Chipotle (CMG) investors may be about to get one sickening fourth quarter earnings report as the popular Mexican fast-food chain deals with an E. Coli outbreak that's gotten more serious.
Shares of the burrito and salad bowl joint plunged 12.3% on Friday following news that The Centers for Disease Control and Prevention (CDC) said the E. coli outbreak tied to Chipotle has spread beyond the two initial states and now included cases in California, New York, Minnesota, and Ohio.
Previously, Chipotle's E.Coli situation that bubbled to the surface earlier this month was thought to be limited to 11 restaurants in Oregon and Washington. The CDC has tied 24 cases in Washington and 13 in Oregon to eating at Chipotle.
Chipotle acted quickly to the original outbreak, shutting the restaurants tied to the infections, reviewing its supply chain procedures, and doing extensive cleanings. The restaurants have since been opened and Chipotle said there have been no new reported cases in Washington or Oregon since it put its remediation plan into effect.
But on Friday, it was announced that several more cases linked to Chipotle had been reported, including two in California, two in Minnesota, one in New York and one in Ohio.
In a new statement issued Friday, Chipotle founder and co-CEO Steve Ells said "we will leave no stone unturned to ensure the safety of our food -- from enhancing the safety and quality assurance program for all of our fresh produce suppliers, to examining all of our food safety procedures from farm to restaurant, and expanding testing programs for produce, meat and dairy items before they are sent to our restaurants."
Although Chipotle has gotten back to business as usual this month in Oregon and Washington, consumers didn't forget what happened so quickly. On Nov. 12, consumer perception firm YouGov BrandIndex released a survey of 4,300 adults that showed Chipotle's "buzz score" fell to -19, a steep decline from pre-existing levels. Surveyed consumers' perception of the chain hit its lowest level in at least 14 months.
And the stock market hasn't forgotten, either. Shares of Chipotle are down about 20% this month, lagging the 3.5% gain for the Dow Jones Industrial Average.
With consumer perception already at a weak point, the spreading of the outbreak to more populous states stands to weigh on sales even more this quarter. Consumers didn't hesitate to take to Twitter to voice their concern on visiting Chipotle.
No one eat chipotle— Brooklyn (@bhand2525) November 20, 2015
have a great weekend everyone — Had planned a fancy dinner for the wife to Chipotle tonight and movie but guess i’ll have to cancel $CMG— Stockguy22 (@stockguy22) November 20, 2015
In its annual report, Chipotle notes that its business model may make it more vulnerable to food-borne illness -- "We may be at a higher risk for food-borne illness outbreaks than some competitors due to our use of fresh produce and meats rather than frozen, and our reliance on employees cooking with traditional methods rather than automation."
Chipotle's full year guidance calls for a same-store sales increase in the range of a low to mid-single digit percentage. For the nine-month period that ended Sept. 30, Chipotle's same-store sales have increased 5.5%.