With a stock that's down more than 36% over the last 12 months, Chipotle Mexican Grill (CMG) is in desperate need of a big boost. Last year's food-borne illness scandal all but destroyed consumer confidence in the company. Struggling to lure back customers, the company is now adding another concept to its business.
But the latest initiative, a potential burger chain, is not a reason to buy the stock. Chipotle shares fell 2.70% in Tuesday trading.
Nearly two weeks ago, Chipotle opened its first Tasty Made restaurant in Ohio. Tasty Made aims to bring the Chipotle concept of fresh, wholesome ingredients to the burger space. The restaurant offers a limited menu of burgers (made from responsibly raised beef), French fries, soda and milkshakes.
Given its current situation, it's understandable that Chipotle would look for new growth avenues, and the venture is off to a promising start.
According to Chipotle reports, The Tasty Made offshoot is already reportedly relishing strong sales. Yelp reviews, which were initially run-of-the-mill, have been improving.
But Chipotle head Steve Ells has an arduous battle ahead as he enters a new part of the increasingly complex fast and fast casual food segment. Huge investments necessary to fuel initiatives may be hard to come by. Pershing Square Capital's Bill Ackman who has taken a nearly 10% stake in CMG, may not agree with the creation of a burger chain.
