Chipotle ailing

After illness outbreaks, the restaurant chain posts its first quarterly loss and has trouble luring back customers.

Chipotle Mexican Grill is having a harder time than it expected winning back customers’ trust and loyalty after a series of foodborne illness outbreaks last fall.

The Denver-based restaurant chain suffered its first quarterly loss since going public in 2006.

Sales dropped 23.4 percent in the first quarter to $834.5 million, Chipotle reported Tuesday. What was a $122.6 million profit in the first quarter of 2015 melted into a $26.4 million loss over the same period this year.

On a per share basis, Chipotle lost 88 cents versus earnings of $3.88 a year earlier.

Analysts had projected the company would report sales of $868 million and a loss of 95 cents per share in the first quarter, according to Thomson Reuters.

“The best approach to rebuilding our business is to proudly serve safe and delicious food in our high-quality restaurants every single day, which is exactly what we will continue to do,” Steve Ells, founder, chairman and co-CEO of Chipotle, said in a statement.

After an E. coli outbreak late last year linked to the company, Chipotle has invested heavily in wooing back customers with offers of free food and communicating a message of improved food safety.

But the payoff from those promotions will take time, while the costs are frontloaded. Food costs also were higher in the quarter, given the extra testing and waste generated from complying with stricter quality-control measures.

The sales volumes per restaurant declined an average of 29.7 percent in the first quarter, while the number of transactions per restaurant was down 21.1 percent. Operating margins at Chipotle restaurants fell from 27.5 percent to 6.8 percent.

ITG Investment Research, which has access to consumer credit card data, said last week in a research note that Chipotle’s recovery in sales has proved more anemic than expected, even with heavy giveaways.

“What would the rate of improvement have been without free food? At this point, that question represents the biggest risk to any recover-rate assumptions for Chipotle,” said Joseph Fersedi, an analyst with ITG.

ITG’s spending data show that the recovery stalled again in the first half of April, which risks weighing on second-quarter earnings, which analysts had expected to turn positive.

The earnings report came out after the close of trading Tuesday. Chipotle shares closed at $445.92 on Tuesday, down from a 52-week high of $758.61.

Quotes in the after-hours market had shares trading in the $420 range.