UBS: Chipotle's queso infuriated some customers -- and the company may not bounce back

  • Chipotle’s queso launch has failed to give the company an anticipated boost
  • UBS says that the company is unlikely to recover soon
  • Chipotle is reporting earnings later Tuesday.

Chipotle‘s displeasing queso has moved the company further away from a comeback.
The company began serving the buzzed-about queso at all of its locations in September, but has drawn the ire of customers who complained the cheesy sauce was a “disappointment.” Though the company was able to pull in modest sales from the initial buzz, it has since fizzled.

“We believe CMG is facing a new normal rather than an ongoing recovery,” a UBS analyst wrote in a note.

The struggling food chain has many challenges ahead, from combating negative customer reviews to dealing with competition as it tries to bring traffic back into its stores, according to UBS. The firm slashed its target for Chipotle’s third-quarter same-store sales growth to 0.5% from 2.5%, “given a weaker than expected queso launch that is unlikely to offset sluggish underlying trends.”
Chipotle is set to report its third-quarter earnings on Tuesday.
Though the company has taken a stab at new marketing campaigns, improving its product line and operational efforts, it has not reversed its lacklustre sales and earnings, structurally high costs, and brand perception challenges, UBS said.
UBS maintains a neutral rating on Chipotle’s shares, with a price target to $US345, which is 7.5% above its current price.
Chipotle stock is trading up 1.04% at $US323.78 per share Tuesday. Its shares are down 13.37% this year.

Read more about how other fast food chains like the company behind Burger King are staying afloat here.

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