This quarter, neither queso nor cutting chorizo proved to be the answer to Chipotle’s enduring woes, which have plagued the fast-casual Mexican chain since a string of foodborne illnesses flung the restaurant into a controversial spotlight in 2015.
After announcing disappointing earnings for the third quarter on Tuesday, Chipotle shares took a nosedive. Extending a year in which shares were already down about 14 percent, shares plummeted an additional 14.5 percent on Wednesday.
The nearly 50–point tumble beneath $300 marks the first time since March 2013 that Chipotle shares have been valued so low. Since then, the brand has been buffeted by repeated food safety scares and a massive data breach earlier this year.
Investors reacted to a few important misses for Chipotle. Perhaps most notable was the chain’s adjusted earnings per share, reported at $1.33, which fell 30 cents shy of Wall Street expectations. Chipotle executives said Hurricanes Harvey and Irma dented sales and contributed to the shortcoming.
Revenue surged nearly 9 percent during the quarter, totaling $1.13 billion and barely missing expectations of $1.14 billion. However, if that figure is considered against the 14.8 percent decline in 2016’s third quarter, it’s clear that Chipotle is still digging itself out of a hole. This week, that pit got deeper.
Chipotle also came up short in the key category of same-store sales, for which the company reported growth of only 1 percent. Wall Street expected 1.2 percent, and the failure to meet even that mark is indicative of the brand’s continued stagnation.
Tempering expectations for the year, Chipotle altered their projected comparable sales growth to 6.5 percent, previously expected to improve 9.7 percent. After opening 38 new units and closing three over the quarter, executives said they expect about 195 new locations in 2017. Chipotle’s initial forecast called for 195 to 210 new stores.
While the addition of queso did temporarily boost sales, the cheese dip didn’t attract new and lapsed customers in droves as Chipotle had hoped. After the initial release, sales surged again following a queso-centric ad campaign, then leveled off. The company said Tuesday that about 15 percent of customers still order the item.
Executives remained positive during an earnings call on Tuesday afternoon. Steve Ells, Chipotle’s CEO, said the quarter had upside despite frustrations related to growth.
“We continued to make important progress to improve the guest experience at our restaurants during the quarter,” Ells said during the call. “Our strategic initiatives … 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. Our leadership remains focused on setting the foundation for future growth.”
As recently as May, before yet another norovirus outbreak was reported at a store in Virginia, Chipotle shares were worth nearly $500, almost double what the stock is trading for today. Since the chain’s market peak in 2015, shares have depreciated more than 60 percent.