Photo Credit: Mike Mozart

Chipotle Mexican Group, Inc.  (CMG) Consumer Discretionary – Hotels, Restaurants, & Leisure  | Reports February 2, After Market Closes

The effects of the first health scare in 2015 still haunts Chipotle and its investors a year and half later. Shares tanked immediately after the first slew of customers reportedly became ill and continued to fall with each subsequent outbreak. Over this journey, financial performance fell to two year lows as growth slipped into negative territory. Chipotle faces a steep uphill battle to recover its losses and regain the trust of its once loyal customers. Some analysts believe the burrito chain can dig itself out of the 15 month drought, starting with a strong fourth quarter report this afternoon.

For the fourth quarter, Analysts at Estimize call for earnings of 58 cents per share, 56% lower than the same period last year. That estimate dropped by nearly 70% in the past 3 months with the confluence of several factors. Revenue for the period is expected to increase by 5% to $1.03 billion, marking positive growth for the first time in over four quarters. Shares of the burrito chain declined 8% in the past year but that almost seems like a positive given comparisons fell by an average of 23% in the trailing four quarters. 

In a report earlier this month, Chipotle stated that same store sales progressively improved throughout the fourth quarter. In October comps fell by 20%, dropped again in November but then jumped by 15% in December. December faced the easiest comparisons as it was the first full month following the initial health outbreak.

To offset some of these losses Chipotle continues to use promotional initiatives and new menu offerings with the intent of driving traffic. Some marketing programs used in 2016 include Chiptopia, the introduction of chorizo and an ongoing student discount. Increasing brand marketing and driving technological investments should also help aid in bringing back customers.

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