Chipotle Mexican Grill’s turnaround from a food-safety scandal hit a setback as the fast-food chain’s quarterly earnings and same-store sales missed analysts’ estimates.
The third quarter featured Chipotle’s initial pilot and then chainwide rollout of Genuine Queso, a blend of cheddar cheese with tomatillos and chiles that was supported by the company’s largest-ever TV ad campaign.
Chipotle said the new product performed well with customers after being introduced to all stores Sept. 12. Overall sales for the quarter increased 8.8% to $1.13 billion but analysts had expected sales of $1.14 billion.
Same-store sales rose 1%, missing estimates of 1.2%, while adjusted earnings per share of $1.33 fell well short of forecasts of $1.63. Hurricanes Harvey and Irma cost Chipotle $0.13 in diluted EPS.
“We continued to make important progress to improve the guest experience at our restaurants during the quarter,” CEO Steve Ells said in a news release. “Our strategic initiatives in operations, innovating our digital sales platform, new menu introductions, and marketing the brand are starting to take hold.”
“Despite several unusual impacts during the quarter, including the impact of hurricanes, we maintained our focus and saw some encouraging signs,” he added.
But investors were not very encouraged, with Chipotle shares falling 9.5% to $324.30 in after-hours trading Tuesday.
As the Denver Post reports, “Chipotle has been struggling to re-establish its footing since some of its stores were linked to an outbreak of foodborne illness in 2015.” The company’s shares sold for up to $700 per share that year.
“A [third-quarter] revenue uplift of almost 9% is not bad per se, but when set against the 14.8% decline posted in the prior year it is clear that Chipotle has still not made up all of the ground it lost,” Neil Saunders, managing director of GlobalData Retail, told CNBC.
Management is sticking by Genuine Queso. “Not only did this campaign successfully change the narrative about Chipotle, early indications are that it is driving sales in the early fourth quarter,” Ells said in an earnings call.