Chipotle food safety woes lead to inquiry
Feds open criminal investigation as sales, profits continue slide
Sales at fast casual chain Chipotle Mexican Grill continue to tumble as the company’s struggle with a bout of foodborne illness issues at locations across the country deepens.
The company on Wednesday reported a double dose of bad news. Sales at restaurants open at least a year slid 30% in December and fell 14.6% during the fourth quarter. Chipotle also said it has been served with a federal grand jury subpoena over an August norovirus episode in California.
The Denver-based company said it was served with the subpoena in December and was notified about an official criminal investigation being conducted by the U.S. Attorney’s Office for the Central District of California, in conjunction with the U.S. Food and Drug Administration’s Office of Criminal Investigations.
The subpoena requires Chipotle to produce a broad range of documents related to a restaurant in Simi Valley, Calif., that experienced an isolated norovirus incident last August, the company said in a Securities and Exchange Commission filing. The company said it will cooperate with the investigation.
Profits are expected to take an even bigger hit. The company now expects fourth-quarter earnings between $1.70 a share and $1.90 a share, down from an already lowered forecast of $2.45 to $2.85 a share issued a month ago.
Investors are growing more queasy. The burrito chain’s stock has taken a walloping, falling by more than one-third in the last 12 months and losing 5% Wednesday to close at $426.67. The company said it has approved the repurchase of up to another $300 million of its shares, in addition to a $300 million authorization approved in December. During the fourth quarter it repurchased 609,000 shares at an average price of $556 apiece.
The number of people that have gotten ill after eating at Chipotle has been growing for months. A norovirus episode in Boston last month sickened more than 120 college students. There have been dozens of cases of Chipotle customers being sickened with E. coli in nine states over the last few months. And in August, Minnesota health and agriculture officials reported an outbreak of salmonella among 64 customers of 17 different Chipotle restaurants located primarily in the Twin Cities area.
Chipotle, which has more than 1,900 restaurants, reports fourthquarter financial results Feb. 2.