The possibility of a lasting lack of customers at Chipotle Mexican Grill Inc. within the wake of the Mexican processed foods chain’s E. coli outbreak prompted a downgrade by Deutsche Bank .
Analyst Karen Short lowered her rating around the stock to promote from hold, while keeping a US$400 price target that implies a further decline a lot more than 20 per cent.
She believes little differs at Chipotle in the past couple of months, despite management’s proactive approach toward new food safety preparation procedures, along with new marketing and compensation programs to regain customer trust.
Short also cites additional problems: Chipotle’s same-store sales were showing the signs of waning prior to the outbreaks, due to higher prices plus a insufficient new menu items.
“While there is not been evidence of any new incidences, the problem still exists on whether Chipotle could weather another outbreak, especially as management now claims its supply chain and processes would be the ‘safest’ available on the market,” the analyst said in the report.
“Moreover however, we remain concerned about the potential permanent insufficient customers (from adjustments to brand perception or increased competition) because of these problems.”
Other problems that recently emerged to cast further doubt about Chipotle’s recovery include out-of-stock items and longer in-store wait times because of increased safety standards.
