Coverage: Chipotle turnaround taking longer than expected

Chipotle Mexican Grill Inc. reported Tuesday that its same store sales fell more than Wall Street expected in the third quarter, and its profit fell 95 percent, as the restaurant chain’s recovery from an E coli breakout in 2015 is taking longer than expected.

Julia Jargon of The Wall Street Journal had the news:

The burrito chain on Tuesday reported same-store sales fell a worse-than-expected 21.9% in the third quarter. Analysts were anticipating a drop of 18.7%. Profit fell 95% in the quarter. Still, the decline marks a recovery from prior months, including its steepest sales decline in January, when same-store sales fell 36.4%.

“While we’re on the road to recovery, we’re not satisfied,” Chipotle Co-Chief Executive Steve Ells told investors on Tuesday.

The company outlined several new initiatives to speed its recovery, including more efficient food production lines to fulfill online orders, order-taking tablets in restaurants to bypass the lines and new mobile ordering technology.

Chipotle also said it might sell its ShopHouse chain of Southeast Asian food. The secondary brand didn’t attract enough customers to warrant further investment and expansion, Mr. Ells said. The company plans to continue supporting the Pizzeria Locale chain in which it has a financial stake and will develop a better burger concept.

John Kell of Fortune noted that its sales fell for the fourth consecutive quarter:

Chipotle had been a darling restaurant chain until the fall of 2015, when the brand’s promise of fresher and healthier foods than rivals like McDonald’s came into question after E. Coli outbreaks hit several states. Chipotle also faced accusations it wasn’t responding fast enough to contain the damage or share information with diners about the food safety problems.

The company has since made a slew of announcements to get diners back into Chipotle’s restaurants. It launched a summer rewards program and a handful of other short-term promotions. Co-CEO and founder Steve Ells got in front of the camera in September to admit the chain “failed to live up to our own food safety standards, and in so doing, we let our customers down.”

The company has since made a slew of announcements to get diners back into Chipotle’s restaurants. It launched a summer rewards program and a handful of other short-term promotions. Co-CEO and founder Steve Ells got in front of the camera in September to admit the chain “failed to live up to our own food safety standards, and in so doing, we let our customers down.”

Some of those moves seem to be making some inroads. Chipotle shared monthly comparable sales and traffic trends. Both of those metrics tumbled more than 30% back in January, but have posted decelerating declines in recent months. Ells on Tuesday said Chipotle was “earning back our customers’ trust, and our research demonstrates that people are feeling better about our brand, and the quality of our food.”

Aldo Svaldi of the Denver Post reports the company is planning new initiatives for 2017:

The revamped strategy will also place a bigger emphasis on digital initiatives that the company promises will make it easier for customers to order and pay for food online and via mobile devices.

As part of that, the company is revamping its secondary food preparation lines to make them more efficient. That will include adding digital screens to help workers, who now rely on papers slips, prepare orders faster.

Customers who order online or through their mobile devices will find shorter wait-times than is currently the case, the company said. Eventually, customers who don’t like the length of a line when they enter a busy restaurant can sit down and use a tablet to place that the faster-moving second prep-line will handle.

Eventually, Chipotle expects the revamped and speedier secondary lines could account for 50 percent of sales, up from 6 percent currently.