An E. coli outbreak linked to its restaurants in several states is taking a toll on Chipotle. Photo contribution: Michael Saechang, flickr
Chipotle’s E. coli problems have become deeper than its burrito bowls.
The Mexican food chain, in a recent SEC filing, said its same-store sales may drop up to 11% and profits could slide 26% in the fourth quarter because of an E. coli outbreak linked to its restaurants in several states.
The outbreak has sickened 52 people in nine states, mostly in Washington and Oregon but a few in California, Illinois, Maryland, Minnesota, New York, Ohio and Pennsylvania. Of those infected, 20 were hospitalized but no one has died. Nearly all reported eating at a Chipotle in the week before they became ill.
The Denver-based chain has been in turmoil since late October, when the outbreak was first discovered. It flared up again last week when dozens of Boston College students fell ill after eating at a local Chipotle, forcing the chain to temporarily close another location. Early testing pointed blame on the highly contagious norovirus, which like E. coli causes severe vomiting and diarrhea.
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The health problems have caused Chipotle’s stock to tumble and raised concerns about its reputation. The fast-growing chain with more than 1,700 locations has built a strong following around its commitment to fresh produce, meats raised without antibiotics and ingredients without genetically modified organisms (GMOs).
The stock, a favorite among investors since its IPO in 2006, is down more than 20% this year and about 30% below its all-time high set in August prior to the tainted food issues.
Neither Chipotle nor the Centers for Disease Control and Prevention (CDC) has been able to pinpoint what food caused the E. coli outbreak. “A common meal item or ingredient served at Chipotle Mexican Grill restaurants in several states is a likely source of this outbreak,” the CDC said on its website.
In addition to lowering its 2016 sales projections, Chipotle expects to spend $6 million to $8 million to replace food, analyze food samples and hire consultants, not including legal costs. Since the outbreak, the chain says it has worked to ensure all teams are adhering to strict food safety protocol and has partnered with a food safety research firm to find ways to improve practices at Chipotle’s suppliers and restaurants.
Still, some analysts say the chain may take a long time to recover as concerned consumers choose to take their appetites elsewhere.
