(Adds details on unauthorized activity in payment system)
By Lisa Baertlein
LOS ANGELES, April 25 Chipotle Mexican Grill Inc
on Tuesday reported a sharp rise in sales at its
restaurants as it recovers from food safety lapses that drove
away customers but disclosing a data breach erased some of the
stock's after-hours rally.
Chipotle shares leaped 7 percent in extended trading after
first-quarter profit also blew past Wall Street's target.
But shares retreated when Chief Financial Officer Jack
Hartung told analysts the chain was investigating "unauthorized
activity" in its payment system from late March though
Hartung said Chipotle had enhanced security and would notify
affected customers. Shares were up 3.3 percent in after-hours
trading at $487.11.
The Denver-based company reported a 17.8 percent jump in
sales at restaurants open at least 13 months, better than the
15.5 percent gain expected by analysts polled by Consensus
Metrix. Those sales plummeted 29.7 percent in the first quarter
of 2016, when Chipotle was grappling with the effects of several
high-profile food safety lapses.
Chipotle wooed back customers by giving away millions of
dollars worth of free and discounted food, upgrading online
ordering and adding spicy chorizo sausage to its menu.
It recently raised prices by as much as 5 percent in some
markets, and is watching for any push back from customers,
The more than 2,300-unit chain in December removed co-Chief
Executive Officer Monty Moran and returned founder Steve Ells as
sole CEO, following pressure from activists including hedge fund
manager Bill Ackman. Since then, the company also has announced
sweeping changes to its board and its business.
Executives have begun to address operational weaknesses
unmasked by the sales swoon. They have increased marketing and
advertising spending, started using software for more efficient
labor scheduling, and have begun reducing waste across its
business, from the kitchen to dining rooms.
Net income for the first quarter of 2017 was $46.1 million,
or $1.60 per diluted share, compared with a net loss of $26.4
million, 88 cents per diluted share, in the year earlier
quarter. Analysts had expected a profit of $1.27 for the most
recent quarter, according to Thomson Reuters I/B/E/S.
Shares in Chipotle flirted with $750 prior to the company
being linked to 2015 outbreaks of E. coli, salmonella and
norovirus that sickened hundreds of people in the United States.
(Reporting by Lisa Baertlein in Los Angeles; Editing by Lisa