Chipotle Sales Per Store Peaked, And Labor Costs Spiked Even Before The E. Coli Crisis

Chipotle Mexican Grill, Inc. CMG’s stock has been hit hard by an E. coli outbreak at the company’s restaurants in recent months. While there’s no question that an outbreak like this one is bad news for any restaurant business, the numbers show that Chipotle’s stock may have been on the verge of a downturn even before a single case of E. coli.

As Deutsche Bank analyst Karen Short pointed out in January, Chipotle bears argue that the company’s same-store sales had already begun to contract prior to the first case of E. coli.

Related Link: Chipotle's E. Coli Disaster Was Qdoba's Gain, New Data Shows

The graph below shows how this trend was developing as of the end of Q3 2015.

In addition to falling sales numbers, Chipotle’s labor costs had been steeply on the rise throughout 2015 prior to the outbreak.

While the E. coli outbreak certainly exacerbated Chipotle’s problems, bulls that are expecting the scare to blow over and Chipotle to return to its pre-outbreak glory days may be disappointed with the company’s post-outbreak “new normal.” Restoring its reputation and regaining the trust of its customers may only be the first step in Chipotle’s recovery process.

Disclosure: the author holds no position in the stocks mentioned.