Food safety scare knocks Chipotle shares to four-month low

By REUTERS
November 3, 2015 03:45
1 minute read.

Chipotle Mexican Grill Inc's shares touched their lowest level since July after the popular burrito chain said it closed 43 restaurants in the states of Washington and Oregon amid an investigation into an E. coli food poisoning outbreak.

Shares in the high-flying restaurant company touched a low of $608.52 in early trading on Monday and closed down 2.5 percent at $624 as investors and analysts fretted that food safety concerns could scare diners away from its more than 1,900 restaurants in the United States.The outbreak is Chipotle's third food safety incident this year.

The closed restaurants, in and around Seattle and Portland, account for roughly 2 percent of Chipotle's US footprint and could lower fourth-quarter sales at established restaurants by 0.6 percent, according to a "conservative bounce-back scenario," Bernstein analyst Sara Senatore said in a research note.

"Food-borne outbreaks are not unusual for the fast food restaurant industry and the impact of previous incidences has proven fleeting for restaurants generally and Chipotle specifically," said Senatore, adding that the latest incident at Chipotle likely would increase scrutiny of its supply chain.

If the restaurants remain shuttered through year-end, the closures could reduce fourth-quarter sales at established restaurants by 1.7 percent and potentially reduce quarterly earnings by 11 cents per share, Andrew Charles, an analyst at Cowen and Co, said in a client note.


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