After another virus outbreak in the quarter, Chipotle Mexican Grill’s (NYSE: CMG) shares fell by 14 percent during pre-market on Wednesday after a huge earnings miss for its third quarter. The Mexican fast food chain is going to need much more to turn around this company.
For the third quarter, Chipotle reported a revenue of $1.13 billion, increasing by 8.8 percent year over year, and falling short of Thomson Reuters analysts’ estimates of $1.63 billion. The company reported an EPS of $1.46 total, but fell to $0.69 due to damages and charges, also falling short of Thomson Reuters analysts’ estimates of $1.63.
Chipotle’s shaky third quarter impacted earnings very hard. The company reported an EPS of $0.69 because $0.64 was slashed off due to data security incidents and another $0.13 due to Hurricane Harvey and Irma. Although the EPS was cut short heavily, it is still up from the previous year’s EPS of $0.27.
Same store sales grew by 1 percent, also falling short of StreetAccount analysts’ estimates of 1.2 percent.
Chipotle said that same-store sales were strong at the beginning of the third quarter, up over 4 percent, but fell to nearly 2 percent. Chipotle did not include in the statement a specific reason, but the plummet in same-store sales can be most likely linked back to the Norovirus outbreak in the Sterling, Virginia location.
In July, Chipotle shares were trading at $398.48 a share, falling almost 30 percent to Wednesday’s open, when the first case of the norovirus was reported. After the outbreak had been publicly announced, shares plummeted by 20 percent from the first reported case to the when it was announced.
The chain also launched its own queso nationwide, but had very mixed responses from customers.
Chipotle opened up 38 new restaurants, and closed down or relocated 3 restaurants.
“Our strategic initiatives in operations, innovating our digital sales platform, new menu introductions, and marketing the brand are starting to take hold. Despite several unusual impacts during the quarter, including the impact of hurricanes, we maintained our focus and saw some encouraging signs,” said Steve Ells, founder, Chairman and CEO of Chipotle.
For the full year outlook, Chipotle expects comparable store sales to grow 6.5 percent. The chain expects to to open new restaurants and have a total of 195 to 210. For 2018, Chipotle expects to open up to 130 to 150 new restaurants.
Chipotle has been struggling since the norovirus outbreak, as the company is performing over 30 percent lower than the S&P 500. Previously, before the outbreak, Chipotle was performing almost double the rate of the S&P 500.