Positive Q1 for Chipotle; Stock Price on the Rise Again
Chipotle Mexican Grill Inc.’s stock has surged this week, a positive sign after the fast food chain continues to recover from a lengthy sales slump after a series of foodborne illness outbreaks that plagued the chain in 2015. Chipotle’s stock--which peaked at about $750 per share in August 2015--experienced a sharp decline once news of food safety problems hit the media in the fall of that year. During the crisis period, Chipotle’s stock price bottomed out at $370 per share in October 2016.
But after a year and a half, things are finally turning around.
Chipotle founder and CEO said in a statement, “2017 is off to a strong start, as our restaurant managers and teams are energized by our renewed focus on the customer,”
Metrics seem to be increasing all around as same-store sales, margins, revenues and net income all experienced jumps in the first quarter of 2017.
It all started on Halloween day in 2015 when an E. coli outbreak on the west coast shuttered all Chipotle restaurants in Oregon and Washington. Two months later, 80 students from Boston College fell ill with norovirus after dining at a Chipotle near their school’s campus. Two weeks after that, consumers in Kansas and Oklahoma fell ill with E. coli after eat at two different Chipotle locations.
To address the food safety issues, the chain overhauled their fresh produce procedures in December 2015. While some vegetables were previously prepped at each store location, Chipotle decided to begin having cilantro, lettuce, tomatoes and other items prepared, packaged and shipped from a centralized location to each store instead. The chain also announced that they would reduce dependence on locally grown ingredients, believing that smaller suppliers cannot keep up with new food safety standards. In February 2016, the restaurant closed all locations for one day to address food safety issues in a live all-staff meeting via satellite feed.
The combination of Chipotle’s food safety woes--paired with the chain’s new reliance on major food suppliers and frozen ingredients--are factors that are believed to have sent the restaurant sales and stock market price into a slump over the past 18 months.