Chipotle sales miss as food freebies fail to lure diners

Thu Jul 21, 2016 6:35pm EDT
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By Sruthi Ramakrishnan

(Reuters) - Chipotle Mexican Grill Inc (CMG.N: Quote) reported a bigger-than-expected drop in quarterly comparable sales as food giveaways and enhanced safety measures failed to bring back diners shaken by a string of food-borne illnesses last year.

The restaurant chain has given away millions of free burritos and other menu items such as guacamole and chips to revive sales growth after outbreaks of E. coli, salmonella and norovirus linked to its outlets put off customers.

The company also launched its first-ever loyalty program in July and added chorizo, a spicy chicken and pork sausage, to its menu.

In a sign the efforts may be starting to pay off, Chipotle reported an uptick in comparable sales in July.

Still, shares were down 2.1 percent in volatile after-market trading on Thursday as investors focused on the slow pace of recovery.

Profit for the second quarter ended June 30 slumped 82 percent, while sales were down 16.6 percent.

"While it has only been a few weeks since Chiptopia (loyalty program) launched, we are pleased to see that July sales comp trends have already improved by 200 to 300 basis points," Co-CEO Steve Ells said.

Analysts, however, said it was too early to conclude that a sales recovery was underway.   Continued...

Signage for a Chipotle Mexican Grill is seen in Los Angeles, California, United States, April 25, 2016. REUTERS/Lucy Nicholson/File Photo