(Adds details from investor conference)
By Sruthi Ramakrishnan and Lisa Baertlein
Jan 10 Chipotle Mexican Grill on Tuesday
reported a jump in December sales at established restaurants,
suggesting the worst may be over for the burrito chain that has
struggled to recover from a string of food safety lapses.
Chipotle shares were up 5 percent at $414.85 after the
Denver-based company said same-store sales for December surged
14.7 percent, compared with a 30 percent drop the year earlier.
Still, shares in the chain remain far below their all-time
peak of nearly $750 hit in summer 2015 as the company works to
fix customer service issues and other operational shortcomings
masked by its rapid growth.
The strong December sales were not enough to salvage the
fourth quarter, which recorded a 4.8 percent same-store sales
decline to mark a fifth straight quarterly drop. In late 2015
Chipotle was linked to outbreaks of E. coli, salmonella and
norovirus that sickened hundreds of people.
Executives speaking at an investor conference on Tuesday
reiterated their call for same-store sales growth in the high
single-digit percentages for 2017. They noted that Chipotle's
2017 performance will be compared to last year's dismal sales
results, partly explaining the improvement.
Chipotle, which also announced a $100 million share buyback
plan, estimated it would report a fourth-quarter profit of 50 to
58 cents per share on revenue of $1.04 billion.
"The Street appears pleased with December same-store sales
returning to positive territory," Instinet analyst Mark
Kalinowski said in a client note.
Those sales gains are likely to be in the double-digit
percentages again for January, compared with a 36 percent drop
in the year-earlier period, Kalinowski said.
Chipotle's sales swooned in November 2015 when the chain was
linked to a multi-state E. coli outbreak, and went into free
fall in December after at least 80 Boston College students were
sickened by norovirus traced to a Chipotle restaurant.
The company was forced to apologize for food safety lapses
and promised to prevent future illnesses.
It since has used free and discounted food to lure back
diners. Plans to revive the business also include improving
customer service, doubling down on worker training, debuting new
digital ordering technology and introducing new menu items such
as spicy chorizo sausage.
Under pressure from investors, Chipotle recently removed
co-Chief Executive Monty Moran and again made founder Steve Ells
sole CEO. It also named new board members following pressure
from activist investor Bill Ackman.
Chipotle incurred higher-than-expected fourth quarter
expenses due to minimum wage increases and higher spending on
advertising and promotions. It also called out a spike in costs
for avocados, the main ingredient in guacamole.
Executives said 2017 initiatives would include marketing
focused on digital ordering as well as a new scripted television
series for children. They also said Chipotle is cutting
unnecessary costs by switching to napkin dispensers that reduce
waste and being more efficient with food and labor.
(Reporting by Sruthi Ramakrishnan in Bengaluru; additional
reporting by Abhijith Ganapavaram and Lisa Baertlein in Los
Angeles; Editing by Shounak Dasgupta and Meredith Mazzilli)