March 16--Chipotle said Wednesday it is considering ramping up offers for free burritos as its sales are slow to recover after a rash of foodborne illness outbreaks.
Speaking at an investor conference, executives said they may increase the number of free burritos or "buy one, get one free" promotions they offer, as they forecast the company's first-ever quarterly loss.
The Denver-based chain first offered free meals (coupons offer the choice of a burrito, burrito bowl, salad or tacos) when all its restaurants were closed on Feb. 8 for a companywide meeting about the outbreaks and new food-safety procedures. Mark Crumpacker, Chipotle's chief creative and development officer, said Wednesday that 5.3 million customers downloaded codes for free meals, displayed on restaurant entrances during the four-hour closure. That's more than double the 2.5 million they expected. About two-thirds of the customers who downloaded the codes ended up redeeming them.
Chipotle is also mailing coupons for a free entree directly to some customers. There are between 6 million and 10 million of those offers that have been mailed already, Crumpacker said, and the company expects to send 21 million in total. They will expire around mid-May.
Chipotle said late Tuesday it expects to report a first-quarter loss of about $1 per share, as poor sales are compounded by higher costs for food-safety procedures and marketing. Sales declines at established restaurants last month averaged 26.1 percent. That's an improvement from January's 36.4 percent but still worse than Wall Street was expecting.
At least two analysts significantly cut their earnings expectations following the report. Nomura analyst Mark Kalinowski cut his forecast for this year and next by nearly half, as did Oppenheimer analyst Brian Bittner.
"We continue to sit on the sidelines until visibility into sales/profit recovery improves," Bittner wrote.
The Wall Street Journal also reported late Tuesday that Chipotle is considering rolling back some of the extra food safety procedures that it promoted earlier this year, including high-resolution DNA-based testing of some ingredients. It wasn't clear whether the changes will be scaling back or cutting the procedure altogether, the newspaper said, citing anonymous sources.
"Our commitment to establishing Chipotle as a leader in food safety is fully intact. Over the last few months, we have implemented a number of programs and procedures to enhance food safety -- including prep of some ingredients in central kitchens, high resolution testing of ingredients and procedural changes in our restaurants. Any changes we may make to our initial plans will be to strengthen what we are doing," said Chris Arnold, a spokesman for Chipotle.
sbomkamp@tribpub.com
