Chipo­tle drops as ex­ecs warn of ser­vice woes

The Denver Post - - BUSINESS -

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-CEO Steve Ells said Tues­day.

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

Ells said that half of the bur­rito chain’s more than 2,100 restau­rants have less-than-ex­cel­lent cus­tomer ser­vice and that the com­pany is now train­ing em­ploy­ees to clean dirty nap­kins off ta­bles, make sure the soda foun­tain is or­ga­nized and keep the glass on its front doors free of fin­ger­prints.

In the last six months, Ells said that Chipo­tle has at­tracted 33 mil­lion new or one-time cus­tomers that had stopped com­ing to its restau­rants. A “great ex­pe­ri­ence” could make those peo­ple come in more often, Ells said.

Shares of Chipo­tle Mex­i­can Grill Inc. fell $29.90, or 7.6 per­cent, to close at $366.37 Tues­day.

Chipo­tle’s same-store sales — a closely watched mea­sure — dropped 21.9 per­cent last quar­ter, worse than the 18.7 per­cent de­crease pro­jected by an­a­lysts.

The com­pany has tried to get din­ers back by spend­ing more on mar­ket­ing and ads, es­tab­lish­ing dif­fer­ent food-safety pro­to­cols and in­tro­duc­ing a loy­alty pro­gram.

Chipo­tle’s ser­vice is suf­fer­ing as the U.S. la­bor mar­ket tight­ens and the chain ex­pe­ri­ences higher em­ployee turnover.

“Peo­ple are leav­ing for bet­ter wages else­where,” said Peter Saleh, an an­a­lyst at BTIG LLC.

The Den­ver-based com­pany also said Tues­day that it’s im­pos­ing a hir­ing freeze as it works to re­cover.

“They’re in a re­ally tough spot,” Saleh said. “I’m not ex­actly sure what they’re go­ing do.”

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