Chipotle: Net income in second quarter recorded at 87 cents a share

Chipotle: Net income in second quarter recorded at 87 cents a share

Chipotle Mexican Grill Inc.’s second-quarter profit and sales have missed the estimations of analysts, an indication that the burrito chain is even today reeling from a food-safety crisis that snatched away its customers and badly affected its reputation.

In a statement on Thursday, the Denver-based company said that net income in the quarter was 87 cents per share. As per the data compiled by Bloomberg, analysts had estimated 91 cents on average. Same-store sales have seen a 23.6% decline, proving the quarter the third straight in terms of declines. Analysts had projected a 20.6% drop, as per Consensus Metrix.

In recent months, Chipotle has worked very hard to regain its footing after a series of foodborne-illness outbreaks. Though the restaurant chain has improved its marketing, introduced a loyalty program, and tried to deal with the crises through coupons and promotions, but it’s been a sluggish recovery.

According to Chipotle officials, the company can ultimately regain its once-enviable sales and profit margins after the rebounding of restaurant traffic.

The co-Chief Executive Officer, Steve Ells, said that the entire company is working on restoring customer confidence and wants to re-establish customer frequency.

After the release of the results, the stock dropped as much as 5.8% to $394 in late trading. It was already down 13% in 2016 through Thursday’s close.

Ells mentioned that with this month, the sales have started getting better following the debut of the Chiptopia loyalty program, which lured 3.6 million participants. He said that on July 1, the company kicked off Chiptopia, and since then, same-store sales have enhanced by 2 to 3 percentage points. Ells added that the size of transactions has also received a boost.

Ells mentioned that nearly 30% of customer orders have now become part of the Chiptopia program.

According to a report in Bloomberg by Craig Giammona, "Chipotle Mexican Grill Inc. posted second-quarter profit and sales that missed analysts’ estimates, a sign the burrito chain is still reeling from a food-safety crisis that drove away customers and tarnished its reputation."

Chipotle has struggled to regain its footing in recent months following a series of foodborne-illness outbreaks. The restaurant chain has ramped up its marketing, launched a loyalty program, and used coupons and promotions to cope with the crisis, but it’s been a slow recovery.

Chipotle’s food-safety scandal burst into public view in November, when the Centers for Disease Control and Prevention said it was investigating an E. coli outbreak tied to the chain. That brought attention to previous foodborne illnesses among Chipotle customers.

A report published in Investors revealed, "The fast-casual chain said that the loyalty program, Chiptopia, has already attracted more than 3.6 million participants since the three-month-long promotion began on July 1, with nearly 30% of all transactions "engaged in Chiptopia" since then."

"While it has only been a few weeks since Chiptopia launched, we are pleased to see that July sales comp trends have already improved by 200 to 300 basis points, and transaction comp trends have improved by an even greater amount," co-CEO Steve Ells said in a statement.

But on a conference call later, he characterized Chipotle's sales recovery as "modest," and said the rebound hadn't come as quickly as desired. Management also cautioned that it's still unclear whether the improvement seen this month would last.


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