Can Chipotle bounce back from its widening E. coli crisis?
Chipotle (CMG) is under pressure once again following news that the Mexican restaurant chain is linked to a second outbreak of E. coli. Shares were down around 4% in midday trading.
The Centers for Disease Control said it is looking into an outbreak of a different DNA fingerprint of E. coli that sickened one person in Kansas, one person in North Dakota and three people in Oklahoma. The customers reported eating at Chipotle restaurants between Nov. 18 and Nov. 26.
This comes just weeks after 53 people in nine states were sickened by a rare strain of the bacteria, with 48 of the 53 reporting they had eaten at a Chipotle in the week before their illness started. Also earlier this month, one of the chain’s locations in Boston was forced to close after an outbreak of norovirus sickened dozens of Boston College students.
“There are two ways to handle a huge PR crisis like this,” said Yahoo Finance’s Rick Newman in the video above. “You can be straightforward about making a mistake, apologize and make sure you do everything you can to fix the problem, or you can deny it’s your responsibility. Chipotle appears to be taking responsibility and fixing the problem. They are revamping their food procedures and centralizing some of the food preparation that seems to be a part of the problem.”
In a statement Chipotle said: “Officials at the Centers for Disease Control and Prevention have indicated that additional cases from similar time periods may still be reported as they make their way through various state health departments to the federal health officials.”
Chipotle has warned that its fourth-quarter comparable-restaurant sales could drop by 8% to 10% from one year ago due to the outbreak. This would mark the first decline in the company's history.
But despite the recent turmoil and a long road ahead of damage control, Newman says the chain will be able to win back lost customers.
“Chipotle is still a popular restaurant chain,” said Newman. “And if they can get their mojo back, people have short memories and customers will start going back.”