We’re all aware of the health problems Chipotle Mexican Grill, Inc. (CMG) has been dealing with in recent months, and investors in CMG stock are hyper-aware. The Chipotle stock price is off 36% in just over four months due to these recent challenges.
Norovirus, E. coli, salmonella … these are some not-so-pleasant microscopic pests one hopes to never encounter. One certainly never expects to encounter them, especially when eating at a popular fast-casual chain in a first-world country.
You know, like Chipotle. Like America.
But outbreaks of norovirus, E. coli and salmonella have all occurred right here in the U.S. — at various Chipotle restaurants. CMG stock owners, after seeing shares roar from $44/share in 2006 to highs of $758 in 2015, are uncertain about the company’s prospects for the first time in years as the stock trades below $500.
Investors are understandably not amused by these developments; nor is the federal government, which has launched a criminal investigation into the matter. But HBO’s John Oliver, in a recent segment on his show Last Week Tonight, is rather amused.
And while he probably didn’t intend to supply fodder for a discussion of CMG stock … well, he did.
Is CMG Stock Bulletproof?
Oliver cheekily remarks that Chipotle’s recent decision to close all of its U.S. stores for half a day for a company-wide meeting might not be enough to address the “systemic problems Chipotle seems to have.” Note to CMG investors and Chipotle patrons: This next part may make you cringe.
The show then cuts to a (real) news clip about a Chipotle store in Florida that, upon a visit from inspectors, was found to have a live bird flying around inside. Not only did the manager know about the presence of the bird, he called it a “regular nuisance.”
One of the major catalysts for any restaurant stock, and CMG stock in particular, is same-store sales, or SSS. You can understand why Chipotle’s SSS might not be doing so hot right now. In fact, there’s no “might” about it — same-store sales dropped 14.6% in the fourth quarter, and plunged 36% in January.
Back to the wild bird in the Florida Chipotle: Inspectors came back the next day and the bird was still there.
There are plenty of reasons to be skeptical of CMG stock, even after the recent selloff. But a recurring avian problem — even if it was just a single store during a specific period — is more than enough to trigger my internal sell siren.
Oliver concludes the segment with a fake Chipotle commercial where a spokesman openly muses about what it can get away with.
“Welcome to Chipotle, thank you for your bravery,” says a cashier.
One line in particular should register strongly with anyone who owns CMG stock. The pseudo-spokesperson looks at the camera and genially says, “I mean let’s face it, if you’re even contemplating eating here after an E. coli scare, what would it take to stop you?”
That question seems compelling when the show cuts to a clip of customer after customer saying they’d continue to eat at the burrito chain. But just as there aren’t wild birds flying around in every Chipotle store, not every customer feels so forgiving.
We can see that quite clearly in the same-store sales figures — which need to rebound soon if CMG shares are ever going to recover.
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.
