After a series of heavy blows to its sales due to a string of E.coli outbreaks, the burrito-chain plans to bring customers back with a hard-to-resist free-burrito offer.
Nevertheless, analysts believe that the move may have a positive effect on regular customers, but the impact on new customers remains to be seen.
Tushar Parashar, an analyst from the New-York based marketing consulting firm, believes that “seriously loyal” customers are not hard to win over. But luring non-loyalists with a free-burrito may not be enough to persuade them to return.
Chipotle’s sales currently keep falling despite the chain’s best efforts. According to a report issued by the restaurant Tuesday, same-store sales sank 26 percent last month. In January, the situation was even grimmer with a 36.4 percent decrease.
Chipotle expects its shares to lose $1 per unit in the best case scenario for the first quarter. The chain’s top executives and managers do not hope for profits and restaurant traffic to recover earlier than 2017.
Chipotle’s CFO Jack Hartung told investors in January that they should expect a ‘messy’ year in terms of profit margins and earnings. Hartung added that for this year the company won’t be able to fulfill expectations of an ‘efficient business model.’
Analysts also believe that the chain will take some time before it fully recovers. They forecast that adjusted earnings for each share would not jump over 3 cents. But the recent drop in sales is worse than experts have expected.
Nevertheless, JPMorgan analysts are more optimistic and expect sales to drop by only seven percent in the second quarter and four percent in the third. The restaurant chain will provide an update on its financial situation at a investor gathering in New York on March 16.
Chipotle Mexican Grill dates back to 1993. By 1998, when McDonald’s bought a major stake in the taco-chain, it had only 16 locations. Eight years later, McDonald’s ditched the business, which had grown in the meantime to more than 500 restaurants.
As of 2015, the popular burrito chain had 2,010 locations in the U.S., Canada, Germany, France, and the U.K., over 45,000 workers, and a net income of $475.6 million.
In recent years, the company has stood out from the crowd with its Food with Integrity mission, promoting organic meat and sustaining local producers.
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