Chipotle Q2 earning report shows a side of sales

Chipotle (NASDAQ: CMG) reported Q2 earnings yesterday after the market closed. Both profit and revenue fell far of the estimation polled by Thomson Reuters. Overall, Chipotle reported a profit of 87 cents a share and a revenue of $998.4 million compared with a profit of 93 cents a share and revenue of $1.1 billion from estimation.

The burrito maker had previously been loath to offer a customer loyalty program, a popular tactic of fast food chains, but unveiled one for the first time earlier this month in an effort to win back customers. Executives said 30% of transactions are now tied to the new “Chiptopia” program, with more than 3.6 million participants.

In February and March during the prior quarter, Chipotle gave away over six million free burritos or bowls and 1 million orders of chips and salsa or guacamole in hopes of luring back wary customers. In the quarter the company posted its first loss as a public company. The project of making people go back to the restaurant is not limited in the second quarter. For the coming quarter, chipotle still insists on providing more free meals to the loyal customers to consolidate the revenue. Also, the meals will be more diversified according to its new plans on making chipotle burger.

However, analysts at Morgan Stanley have said that a full sales recovery could take years, citing their survey results that showed about 25% of the chain’s customers have stopped going or aren’t going as frequently.

Concerns about the food in Chipotle came to the public since last October over 120 Boston College students who ate at a single Chipotle location over the weekend have been sickened. In February, the Centers for Disease Control and Prevention declared an end to Chipotle’s E. coli contamination that sickened 55 people in 11 states.

Also, the company has had additional unwanted attention in recent weeks with the charging of its chief creative and development officer Mark Crumpacker in a New York City cocaine sting. Mr. Crumpacker was allegedly among 18 buyers indicted in the drug ring and was arraigned on seven counts of criminal possession of a controlled substance in the seventh degree, a misdemeanor.

Chipotle says Q3 is off to a “nice start” in a very non-specific update. By nice start, Chipotle means a 200 bps to 300 bps sequential improvement in comp sales which still puts it at around -20%. The company did tip off that it anticipates opening 220 to 235 restaurants this year. The company still holds the optimism outlook for next quarter. The Chiptopia program will still be the key move factor for this company to achieve a better than expected earning in Q3.

Leave a Comment