April 27--Will chorizo be the savior that Chipotle is hoping for?
The spicy pork-and-chicken sausage may be launched at restaurants nationwide as Chipotle tries to wean customers away from free meals and get them in the habit of visiting the burrito chain on a regular basis. The chain had tested chorizo in select markets before a rash of food outbreaks led it to stall a possible expansion.
Chipotle said Tuesday that sales at established stores in the first three months of the year fell nearly 30 percent from a year ago on the continued fallout from foodborne illness outbreaks. The Denver-based chain also reported its first-ever quarterly loss, although it was less severe than Wall Street was expecting.
More investors distanced themselves after the results were released. The stock lost 5 percent in after-hours electronic trading.
Chipotle lost $26.4 million, or 88 cents per share in the first quarter. Last month, the chain said it could lose about $1 per share during the quarter. During the same quarter one year ago, Chipotle posted net income of $122.6 million, or $3.88 per share.
Revenue slid 23 percent to $834.5 million. Costs for food and marketing rose, as Chipotle gave away millions of free meals to draw customers back in the doors after outbreaks of E. coli, norovirus and salmonella late last year.
Chipotle said it gave away about 6 million burritos in February and March, and about 1 million bags of chips with salsa or guacamole. The burrito chain is also mailing coupons for a free entree directly to some customers. The company expects to send a total of 21 million coupons, which will expire around mid-May.
The company said it didn't expect to post another loss in the second quarter, but it didn't offer any specific forecasts because of "volatile" sales.
In addition to the possible addition of chorizo, Chipotle said it's making other tweaks to its food after changes to improve food safety left customers with a bad taste in their mouths. It had moved to pre-cut lettuce in central kitchens, but it said Tuesday it will now cut lettuce in restaurants. It will also stop pre-slicing bell peppers, and instead blanch them whole. Some changes, though, are actually leading to improved customer satisfaction, Chipotle said, like the additional step to sous-vide steak before grilling, which makes it less likely to contain pathogens but also makes it more tender.
Chipotle is also considering some kind of loyalty program to bring in more of its most loyal customers, and making other changes to its delivery of online and mobile orders to ensure quicker delivery and improve sales.
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