July 25, 2017 / 8:28 PM / 4 months ago

Chipotle links sick worker to latest Norovirus outbreak

LOS ANGELES (Reuters) - Chipotle Mexican Grill Inc (CMG.N) is retraining kitchen crews on food safety and enforcing a zero-tolerance policy for employees refusing to abide by new rules, after identifying a sick employee as the cause of a Norovirus outbreak that forced it to briefly close a restaurant in Virginia last week.

A Chipotle Mexican Grill is seen in Los Angeles, California, U.S. on April 25, 2016. REUTERS/Lucy Nicholson/File Photo

“We believe someone was working while sick,” Chief Executive Steve Ells said on a conference call with analysts on Tuesday. Chipotle offers employees paid sick leave, but some workers told CNBC that they were forced by bosses to work while they were ill.

The latest outbreak, along with a separate viral video showing rodents in a Dallas restaurant, pushed Chipotle shares down 13 percent last week. It was a big setback for the burrito chain, which is fighting to rebuild consumer trust after E. coli, Salmonella and Norovirus outbreaks in 2015 battered its sales and brand.

The company’s stock had flirted around $750 two years ago before the sales-crushing food poisoning outbreaks sickened hundreds of customers in the United States.

The shares got a slight boost on Tuesday, rising 1.6 percent to $354.25 in extended trade, after the company reported a quarterly profit that more than doubled on stronger sales, fewer giveaways and lower labor costs.

Bill Marler, a Seattle attorney who represented nearly 100 people sickened in Chipotle’s 2015 outbreaks, said the company has made the right food safety moves at headquarters, but still has work ahead.

“They have more to do to make the individual restaurants responsible,” Marler said. “That is where you have to get the work done.”

Rebuilding customer confidence may prove even harder.

Chipotle has fallen from No. 1 in Brand Keys’ annual loyalty index of fast-casual restaurants to No. 9 since the 2015 outbreaks, Robert Passikoff, president of the branding consultancy, said.

“I always joked that they had a reserve table at No. 1,” said Passikoff, who added that Chipotle’s customers are no longer giving the formerly high-flying chain the benefit of the doubt.

“I wouldn’t bet on them moving up the list,” Passikoff said.

BOREDOM AND QUESO

That is not lost on Mark Crumpacker, Chipotle’s marketing chief, who told analysts that clawing back customers will be “an ongoing challenge.”

Chipotle is addressing the “boredom” cited by “lapsed defectors” who used to visit the chain frequently by considering their request that it add queso, a cheesy dip, to its small menu. It now plans to test the cheesy dip in 350 restaurants in Colorado and California.

The company is also updating its app, adding its first-ever pickup window in Ohio and improving the speed of food-preparation areas for takeout orders.

Chipotle’s second-quarter profit rose more than 160 percent to $66.7 million, or $2.32 per diluted share, beating analysts’ average estimate of $2.18, according to Thomson Reuters I/B/E/S.

Sales at restaurants open at least 13 months rose 8.1 percent, but less than the 9.5 percent gain expected by analysts polled by Consensus Metrix.

Executives said the latest Norovirus outbreak dented sales by about 5.5 percent over the last several days.

Reporting by Lisa Baertlein in Los Angeles; Editing by Bernard Orr

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