Chipotle’s lastest illness outbreak is threatening to derail its nascent recovery from the 2015 E. coli outbreak that devastated sales.
The company said this week that it closed a restaurant for two days after customers who ate there contracted norovirus, an illness that causes vomiting, diarrhoea, nausea, and other symptoms. More than 130 people have reported getting sick after eating at the restaurant.
The outbreak was confined to a single restaurant in Sterling, Virginia, and Chipotle has said it’s now safe to eat there.
But it’s renewing peoples’ fears about eating at Chipotle — something the company has been battling to overcome since the E. coli outbreak that involved restaurants in 14 states two years ago.
As a result, Nomura Instinet analyst Mark Kalinowski lowered estimates Friday for the company’s same-store sales and earnings.
“Given Chipotle’s late 2015 challenges with health-related issues, and the media (and social media) attention that this newest item appears to be gathering, we believe it prudent at this time to take a more cautious outlook about Chipotle’s same-store sales and earnings trends,” Kalinowski wrote in a research note.
Nomura is lowering its earnings-per-share estimate for 2017 and 2018 by 8%, and dropping its target price from $US480 to $US385, he said.
Kalinowski cited risks from possible adverse effects on sales from the aftermath of the Sterling, Virginia Outbreak, as well as risks that another other near-term, health-related incident might happen.
“We continue to view the Chipotle stock as one of the higher-risk restaurant names we cover… in part due to the health-related challenges that clearly have not fully dissipated,” he wrote.
Chipotle CEO Steve Ells said the company took “aggressive action” to address the norovirus outbreak in Sterling, and that Chipotle has become a leader in restaurant food safety in the aftermath of the E. coli outbreak.
“In the rare case that an event does occur these systems and the associated processes are designed to provide very fast detection and rigorous procedures to quickly remedy the situation,” Ells said. “We believe these advancements, among others, have put us on the path to industry leadership while we continually strive to find new and innovative ways to ensure that our restaurants are safe.”
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