Chipotle’s Rivals Take Advantage of E. Coli Outbreak Scare

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Chipotle Mexican Grill Inc. (NYSE:CMG) quickly tumbled following the E. coli scare at the company stores on Friday, November 20. On news that patrons at the company’s restaurants got sick, the company stock tumbled 12.32% on Friday down $75.32.

Despite the dramatic drop, the company has since rebounded up 7.54% between Monday, November 23 and Friday, November 27. Immediately following the scare, on Monday, the company stock rose 4.31%.

Even before the scare, the company stock was down 20% on the year, with further disappointing news in Q3 that indicated same-store growth only rose 2.6% year-on-year. Since Q1 2013 when the company same-store sales only rose 1%, this is the lowest same-store sales growth the company has experienced.

In comparison, same-store growth hit a staggering 16.8% in 2014. Analysts expect only a 3.6% growth for all of 2016.

Chipotle continues to struggle, but many other competitors have seen amazing growth during the last year. Yum! Brands (NYSE:YUM) is a major rival, with several restaurants under its name. The company is only up 0.15% on the year, and hit its high in May when the company stock was near $100. The company stock is now at $72.96 a share, but the main focus is on Taco Bell which is owned by the company.

Taco Bell released their same-store sales growth for Q3 that outshined Chipotle, experiencing a 4% growth.

Moe’s Southwest Grill, a privately owned company, reported 5.8% same sales growth in 2014. Qdoba, one of the most similar restaurants compared to Chipotle, released their Q3 same store sales growth which reached 6.6%. The company is owned by Jack in the Box (NASDAQ:JACK). During Q2 2015, Qdoba also had stronger same store sales growth, with a 7.7% gain versus Chipotle’s growth of just 4.3%.

The recent E. coli scare is just another downfall to the company’s potential profits in Q4 2015. Wall Street activity in the company has cooled in 2015. Bank of America (BAC) and Merrill Lynch both downgraded the company stock to a rating of “underperform.” This rating is considered a “sell” by most analysts. CRT Capital has also downgraded the company stock to a “hold.”

Analysts also expect that the company will take on more costs in an attempt to ensure the supply chain is further secured against E. coli and other potential outbreaks. There will also be costs associated with helping the brand recover in consumer relations as a result of the outbreak.

Jacob Maslow

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