Chipotle Giving Investors and Customers Bad Gas
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Chipotle (CMG), the bean and burrito chain, is once again giving customers and investors long bouts of bad gas. Yesterday, customers who ate at 21031 Tripleseven Road described severe vomiting, diarrhea, and stomach pains contracted in the hours after eating at the Chipotle Mexican Grill. Chipotle used to be known for giving short investors bad gas; David Einhorn, the founder of GreenLight Capital, said in 2014, regarding Chipotle, "This short gave us gas," Einhorn said in the letter." Greenlight closed its short position in 2014 at $417.56; it originally sold the short at an average price of $320.29, the fund calculates its internal rate of return (IRR) was a loss of 33%.
Only if Einhorn had kept his short, the fund would have received a strong dose of Pepto-Bismal for its 2014 "gas attack". Since 2015, Chipotle has been delivering sub-optimal results to investors and customers.
It all started on November 3, 2015 when it was first was reported that Chipotle suffered an ecoli outbreak. Chipotle said in a November 3, 2015 press release:
"On the heels of an E. coli incident that was linked to eight of its restaurants in Oregon and Washington state, Chipotle Mexican Grill (NYSE:CMG) has taken a number of immediate steps to assist investigators as they conduct their review of the incident in Oregon and Washington. Among the specific actions the company has taken since the incident began are:"
However, the company is claiming that this time it is different. Jim Marsden, Chipotle’s executive director of food safety, said "the reported symptoms are consistent with norovirus...Norovirus does not come from our food supply, and it is safe to eat at Chipotle. We plan to reopen the restaurant today.”
Investors are hoping this is the case as samestore sales plummeted after Chipotle's last outbreak—in Q1 of 2016, same store sales declined by over 21%. Chipotle stock is down 6% today on the news. As mentioned, the director at Chipotle of Food Safety, Jim Marsden, reports that the store will re-open later today. Marsden and investors are hoping that this is an isolated incident.