Home / Business / Chipotle Mexican Grill Inc sales plunge as foodborne illness outbreak brings federal subpoena
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Chipotle Mexican Grill Inc sales plunge as foodborne illness outbreak brings federal subpoena

Chipotle’s reputation has been hammered in recent months by an outbreak of E. coli that afflicted at least 53 people in nine states, followed by a norovirus contagion at a Boston location that sickened more than 140 college students. A new spate of illnesses in three additional states was announced by the Centers for Disease Control and Prevention late last month.

Chipotle Mexican Grill Inc., struggling to rebound from multiple outbreaks of foodborne illness, reported a bigger plunge in fourth-quarter sales than the restaurant chain expected and said it got served with a subpoena in a federal criminal investigation.

How Chipotle is changing its cooking methods after a devastating E. coli outbreak

Joe Raedle/Getty Images

After an E. coli outbreak that sickened more than 50 people, Chipotle is tweaking its cooking methods. Onions will be dipped in boiling water to kill germs before they’re chopped. Raw chicken will be marinated in re-sealable plastic bags, rather than in bowls. Cilantro will be added to freshly cooked rice so the heat gets rid of microbes in the garnish.

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Same-store sales — a closely watched benchmark — tumbled 14.6 per cent in the period, the Denver-based company said in a regulatory filing on Wednesday. The decline, Chipotle’s first quarterly drop as a public company, was previously projected to be as much as 11 per cent. The grand jury subpoena, meanwhile, stemmed from a probe into a norovirus outbreak by the U.S. Attorney’s Office for the central district of California, which is working with the Food and Drug Administration’s Office of Criminal Investigations.

Chipotle’s reputation has been hammered in recent months by an outbreak of E. coli that afflicted at least 53 people in nine states. That was followed by a norovirus contagion at a Boston location that sickened more than 140 college students. A new spate of illnesses in three additional states was announced by the Centers for Disease Control and Prevention late last month.

The shares fell 5 per cent to close at $426.67 in New York , reaching their lowest point in more than two years. The stock declined 30 percent in 2015.

In the wake of the Boston outbreak — and the national news coverage that followed — same-store sales fell 34 per cent, the company said on Wednesday. After the CDC report on the additional E. coli cases in late December, the sales dropped 37 per cent. They were down 30 per cent for the full month of December, Chipotle said.

Earnings Estimate

The company now estimates that fourth-quarter earnings will range from US$1.70 to US$1.90 a share. Analysts predicted US$2.49 before the announcement, according to data compiled by Bloomberg. Chipotle also expects to record US$14 million to US$16 million in expenses during the quarter because of the crisis. The company has had to replace food in restaurants, conduct lab tests and boost marketing to cope with the situation.

Chipotle also is making more share buybacks as it tries to placate investors. The board agreed to repurchase US$300 million in stock, in addition to US$300 million announced on Dec. 4.

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