Chipotle Outlines New Initiatives to Speed Recovery

Oct. 26, 2016

The company outlined several new initiatives to speed its recovery, including more efficient food production lines to fulfill online orders, order-taking tablets in restaurants to bypass the lines and new mobile ordering technology.

Chipotle also said it might sell its ShopHouse chain of Southeast Asian food. The secondary brand didn't attract enough customers to warrant further investment and expansion, Mr. Ells said. The company plans to continue supporting the Pizzeria Locale chain in which it has a financial stake and will develop a better burger concept.

The company, which has been averse to television advertising, is considering airing national commercials to reach a wider audience.

Mark Crumpacker, the marketing chief who recently returned to the company after months on leave following a drug arrest in July, . . . . explained that the company is reviewing ad agencies ahead of a new spring advertising campaign.

Chipotle largely relied on food giveaways in the months following the food safety incidents, which also included norovirus and salmonella outbreaks. But this summer Chipotle introduced a loyalty program that drew back some of its most frequent customers.

Chipotle also plans to study new menu items, including desserts. The chain has stuck to a limited menu for much of its 23-year history, but recently rolled out chorizo sausage, which now accounts for 7% of entree sales.

Chipotle will slow its new restaurant openings in 2017 to between 195 to 210, down from the 220 to 235 targeted for this year. Mr. Crumpacker said the reduction is temporary. A new restaurant design will be cheaper to build and maintain, he added.

The company’s sales comparisons are likely to improve in the fourth quarter because the year-ago period is when sales started slumping amid the E. coli outbreak, the biggest in a series of food-safety scares that turned off customers.

Chipotle said it expects its fourth-quarter same-store sales to decline by a low-single-digit percentage, which would be a marked improvement from recent results.

Chipotle shares sink after co-CEO says he is 'nervous' about hitting year-end guidance

Dec 6, 2016

Shares of Chipotle Mexican Grill fell more than 5 percent on Tuesday after the company said that it was "nervous" about hitting the guidance it provided in October.

In that forecast, Chipotle said same-stores sales would fall at a low-single digit rate in the fourth quarter and would rise at a high-single digit rate in 2017.

"I'm not satisfied with the rate of recovery and the quality of the restaurant experience," co-CEO Steve Ells told investors at a conference on Tuesday.

Chipotle's stock tumbles to pace S&P 500 decliners after reports of downbeat sales outlook

Dec 6, 2016

Shares of Chipotle Mexican Grill Inc. tumbled 5.7% in active morning trade Tuesday, enough to make them the biggest decliners in the S&P 500 after reports that the fast-casual restaurant chain provided a downbeat sales outlook. Volume spiked to 1.6 million shares, which is already above the full-day average of 1.4 million shares.

Speaking at the Barclays "Eat, Sleep, Play--It's Not All Discretionary" conference, Chipotle management said it was nervous about meeting sales guidance, as sales haven't recovered as much as expected, according to tweets from Bloomberg reporter Shelly Banjo. The company also said it would need to raise prices to cover minimum wage increases. Bloomberg also reported that co-Chief Executive Steve Ells wasn't happy with customer service at its restaurants as lines have slowed down. The comments come as Chipotle struggles to recover from a sales decline in the wake of an E. coli outbreak at its restaurants last year.

Chipotle May be About to Axe One of Its CEOs

Dec 6, 2016

Bruised and battered Chipotle (CMG) may be about to rally behind the vision of a single leader.

According to a tweet from well-known restaurant Howard Penny of Hedgeye Risk Management, Chipotle co-CEO Monty Moran may be on his way out the door. "Our management team has not changed -- if we make any management changes, we will announce them in a timely manner," Chipotle spokesman Chris Arnold said via email.

The better-burrito joint has had a co-CEO structure since promoting Moran from president and chief operating officer in January 2009 to serve alongside founder Steve Ells. Moran, a lawyer by trade and long-time friend of Ells, was there at Chipotle's founding. As is recalled fondly on the website of Moran's former employer Messner & Reeves, one day back in the early 1990s Moran was asked by Ells to sample a new burrito recipe. Moran allegedly tasted the creation and promptly said, "You ought to sell these things."

Ells wasted no time taking his bestie's advice. In 1993, Ells took his recipes and opened a small burrito joint in Denver. By 1997, with five stores up and running, Ells reportedly reached out to Moran for business and legal advice.

After Moran had led so much of Chipotle's strategy over the years, the website says, he joined Chipotle as president and chief operating officer in 2005.

Since then, many on Wall Street have held that Ells -- a classically trained chef -- was in charge of Chipotle's push to source better ingredients, while Moran handled operations, growth plans and developing what it calls a "unique people culture."

But it hasn't been made clear to investors why Chipotle needs to still have such a co-CEO structure. If anything, Moran should be the fall guy for Chipotle's food safety scares in 2015 due to his focus on operations. Ells is unlikely go anywhere, seeing as he is the founder, face of Chipotle, and architect of the company's menu.

Chipotle Plunges After Saying That Customer Service Has Slipped

December 6, 2016

Chipotle Mexican Grill Inc., the burrito chain struck by a food-safety crisis last year, suffered its worst stock decline in six weeks after warning that deteriorating customer service is hampering comeback efforts.

As the company works to bounce back from a widespread E. coli outbreak, it has lost its focus on the customer experience, co-Chief Executive Officer Steve Ells said on Tuesday. That’s slowed down lines at its restaurants and undermined one of its former strengths.

“I’m not satisfied with the rate of recovery,” Ells said during a Barclays Plc investment conference in New York. “I’m particularly not satisfied with the quality of experience in some of our restaurants.”

Chipotle Drops Dual-CEO Model

Co-CEO Monty Moran resigns, leaving founder Steve Ells as company’s sole chief executive

Dec. 12, 2016

Chipotle Mexican Grill Inc. is abandoning its dual-CEO structure, making company founder Steve Ells sole chief executive as the beleaguered burrito chain tries to regain its footing.

The company has struggled since a series of disease outbreaks last year gave customers pause about returning. Mr. Ells told investors last week that he’s not satisfied with the pace of the recovery and the company’s finance chief said he was feeling nervous about whether the company would meet its sales guidance for the year.

Investors have criticized Chipotle’s co-CEO structure, saying the company spends too much on executive compensation. Total pay for co-CEOs Monty Moran and Mr. Ells last year totaled $13.3 million and $13.6 million, respectively.

Mr. Moran, friends with Mr. Ells since high school, joined Chipotle in 2005 as its general counsel and became co-CEO in 2009. The company said on Monday that Mr. Moran has stepped down from the co-CEO role and from his board seat, effective immediately.

“Given Chipotle’s mostly self-inflicted and significant challenges of the last 12 to 15 months, it would have been unusual if no top person at the company hadn’t undergone a transition such as this,” Instinet analyst Mark Kalinowski said.

While analysts said Mr. Moran contributed to the company’s strong growth before the outbreaks, they said having one CEO will streamline operations. His departure “sets the stage to bring in new individuals and amplify the executive team with a skill set more closely aligned to addressing the company’s current issues,” Buckingham Research Group analyst John Zolidis said.

Chipotle’s board makeup also has come under fire for being too clubby. Most of the board members have been with the 23-year-old company from the start and have close ties to Mr. Ells. At an average of 14 years, its members hold the second-longest tenure of any restaurant company board, according to Barclays Research.

A new concern emerged last week when Mr. Ells said employees have been so busy implementing new food-safety changes that they haven’t had time to keep up with cleaning tables and that customer satisfaction scores have fallen. On Monday, the company said Mr. Ells will more closely tie employee incentives to the guest experience and make it easier for restaurant general managers to achieve “restaurateur” status, the highest rank of restaurant-level employee.

Chipotle Mexican Grill Inc. is expected to report fourth-quarter earnings on Thursday after the closing bell.

The Mexican fast-casual chain had some good news earlier in January, announcing same-store sales for the fourth quarter that improved each month that the quarter progressed. In December 2016, the company said same-store sales increased 14.7% versus a 20.2% decrease in October.

Even with improvement, analysts warn that there are still challenges to overcome going forward. Digital advancement could help the company clear those hurdles.

Chipotle shares have an average hold rating with a target price of $403.62. Chipotle shares are down 11.7% for the past year while the S&P 500 index is up 19.8% for the same period.

Earnings: Analysts polled by FactSet forecast earnings per share of 56 cents, down from $2.17 per share for the same period last year.

Estimize, a software platform that crowdsources estimates from buy-side analysts, hedge-fund managers and others, sees EPS of 58 cents.

Revenue: FactSet analysts see sales of $1.04 billion, up from $997.5 million last year.

Estimize sees revenue of $1.03 billion.

Chipotle has missed FactSet sales estimates for the past six quarters.


Other issues: As time creates more distance between Chipotle and the illness outbreaks that started in late 2015, analysts at The Buckingham Research Group believe same-store sales will improve.

“We expect comps to continue to accelerate as negative media headlines recede into the past and as execution at the store level improves due to efforts to [simplify] processes and focus on the consumer experience,” analysts wrote in a note published Friday. “Further we believe digital order penetration will rise and catering and new menu item introductions will together fuel momentum in the recovery.’

Buckingham Research rates Chipotle shares buy with a $547 price target.

RBC Capital Markets analysts also believe digital ordering could be an important part of the company’s story in 2017. Digital ordering only represented 7.4% of orders in December though more than half of Chipotle meals are consumed outside of the restaurant, analysts say. A new order interface that cuts wait times to 10 minutes from 30 minutes and a second assembly line, which will be introduced in spring 2017, could improve the experience.

Buckingham Research rates Chipotle shares buy with a $547 price target.

Chipotle fourth-quarter earnings 55 cents, vs 57 cents expected; revs $1.03B

Chipotle Rallies After Data Researcher Predicts Sales Surprise

March 21, 2017

Chipotle Mexican Grill Inc. shares rose the most in almost six weeks after data-analysis firm M Science predicted that first-quarter sales will “easily beat” Wall Street’s estimates, bringing a ray of optimism to a chain battered by a food-safety crisis.

The researcher studied same-store sales during February and the first 10 days of March, according to M Science Chief Executive Officer Michael Marrale. The firm made the call based on multiple data sets and proprietary models, he said.

Analysts have been predicting same-store sales growth of almost 15 percent for the first quarter, according to data compiled by Bloomberg. That’s coming off a decline of 4.8 percent in the previous three months and a 30 percent plunge in the year-earlier period, when Chipotle was reeling from a series of foodborne-illness outbreaks.

The report brought new hope that Chipotle can bounce back soon from the crisis, which led to an exodus of customers and crushed its stock. The shares declined 21 percent in 2016, following a 30 percent decline the prior year.

Chipotle rose as much as 3.1 percent to $408.60 on Tuesday, the biggest intraday gain since Feb. 9. The shares had been up 5 percent this year through Monday’s close.

The Denver-based burrito seller has tried to draw back diners with free food and deals, along with heavy advertising. Chipotle also is trying to improve its digital ordering systems and may start selling dessert this spring.

The company declined to comment on financial results ahead of its official report next month.