Chipotle quarterly restaurant sales down more than expected
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A Chipotle Mexican Grill is seen in Los Angeles, California, U.S. on April 25, 2016. REUTERS/Lucy Nicholson/File Photo
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By Lisa Baertlein
(Reuters) - Chipotle Mexican Grill Inc (NYSE: CMG) on Tuesday reported a bigger-than-expected drop in quarterly sales at established restaurants as it fights to recover from a string of food safety lapses late last year.
Shares in Chipotle fell 2.2 percent to $396.84 after the Denver-based burrito seller posted a 21.9 percent drop in third-quarter sales at restaurants open at least 13 months. That was steeper than the 18.7 percent decline expected by analysts polled by tracking firm Consensus Metrix.
While the company said it expects same-restaurant sales to fall again in the fourth quarter, it does expect them to grow in the "high single digit" percentages for all of 2017.
Executives, who have depended on free and discounted food to lure back diners, laid out plans to rebuild sales and profits by improving service, debuting new technology and introducing new menu items.
Analysts, who noted that sales declines are easing, took a wait-and-see stance on that news.
"There are still a lot of questions in the air," Stephens Inc analyst Will Slabaugh told Reuters.
Chipotle's projects include a new ordering app, in-restaurant tablets, online ordering and payment for catering, and faster food preparation lines. Executives hope such efforts will deliver swifter, more accurate service without increasing labor costs.
Chipotle added spicy chorizo sausage to U.S. menus this month, and executives said the chain's new offerings may include dessert.
"These improvements are very gradual and do not provide any indication that Chipotle will return to full financial health at any time in the near future," Håkon Helgesen, retail analyst at Conlumino, said in an email.
Chipotle's third-quarter net profit fell to $7.8 million, or 27 cents per share, due to the chain's slow sales recovery, discounting and other charges. It reported net profit of $144.9 million, or $4.59 cents per share, a year earlier.
The profit results from the latest quarter included a $14.5 million non-cash pretax impairment charge related to Chipotle's 15-unit ShopHouse Asian-themed chain, which is being put up for sale after missing internal targets.
The company, which is also planning national television advertising, will open fewer restaurants. It forecast 195 to 210 restaurant openings for 2017, down from 220 to 235 expected this year.
Chipotle's stock has lost about one-third of its value since food safety woes led to the temporary closure of dozens of Chipotle restaurants across the United States last year.
(Reporting by Lisa Baertlein in Los Angeles; Editing by Sandra Maler and Jonathan Oatis)
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