As if Chipotle Mexican Grill, Inc. (CMG) really needed more controversy. The struggling fast-casual burrito chain is still trying to regain the momentum it lost last year, when a series of food-borne illnesses like E. coli, norovirus and salmonella, appeared in its food at several locations across the country, getting hundreds of people sick.
CMG stock is down 12% in 2016 and 30% in the last year. Currently changing hands for about $420 per share, it would have to go on an 80% run to regain its 52-week high at $758.61.
That’s not gonna happen — especially after a recent University of South Carolina study showed that entrees at Chipotle and Panera Bread Co (PNRA) can have a calorie count 35% higher than meals at McDonald’s Corporation (MCD) and Taco Bell, which is owned by Yum! Brands, Inc. (YUM).
Counterintuitive? Sure. But it’s true all the same, and that’s not good for CMG stock owners waiting for a catalyst to bring droves of people back to Chipotle’s stores.
CMG Stock: All News Is Bad News
There’s an old PR mantra that goes, “There’s no such thing as bad publicity.” I assure you that the vast majority of CMG stock owners want to find the quote’s originator, show him the headlines about Chipotle’s tainted food making hundreds of people sick, slap him in the face and say: “How is that good publicity?!”
But they can’t do that. Because we don’t know who originated the saying. Oh, and because it would be wrong, I suppose.
For CMG, in fact, there’s really been no such thing as good publicity recently. Customers still haven’t gotten over the random outbreaks, the first of which was an E. coli outbreak in Seattle last July, and the most recent one being a norovirus issue at a Boston location in March.
It’s showing up in the numbers, too. Chipotle’s traffic has really taken a hit, and in the fourth quarter, same-store sales plunged 14.6% — the first time SSS had ever fallen for CMG.
CMG stock refused to bounce back the next quarter as well, as Q1 revenue fell 23.4% and SSS plunged 29.7%.
Now, when Chipotle is spending millions on promotions, food coupons and mailing campaigns, these unflattering study results are released. If people’s 401(k)s weren’t hanging in the balance, this would be funny.
The South Carolina study found that the average fast-casual dish contained 760 calories, while the average fast-food meal only contained 561 calories.
CMG stock, down 1.4% today, will have to look to the release of second-quarter earnings, due out July 12, for any significant news that will get the stock out of its funk.
Until then, all you can do is cross your fingers and hope. If that’s not your favorite strategy, perhaps selling Chipotle and moving into another stock you’re more confident in is a prudent play.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
