E.coli outbreak looks set to infect Chipotle's same-outlet sales

Mon Nov 23, 2015 11:15am EST
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By Yashaswini Swamynathan

(Reuters) - Same-restaurant sales at Chipotle Mexican Grill Inc, hit by an E.coli outbreak at its restaurants, look set to decline for the first time since the burrito chain was spun off from McDonald's Corp in 2006.

The company on Friday said the outbreak, initially limited to restaurants in Washington state and Oregon, had spread to four additional states: California, Ohio, New York and Minnesota.

Chipotle's shares slipped to an 18 month-low after markets opened on Monday but quickly rallied to trade up 6 percent at $569.03. They had fallen 12 percent on Friday.

"I think there might be a strong reaction to the downside on Friday ... there haven't been any new cases since those several cases that were reported on Friday afternoon," Maxim analyst Stephen Anderson said.

Anderson, who expects more cases to be reported soon, said the outbreak could hurt Chipotle's traffic for the next few quarters.

Some analysts said investor reaction was overdone and that Chipotle was a good long-term bet.

"... We see value in shares from current levels for investors that can look through the near-term choppiness," William Blair analysts said.

Chipotle's stock has declined more than 16 percent since Oct. 31, when Chipotle said it would close 43 restaurants following the outbreak. The company said on Nov. 10 it would reopen those restaurants.   Continued...

A sign is seen at a Chipotle Mexican Grill restaurant in San Francisco, California July 21, 2015.    REUTERS/Robert Galbraith