Restaurant company desperately needs help
Steve’s breakdown: Can it get any worst at Chipotle? We’re thinking some well thought out digital/social media has to kick in right about now. If that’s your game, your might want to try Chris Arnold, Director of Public Relations at email@example.com or (303) 222-5912
DENVER, CO: It’s likely that diners have begun to avoid Chipotle Mexican Grill.
A confirmed case of norovirus at one location and a viral cellphone video of rodents falling from the ceiling at another has soured perception of the brand, according to Credit Suisse analyst Jason West.
Credit Suisse’s online sentiment tracker, which measures how consumers feel about a brand, showed the perception of the Chipotle brand fell to near record lows following the two incidents last week.
“Not surprisingly, online sentiment plummeted in recent days,” West wrote in a research note Monday. In the past, sales at the Mexican food chain tended to fall as opinions turned negative, he said.
Sentiment slipped from a score of 55 on July 17 to negative 11 on July 18, when the norovirus incident was first reported at a Virginia restaurant and the mice were spotted in a Dallas-area Chipotle.
These scores improved modestly on July 19 and July 20, reaching 12 and 16, respectively. West anticipates that for the month of July consumer sentiment for Chipotle will average around 35.
“By comparison, online sentiment averaged 24 during the month of Dec ’15, the low point following the E. coli and Boston norovirus incidents,” he wrote.
The average score was 56 during the second quarter of this year, West said.
“This sentiment data has had a 76 percent correlation with Chipotle’s same-store sales since the 2015 food safety crisis,” West wrote. “This data suggests [same-store sales] have likely fallen to at least negative 10 percent in recent days, if not worse.”
While West retained his second-quarter same-store sales estimate for the company, he lowered his third- and fourth-quarter forecasts. He now sees Chiptole’s same-store sales falling 2 percent in the third quarter and 3 percent in the fourth quarter. Previously, he expected the brand would see same-store sales rise 7 percent and 4 percent, respectively.
In addition, West slashed his price target by $100 to $325.
Shares of Chipotle slipped to a 52-week low of $336.52 following West’s note, but have since recovered. On Monday, the stock was down about 1percent, trading around $342.
The chain said norovirus does not come from the restaurant’s food supply and can be transmitted by anyone who is sick, including customers, who visit the location. It said the rodent infestation was “an extremely isolated and rare incident.”
Chipotle reports second-quarter earnings on Tuesday afternoon.