E.coli outbreak effect: Chipotle will continue to face volatility in stock price and sales

E.coli outbreak effect: Chipotle will continue to face volatility in stock price and sales

There will be more volatile days to be witnessed by Chipotle Mexican Grill affected by E.coli outbreak, says investors. Companies have to bear the brunt for food safety wrongdoings in different ways. For public traded companies, there is nothing more painful that waiting when its stock price will back on track.

Last day, shares of CMG fell by another 6% amounting to $574.66. There was a time when Denver-based fast-food restaurant chain enjoyed premium position in the share market.

It’s ‘Food With Integrity’ them focusing on fresh and local ingredients have helped create a special place for itself in the hearts of people. But its image is getting affected as the E.coli outbreak remains one of the most debated topics over the internet. Little before the time the E.coli outbreak incident has happened, Chipotle shares are off by $157.42 per share, which equates to drop of 21.49%.

The E.coli outbreak has brought closure of 43 stores in Oregon and Washington. It means that Chipotle officials have lost around $80 million since the closure of 43 restaurants. November was the worst time for Chipotle, as it has witnessed maximum loss during that month. But decline in shares continued on day-to-day basis.

Analysts have carried out comparative analysis in which they have compared Chipotle’s crisis with similar incidents happened with other fast-food outlets. A Motley Fool analyst has compared the situation with that of earlier events happened with Burger King, Kentucky Fried Chicken, Wendy’s and Taco Bell.

As per the analyst, the other food outlets were affected, but they were able to make quick recovery. “The popular fast casual Mexican chain is and will continue to take a hit in both its stock price and its sales, but the impact will be temporary as long as the company gets the problem under control”, affirmed analyst Daniel B. Kline for Motley Fool.

One thing needs to be appreciated by Chipotle that it immediately reacted to the outbreak by closing 43 outlets that were subjected to deep cleaning and change ingredients and food preparation methods.

Steve Ellis, Chipotle’s founder, chairman, and co-chief executive officer, will be present at the second Annual Bernstein Consumer Summit in New York City, where it is expected that he will address about the not-so good performance of the company in the stock market. Uncertainty could be one of the factors affecting Chipotle.

As per the US Centers for Disease Control and Prevention’s (CDC)’s last report on the six-state E.coli outbreak issued on November 20, 17 Chipotle Mexican Grill restaurants were linked to sickening of 45 people. California, Minnesota, New York, Ohio, Oregon and Washington State were affected by the outbreak.

A common meal or ingredient is considered to be reason to be blamed for the outbreak, said CDC, which is yet to zero down on the source.

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