents per share, in the three months ending Sept. 30, compared with $144.9 million, or $4.59 per share, in the same quarter a year ago. Adjusted earnings were 79 cents per share, below the $1.96 per share analysts expected, according to FactSet.

Revenue fell 15 percent to $1.04 billion, below the $1.09 billion analysts expected.

Chipotle said that it also plans to stop investing it its Southeast Asian-inspired chain ShopHouse. The food at that chain, which was started five years ago and has 15 restaurants, wasn't able to attract a big following, Chipotle said. The company said it is seeking "strategic alternatives" for ShopHouse. Instead, it plans to bet on pizza and burgers for growth. The company is an investor in Pizzeria Locale, a fast-cooking pizza chain with seven locations. Earlier this year, it applied for a trademark for "Better Burger."

Shares of Chipotle Mexican Grill Inc. fell $8.83 to $396.84 in after-hours trading Tuesday. Its stock is down about 40 percent for the year.


Sign up for Denver7 email alerts to stay informed about breaking news and daily headlines.

Or, keep up-to-date by following Denver7 on Facebook, Instagram and Twitter.