Chipotle, a US-based restaurant chain, said that it expects to report a loss of $1 per share in the first quarter. Last month, the company reported a quarterly loss, the first loss since becoming a public company. Recent illness incidents linked with its restaurants had a destructive impact on Chipotle's balance sheet and pushed it to close several stores.
The restaurant chain noted that sales have begun to recover over the recent period and Chipotle witnessed a sequential rise in weekly same store sales from 8, February 2016 till March first week. However, the company's weekly same store sales started to decline in the second week of March.
Chipotle's same store sales during February declined 26.1%, but still less than a 36.4% decrease in January. The company anticipates operating margin for the first quarter in the mid-single digits. The leap day contributed an additional 2.6% to the same store sales in February.
Chipotle's sales recovery stems from February 8, when the company unveiled a 'free burrito offer' as part of its advertising campaign to stimulate revenue at its restaurants. But, same store sales dropped during the March second week due to a temporarily closure of a store in Boston area. A restaurant store in Billerica was closed after a worker confirmed positive for norovirus but soon restored its operations.
Chipotle, which suspended executives' compensation last week, said that it will experience higher marketing expenses and other related corporate costs in the first quarter of 2016. In addition, the restaurant chain will incur additional food expenses by roughly 200 bps as part of its food safety measures. The company also anticipates legal costs to increase in the first quarter.
According to USA TODAY, the two CEOs were paid $14 million in 2015 even after the company announced bonus cut for its executives. Equilar, a compensation company, said that the average pay for CEOs in the S&P 500 index totalled $10.6 million in 2014.
Meanwhile, James Marsden has been appointed as the new executive director of food safety. Marsden in his role will control food safety measures at Chipotle and take necessary steps to prevent illness outbreaks in the future. Before joining Chipotle, Marsden worked at Kansas State University, where he held the position as a renowned professor of food safety.
Chipotle is aggressively taking steps to make its food stores safest in the restaurant market by implementing various safety measures. These precautions are expected to add an additional 2% to its net food expenses. But, the restaurant company remains positive regarding its profit margins in the coming period.
Bloomberg quoted Asit Sharma, an expert at Motley Fool, who said that gloomy sales figures in the recent period signal Chipotle requires long time to recover its sales. Shares of Chipotle dropped as high as 6% to $472.60 during the late trading.
Chipotle has been battling against E.Coli outbreak over the recent period, which damaged the company's balance sheet and forced it to report its first quarterly loss in February. The company is trying to recover its sales by implementing various business strategies.
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