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TORONTO – There’s one group of customers that do not seem everything bothered by a series of outbreaks at Chipotle Mexican Grill: teenagers and college-aged youth.
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That could signal a spot of expect a business whose fresh-prepped Mexican fast-food dishes took the by storm prior to being rocked with a food poisoning scandal this fall and winter. Hundreds of customers fell ill, with cases of both E. coli and Norovirus reported, and also the outbreaks resulted in a 44 percent plunge in the restaurant chain’s fourth-quarter profit, reported .
Chipotle reported earnings of US$67.9 million within the three-month period ended Dec. 31, or US$2.17 per share, compared with profit of US$121.Two million (US$3.84 a share) in the same period a year earlier.
The numbers beat the business’s own projections from last month, when it said it likely to report fourth-quarter earnings per share which is between US$1.70 and US$1.90. Same-restaurant sales, an important retail metric that strips out sales growth from new restaurants, plunged 14.6 per cent and revenue fell 6.8 percent, to US$997.5 million.
But data from researching the market firm NPD published in advance of Chipotle’s bruising results Tuesday offers a glimmer of optimism for the company.
NPD found that total customer visits to the fast-casual restaurant chain fell five per cent in the three-month period ending Dec. 31, compared with a traffic gain of 19 per cent within the same quarter last year.
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But the research firm reported customers aged 13 to 24 increased their visits by more than 10 % year-over-year during the headline-grabbing period between October and December, despite the fact that outbreaks of E. coli associated with Chipotle were reported in 11 U.S. states, and a Norovirus that swept through Boston was associated with a Chipotle restaurant.
“That loyal cohort was either unaware, didn’t care or were attracted by some from the discounting that Chipotle quickly gone to live in in order to drive traffic in that age bracket,” says Robert Carter, executive director at NPD in Toronto.
“It’s difficult to think that there would be a lack of awareness, but either they simply didn’t think these were getting sick or didn’t accept is as true was as widespread and dangerous because it was. To actually see an increase in traffic in that period, the company loyalty must be incredible – that’s like Tim Hortons’ brand loyalty (in Canada).”
Teenagers and teenagers aged 13 to 24 account for more than a third of Chipotle’s traffic volume within the U.S., roughly 35 percent, based on NPD, and visits from that demographic climbed 11 per cent in 2015, the research firm said.
In Canada, Chipotle is a much newer brand with so few units it does not register on NPD’s restaurant tracking.
The challenge Chipotle faces now is to recover newer or infrequent customers, who might otherwise go to a full-service restaurant or to McDonald’s, which has begun offering some customized burgers and all-day breakfast in order to compete with fast-casual rivals.
Carter believes Chipotle will need to do a sustained advertising and marketing campaign to underline heightened food safety precautions whether it has a hope of bringing infrequent customers back to the chain.
“They will even likely have some price incentives to obtain individuals to check it out,” Carter added. He believes it might take about six months for the chain to recover. Chipotle’s share price has tumbled 37 per cent in the past three months. They rose just slightly on Tuesday, closing up 0.7 percent at US$476.
The negative PR in the U.S. poisonings has probably hurt the brand’s image in Canada too, Carter said, but he imagines a good messaging effort may help restore the budding brand’s image.
Chipotle has implemented a range of new food-safety measures to detect contaminants, including sophisticated ingredient testing and additional practicing restaurant employees.
The company has also hired food service experts, conducted scientific tests at its restaurants and replaced food, that will cost approximately at US$14 million to US$16 million in the fourth quarter.
On Monday, the U.S. Cdc and Prevention reported that the two E. coli outbreaks associated with Chipotle “appear to be over,” with the most recent related illness reported towards the CDC at the begining of December.
Hshaw@nationalpost.com
Twitter.com/HollieKShaw
