CHIPOTLE: 'It's going to be messy'

Chipotle says customer traffic and profit margins won’t fully recover from recent food safety scares until 2017.

“It’s going to be messy in terms of margins, it’s going to be messy in terms of earnings,” Chipotle Chief Financial Officer Jack Hartung said in an investor presentation Wednesday, referring to the rest of 2016. “We’re not going to be the efficient business model that everyone has come to know.”

Hartung said the company is expecting to win back “most, if not all” customers at some point in 2017. Ahead of the presentation, Chipotle’s shares, which have fallen 42% in the past three months, rose by 6% ahead of the presentation.

Margins will be affected by plunging sales and higher investments in food safety and marketing to win back customers, executives said.

Chipotle is launching a massive marketing effort in mid-February to encourage customers to come back to its restaurants. The chain’s same-store sales fell by 30% in December following two recent E. coli outbreaks spanning nine states and a norovirus outbreak in Boston.

“We are making an unprecedented effort to reach out to our most loyal customers with a detailed story about what happened,” Chipotle Chief Marketing Officer Mark Crumpacker said.

While earnings and sales are suffering in the short term, Hartung said the recent outbreaks don’t change the company’s long-term outlook.

“In the long term, we don’t really feel any different about our economic potential,” he said.

When asked whether February is too early to invite customers back to its restaurants, Chipotle co-CEO Steve Ells said he was confident that the restaurants are safe and contamination-free.

“I have confidence that we’re going to recover from this, that we’re going to win our customers back,” Ells said.

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