Criminal investigation underway at Chipotle

Sales fell further in the week of December 21 after the US Centers for Disease Control and Prevention announced that it was investigating five new cases of E.coli contamination.

Chipotle said the grand jury which called for the investigation is demanding documents related to the norovirus outbreak that happened in August in Simi Valley, Calif. and sickened more than 200 employees and customers.

Federal authorities have opened a criminal investigation of Chipotle Mexican Grill after anorovirus outbreak in California that led to at least 234 people being sickened, according to a U.S. Securities and Exchange Commission filing.

Chipotle estimated a 14.6 percent fall in fourth-quarter same-store sales, compared with the earlier estimate of a 8-11 percent drop, the first decline in the company’s history. Those cases received far more national media attention than the California incident, and the company’s sales have since plunged. December’s slide is worse than the 16% same-store sales decline Chipotle saw in November at the height of the E. coli outbreak.

To forecast Chipotle’s future, Credit Suisse analysts looked to the past and analyzed the aftermath of other prominent food crises at chains, including a E. coli outbreak at Jack in the Box in 1993, one at Taco Bell in 2006, two food safety events at Yum’s China unit and one at McDonald’s China. The institutional investor owned 1,061,894 shares of the company’s stock after buying an additional 92,178 shares during the period.

To rehabilitate its image, Chipotle has taken out full-page ads apologizing to customers in dozens of newspapers around the country.

He also noted Chipotle started getting complaints about illnesses on Tuesday, Aug. 18, and shut down its restaurant the following Friday.

Management has retracted their revenue guidance for this year because they can no longer provide reasonably predictions due to fallout from the foodborne illness outbreaks.

“We intend to fully cooperate in the investigation”, the company said in the filing. It has also vowed changes to step up food safety at its restaurants.

Already reeling from a series of food-borne-illness outbreaks, Chipotle Mexican Grill now faces a federal criminal investigation, as well.

Fourth-quarter diluted earnings are now expected at $1.70-$1.90 per share, down from the $2.45-$2.85 per share projected a month ago. Among those expenses were food replacement costs, lab testing, and marketing.