(NASDAQ:CMG), lost 30 percent in sales for December after a series of food scares hit some of its restaurants, and for revealing that a federal criminal investigation had begun over its customers getting sick.
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Chipotle Mexican Grill Inc., the Denver-based chain staggering from a string of food-borne illness outbreaks at its restaurants, is under federal criminal investigation for a norovirus outbreak at one of its California locations. That was followed by a norovirus contagion at a Boston location that sickened more than 140 college students. Chipotle has acknowledged it saw sales plunge by 30 percent last month in the aftermath of the outbreaks.
The company, which also announced a $300 million share buyback, said it will fully co-operate with the probe.
Chipotle hasn’t been having a very good time with PR as of late.
According to a county inspection report, the area manager for Chipotle said the company got its first customer complaint about an illness on August 20. Analysts predicted $2.49 before the announcement, according to data compiled by Bloomberg.
Chipotle voluntarily closed the restaurant to restock food products and conduct extensive cleaning and disinfection. The company spokesman’s only comment clarified that the subpoena was for the Simi Valley case. In October and November an E. coli outbreak affected 53 customers in nine states.
During the investigation by Ventura County officials, they found significant lapses in food safety and hygiene including allowing sick employees to continue reporting for work, hiring unlicensed food handlers, and finding fruit flies. It can be spread by contaminated food or from person to person. Its symptoms, including diarrhea, vomiting, and stomach pain, usually last a couple of days.
The subpoena will require the company to surrender a broad range of documents that are related to the norovirus outbreak at a restaurant in Simi Valley, California, in which over 200 people became ill, including 17 workers at the store. “It is not possible at this time to determine whether we will incur, or to reasonably estimate the amount of, any fines, penalties or further liabilities in connection with the investigation pursuant to which the subpoena was issued”, the company said.
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“Any more incremental bad news, particularly if there is an unfavorable verdict from the grand jury, will place even more pressure, not just on the bottom line result but potential further damage to the brand, which in turn hurt sales”, Anderson said.
