Health-related troubles for fast casual restaurant chain Chipotle continue to grow.
The hits keep coming for Chipotle, the fast-food chain that prides itself on delivering an experience that is distinctly different.
With its commitment to organic, non-GMO ingredients and its trendy spin on Mexican flavors, Chipotle once served as the model for others who wanted to break out of the burger-and-fries box. Now it’s standing as an example of how far the mighty can fall, courtesy of multiple illness outbreaks and a federal grand jury subpoena.
Chipotle’s problems hit a new peak at the start of 2016 when news of that subpoena and investigations by the FDA and a U.S. attorney’s office in California broke. Tumbling sales in the wake of multiple foodborne illness outbreaks have also taken their toll on earnings.
The company braced investors for earnings pain, but no one was prepared for the actual results. Its bleak estimate of 11% didn’t come close to the 15% decline at locations open for at least 13 months. In December alone, the loss metric plummeted by 30%. As of early January, Chipotle stocks were at their lowest point in two years. They have fallen by some 40% over the past three months.
While the grand jury subpoena relates to a norovirus outbreak in August at a Simi Valley, Calif. location, the troubles for the company began much sooner. Last fall, Chipotle was forced to close 43 restaurants in Oregon and Washington State after its food was linked to an E. coli outbreak in the region. Reports of E. coli contamination also came in from seven more states, including Maryland and Illinois.
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In December, at least 120 Boston College students became sickened with the norovirus after eating at Chipotle. Health inspectors there cited a single location for improper poultry handling and the presence of a sick employee in the establishment.
Striving to regain its trusted standing, Chipotle has announced full cooperation with the subpoena and California investigations. It’s also vowed to sanitize each of its locations, has employed food safety consultants and is rolling out stricter testing of its ingredients. Over the weekend they announced stores nationwide will be closing for a few hours during the morning of Feb. 8 for an all-staff meeting on food safety to be conducted via a live satellite feed.
These moves, however, are not adding up as wins at the cash register or with investors as of yet. On Jan. 6, Chipotle filed a document with the Securities and Exchange Commission related to the subpoena. Right after that filing, the company’s stock fell almost 3% to $435.72. In July, before the foodborne outbreaks rocked the chain, its stocks sold for $750.
With its newfound commitment to food safety and vows to turn its ship around, Chipotle seems confident in its ability to rebound like Taco Bell did following its 2006 E. coli scare. The rebound, however, isn’t going to come fast, company officials say, warning that future developments could significant influence sales.
