Chipotle drops as execs warn of service woes
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.”